Today I turn 39, and I am very excited to bring you Leverage Charts, a newsletter designed to inspire, motivate, and provide valuable personal finance and investment education in a simple, visual, and easy-to-follow format.

If you are wondering why you have received this email, it’s because you’re either a family member, a friend, a client of Leverage Financial Advisory, a former colleague, a former classmate, a former student of mine at Boston University, or someone who at one point inspired me to “give it a shot.” If you do not wish to receive this newsletter, you can easily unsubscribe - no hard feelings…but it is my birthday, so maybe wait until next week.

To kick things off let’s start with Super Bowl LVIII! If you think prices at the grocery store have been high, they don’t even come close to a spot at the big game on Sunday. The average ticket price is nearly $10,000 - up 70% from last year’s average price and well above the most recent record high in 2021! I would take this as a sign that the economy is humming right along.

Stocks

If you’ve looked at your 401K recently, you likely felt pretty good when you logged on. The S&P 500 Index, often referred to as "The Stock Market" in the media, is made up of the 500 largest publicly traded companies in the United States.

In the last 100 years, the S&P 500 averaged about a 10% gain per year. So far, just six weeks into 2024, it’s already up 5.38%. And going back a couple more months, it’s up a remarkable 14 out of the last 15 weeks! According to one of my favorite Wall Street analysts, Ryan Detrick, a run like that hasn’t happened since March of 1972 - 52 years ago.

So what comes next? That will always be the million-dollar question, and unfortunately, nobody knows. But if you look at the chart above you will see a red line called the 200-day moving average. This is an indicator that I use religiously in my investment management process.

The 200-day moving average takes the closing prices of an index, ETF, or stock for the last 200 days, adds them up, and then finds the average price for the last 200 days. This is called a "moving average" because every day it gets updated with yesterday's closing prices, and drops off the 201st day's data.

If the price of a stock that you are tracking is above its 200-day moving average, by definition it’s in a long-term uptrend, as it shows that its price has been rising steadily over the last 200 days.

As of last week, the S&P 500 was trading 12% above its 200-day moving average. In the last 20 years, this has happened 13 other times. Here’s what happened 3 months later:

The returns were positive 62% of the time, with an average gain of +0.75%. 13 out of 13 times, however, there has been a decline. The average decline was 5.36%, around 27 days later.

So what does this mean for you as an investor? It means that in the past when the stock market has hit these high levels there have been some ups and downs over the next few months. Does it mean history will repeat? Not necessarily, but we can use history as a guide to help us prepare for what could be ahead, and leverage any opportunities that may present themselves.

Thank you for reading, much more to come!

Brian