The Monthly Review: February

This month, American stock markets have reached new highs, with the S&P 500 approaching 5,150 and the Nasdaq nearing 16,300 points. The S&P 500 closed its fourth consecutive positive month, gaining +21.5%, a significant increase seen only six times in the past 80 years, usually after a recession or during the early 2000s bubble.

However, the rally's low market breadth is concerning, as it has been primarily driven by the "Magnificent Seven," which have now narrowed down to just two leaders: Meta and Nvidia. While Meta is up nearly 40% and Nvidia over 70%, Google and Apple are in negative territory, and Tesla has lost more than 25% of its value.

Despite a good earnings season, including strong results from Nvidia, the overall market indicators do not suggest a continuation of the rally. Observers note that geopolitical news is often ignored by stock investors, who remain optimistic about economic indicators, while bond investors are more cautious about future interest rates. The only rising bond index this year is the high-yield index.

The analysis highlights the risks of investing in a seemingly strong market, drawing parallels to Cisco's past performance, which peaked in the late 1990s but never returned to those highs. Warren Buffett's advice to invest in solid companies and the S&P 500 is reiterated, emphasizing the importance of repurchasing during market declines. In conclusion, while current market performance appears positive, caution is warranted as potential risks loom.