Chief Investment Strategist, The Freeport Society
The S&P 500 ended the day yesterday above 5,500 for the first time. But the overall story hasn’t changed.
Ned Davis Research crunched the numbers back to 1974 and found that by at least one metric this is the thinnest bull market in the past 50 years. Only one out of four S&P 500 stocks is outperforming the index this year.And according to data from FactSet, as of June 24, the market caps of just the so-called “Magnificent Seven” make up about 31% of the iS&P 500.
The only other time during the past half century that had market breadth nearly as thin was 1998-1999… at the exhausted tail end of the 1990s tech bubble.
Does this mean the market is doomed to crash tomorrow?
No.
It doesn’t necessarily mean anything.
The 75% of stocks currently underperforming the index could reverse course tomorrow and start leading it. Or for all we know, the market could get even thinner from here.
What I do know is this: It’s never easy to consistently beat the market. And when a market is this thin, it’s even harder if you don’t have an edge.
So today, let’s give you that edge…
Follow the “Leaders”
There’s a reason why Congress has an approval rating of just 16%: We can’t trust the average congressman as far as we can throw them… with one exception.
We can trust them to act in their own narrow self-interests… including trading on insider information.
Our Freeport Society friend and contributor Eddie Tan – who recently covered an interesting “insider” transaction for us – obsessively follows insider trading of all kinds… from stock buys and sells that folks in the C-suite make to what politicians are adding or removing from their personal portfolios.
Thanks to the Stop Trading on Congressional Knowledge (STOCK) Act of 2012, all members of Congress must report their stock market transactions. Of course, not all do… but enough comply to give us the opportunity to follow suit.
Figuratively speaking, Eddie has mainlined himself into the U.S. Securities and Exchange Commission channel that makes these reports public.
On Friday, he called me up.
“Georgia congresswoman Marjorie Taylor Greene has just reported some very interesting stock buys!” he said, clearly trying to contain his excitement at the news. “I’m going to dig in.”
Hell yeah!
Greene, a Republican, sits on the Cybersecurity, Information Technology, and Government Innovation congressional subcommittee, so knowing what stocks she’s trading might actually give us an edge!
Per Eddie:
Greene disclosed purchasing between $1,000 and $15,000 of CrowdStrike (CRWD) on June 24. That was the same day that the cybersecurity company was added to the S&P 500…
Besides Crowdstrike, Greene also purchased… ASML (ASML), NextEra Energy (NEE), and Costco Wholesale (COST). ASML and NEE stand out because they are both major beneficiaries of the AI boom.
Energy companies have done well this year amid increased power demand from AI data centers. NextEra is no exception and has risen by about 14% year to date, which doesn’t include the returns from its nearly 3% dividend.
The company has a focus on solar energy and believes that it is the most cost-efficient form of energy. Through its Ten-Year Site Plan, NextEra expects solar to account for 38% of its power generation compared to 6% today…
Man, it’s great to have Eddie on our team!
This revelation is fantastic. But he wasn’t done. He also said…
Greene isn’t alone.
Other politicians who have disclosed buying NEE stock in 2024 include Rep. Ro Khanna and Rep. Kevin Hern.
I never would have pegged Marjorie Taylor Greene as an investor in solar energy, but she has access to information you and I will never have.
My suggestion?
Do your own research into these stocks and, if they meet your requirements, consider adding them to your portfolio.
From my perspective, using our C.H.A.O.S. Cash System:
- CrowdStrike looks a little overheated right now and I’d suggest caution.
- ASML and Costco are hot and right in our buying sweet spot.
- And NextEra Energy rates a little lower than I’d normally like to see for a new purchase. We’ll call it the bullish side of neutral.
To better understand how our C.H.A.O.S. Cash System works, watch this video.
We’ve spotted seven other stocks on political insiders’ radar at the moment. You’ll find all the details in this free report: 7 Stocks Political Insiders Are Buying Before the November Election.
Before I sign off and let you get an early start on the July 4 holiday, I’ll address the elephant in the room.
The U.S. Supreme Court seems to have a supreme talent for infuriating virtually everyone of all political stripes at one point or another, and over the past week they were in rare form. I’d argue one of their rulings was a major win for freedom… the other not so much.
In the “Chevron” cases decided on Friday (Loper Bright Enterprises v. Raimondo and Relentless v. Department of Commerce) the court made a technical ruling that literally turns federal regulation upside down.
In a nutshell, in the 1984 case Chevron v. Natural Resources Defense Council, the Supreme Court created the so-called “Chevron Doctrine.” This said that in cases where a law was vaguely written, courts were to defer to the federal agency’s interpretation.
So, if you found yourself in a dispute with the SEC, the Environmental Protection Agency (EPA), or any other alphabet soup governmental body, the government was presumed to be right. If you disagreed, too bad.
Well, that’s no longer the case.
Going forward, “Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority,” according to the Supreme Court’s ruling.
Republicans are cheering because they see it as a slapdown to the Biden administration’s environmental agenda. Of course, they’ll probably do an about-face and whine about it the first time a Republican administration sees one of its rules overturned in court.
It promises to be messy.
But I welcome any court ruling that limits the power of the government. We’ll call this one a win for freedom.
In the second case, Trump v. United States (yes, that is the actual name), the court found that “the nature of presidential power entitles a former President to absolute immunity from criminal prosecution for actions within his conclusive and preclusive constitutional authority. And he is entitled to at least presumptive immunity from prosecution for all his official acts. There is no immunity for unofficial acts.”
I don’t like hearing “absolute immunity” and “president” in the same sentence. That doesn’t sound like the kind of statement that would be consistent with my freedom. But I suppose some of this sounds reasonable. A president can’t be tried for murder for legally sending the Marines into battle, for example.
But here’s where it gets wonky…
As Justice Amy Barrett pointed out in her separate opinion, the Supreme Court’s ruling doesn’t allow any evidence from official actions to be used to prove wrongdoing for an unofficial criminal act. It’s virtually impossible for a president to completely separate private acts from official acts. It’s hard enough for me to separate my work life from my personal life, and I’m not a president.
So, this essentially makes it impossible to ever gather evidence of presidential wrongdoing. Any evidence that might have been used is going to be at least tangentially related to an official act and thus off limits. And it gives any future president a long runway to abuse power with no fear of punishment.
Yikes.
Justice Sonia Sotomayor might have been exaggerating a little when she said a president who “orders the Navy’s Seal Team 6 to assassinate a political rival” is now “insulated from criminal prosecution.” But given the leeway the court seems to be comfortable giving a president… well, let’s hope we never find out.
On that lovely thought, enjoy a day off tomorrow and tune out the news. The world isn’t going to quit turning if you put down your phone and enjoy a hot dog, a beer, and an all-American fireworks show.
To life, liberty, and the pursuit of wealth.