UPDATE

🌤️ Happy Friday

Good morning, it’s the end of the week! We wish you a happy December and what looks like the start of colder weather (if you enjoy that).

For those of you with a .edu email address, it’s around that time in the semester when final exams and projects are coming up. Best of luck with your academics as we enter the home stretch of 2023!

Read time: 4 minutes

WEEK IN REVIEW

📈 Market Performance

Wall Street Bull by Scott Beale, via Flickr

The story of the past month has been the S&P 500 pushing toward the 4,600-point mark. To recap, it was looking increasingly unlikely, during the fall, that the market would recover from its downward spiral.

A few months later, we’re projecting it’s only a matter of time before the S&P index breaks 4,600 points. You might be asking “Why is this so important?” The S&P 500 has only ever reached above 4,600 points during late 2021. While a numerical value on the index doesn’t necessarily mean much in a vacuum, these gains point to the companies within the index gaining significant value (and since they are the 500 largest) it’s a good predictor of corporate performance.

S&P 500 (1-month), via Google Finance

Here’s an experiment for you: pull up the 1-month stock view of Apple, Amazon, Google, or Microsoft. What you’ll see is a very similar growth pattern between these companies and the indexes they sit within. If you hold these individual stocks, that’s a win, but for those who have index funds in retirement accounts, the growth of all companies will also push the value up.

The S&P hit its highest point last Friday at 4,594.63. Any good news about rate decreases or macro events that predict more success in the future should help the index push right past that.

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via Surfshark media

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MARK IT. EXPLAINED

🔐 The Difficulty in Valuing Crypto

Crypto Market, via Penn Today

Here at MARK IT., we like to talk in-depth about value investing and the perks of long-term holding to build wealth. But we know many have different investing styles or might not be into the investing world just yet. For example, there are day traders, Forex traders, and cryptocurrency traders. 

With day trading, for example, one might be trading stocks within a day or a few days, but the underlying asset is the same. Someone who buys Apple stock for the long term and someone who trades Apple stock within the day are both buying the same stock. This has benefits because it's easier to value a stock using discounted cash flow, and once you trade the stock enough, you even understand how it moves in the short term. 

That is why cryptocurrency is so hard to value and so volatile: there's nothing tangible to peg the asset to. A company must report its cash flows, making it easier to figure out a stock's direction. Foreign currencies may be sensitive to macro shifts and trade deals. But what is crypto sensitive to?

⚖️ The Strength Index

Here's where the RSI comes in, and it's something that we've explored in the past. The RSI (or relative strength index) is a measure of how overbought or oversold something is. This could be important to know, as more people buying an asset means that the asset could be subject to hype instead of its fair value. Any stock screener can show you the RSI on a given ticker. An RSI below 30 means undersold, and an RSI above 70 generally means overbought. Anywhere in between means that the crypto coin (or stock) is trading somewhere around its fair value. 

The RSI is just one tool in the value investor's toolkit. It's never a good idea to buy or sell something based on one metric. That's why we report on cash flows, enterprise value, debt, and company actions. With cryptocurrency, many of these metrics don't exist, which is why it's necessary to default to the RSI. 

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🤝 Keep in Touch

• For general announcements or updates on what we're working on, follow Abbas on Twitter 👉 @RealAbbasAkhtar

• Also, we want to hear your feedback! Send any comments or suggestions to [email protected]

Thanks again for reading!

Nothing MARK IT. publishes constitutes professional and/or financial advice, nor does any information published by MARK IT. constitute a comprehensive or complete statement of the matters discussed.