Turning the Page to 2024

Farewell and thank you to 2023 which exceeded almost everybody’s expectations after a dismal 2022 and predictions of a dire recession.  This blog was more positive than most, projecting a 5% to 10% gain for the S&P 500 vs. the actual price gain of 23.9%.  Now it’s on to 2024.  Let’s start with our quarterly look at benchmark index ETFs.

The ETF reports on ValuEngine that follow market benchmarks provide a side benefit in writing market analyses.  They are a window to implicit forecasts for 3-, 6- and 12-month forecasts that VE models make for each benchmark’s ETF portfolio holdings.  This is because the ratings and projections combine bottom-up constituent analysis with analyses of the historical price movements of the ETF in different market environments.   This empowers us to provide both looks back and share our model’s views on that which lies ahead.  

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The benchmark indexes and ETFs analyzed here are:

  1. The S&P 500 Index representing US Large Cap. The ETF is iShares’ SPY;
  2. RSP, an equally weighted S&P 500 ETF representing an equally weighted version of the S&P 500;
  3. The S&P 400 MidCap Index representing US MidCap. The ETF is SPDR’s MDY;
  4. The Russell 2000 Index representing US Small Cap. The ETF is iShares’ IWM;
  5. The Russell 1000 Large Cap Growth Index. The ETF is iShares’ IWF;
  6. The Russell 1000 Large Cap Value Index. The ETF is iShares’ IWD;
  7. The Nasdaq-100, constructed as an index using the top 100 non-financial stocks with primary listing on the Nasdaq. It is now regarded as the premier US Big Tech Index. The ETF is Invesco QQQ. 

All historical data are as of 12/29/2023


240111 Blog first table
Current ValuEngine reports on these stocks or ETFS can be viewed HERE


  1. The dominant leadership of large cap technology and communication stocks came back with a vengeance in 2023 capping off what has been a 5-year run since the end of 2018.  Even with the bear market in 2022, the leadership went up so much more in the few positive months in the market than other stocks that the higher decline during the first six months of 2022 was quickly reversed. QQQ, the Invesco ETF that tracks the Nasdaq-100, beat every other benchmark index in every time period.
  2. Our predictive model expects much of the same during the next 12 months. Both QQQ and the broader IWF representing large cap growth receive the system’s highest rating of 5 (Strong Buy).
  3. Our valuation model, however, considers the portfolios of stocks held by these ETFs to be very overvalued.  Especially noteworthy is the fact that only 19% of the 100 stocks in QQQ are considered undervalued.
  4. The S&P 500 Equal Weight Index tracked by RSP underperformed its capitalization-weighted underlying index SPLG (the lowest fee of the ETFs that track the S&P 500) by 12% in 2023, the most in any calendar year since the index’s inception.  This may be a warning sign that the S&P 500 leadership is very narrow.  Historically, major corrections have followed narrow leadership.
  5. Looking at the 1-month price gain row, the leadership began to reverse with IWM, which tracks the small-cap Russell 2000 benchmark, gaining 12%. MDY, tracking the S&P Midcap 400, gained just shy of 9%. This  compares to just 6% for QQQ.
  6. Small Cap (IWM) stocks are very cheap relative to large cap stocks on a relative basis – especially by historical standards.  This is true both according to traditional valuation measures and ValuEngine’s proprietary valuation model. Breadth is also something to consider as IWM outperformed the equal-weighted S&P ETF (RSP) on a 12-month basis.

Also, as has been the case lately, there has been distinct differentiation between return performance among the S&P 500 GICS Sectors as characterized by the Select Sector SPDR ETFs as shown here:


Symbol Name 1 Year Returns 3 Year Returns 5 Year Returns Div. Yield %  Standard Deviation P/E Ratio # of Holdings
XLK Technology 60.37% 14.93% 27.05% 0.8% 23.1% 36.5 66
XLF Financial 13.64% 11.14% 12.14% 1.9% 21.2% 17.1 73
XLV Health Care 2.70% 8.50% 11.75% 1.6% 14.6% 23.1 65
XLE Energy 1.26% 35.86% 13.70% 3.6% 30.5% 7.8 25
XLY Consumer Discretionary 43.73% 4.87% 14.02% 0.9% 24.8% 27.9 54
XLI Industrial 19.25% 10.76% 14.36% 1.6% 20.1% 24.5 80
XLC Communication Services 58.05% 3.62% 13.12% 0.8% 21.2% 27.4 23
XLU Utilities -7.28% 4.20% 7.07% 3.4% 18.1% 22.3 31
XLP Consumer Staples -1.10% 4.88% 10.14% 2.7% 14.7% 24.6 39
XLB Materials 13.33% 8.61% 13.74% 2.0% 21.8% 16.5 30
Current ValuEngine reports on these stocks or ETFS can be viewed HERE


  1. After a dismal 2022, the market recovered with a vengeance in 2023. Closing out the year with nine consecutive weeks of gains, the S&P 500® finished with an impressive 26% return for the year. The relentless strength of the Magnificent Seven powered those gains throughout, pushing the mega-cap S&P 500 Top 50 up an astonishing 38%.
  2. Thanks to optimism that the Fed would be able to engineer a soft landing, overall market sentiment improved drastically in the last two months of the year. This broadened the rally, with the S&P MidCap 400® and S&P SmallCap 600® both rising 16% for 2023.
  3. Most sectors posted gains, led by Information Technology, up an astounding 58%, with Communication Services close behind, up 56%.
  4. Two Sectors posted negative returns for 2023: Consumer Staples and Utilities

With so much attention focused on seven stocks, the other stocks in the top 10 in QQQ and/or SPY were out of the limelight. But we’ll take a quick look at them here in comparison with Apple (AAPL), the largest of the holdings in both QQQ  and SPY. 

The four remaining stocks include: 

Broadcom Inc. (AVGO) designs, develops, and supplies various semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products worldwide. The company operates in two segments, Semiconductor Solutions and Infrastructure Software.  Broadcom Inc. was founded in 1961 and is headquartered in Palo Alto, California.

Costco Wholesale Corporation (COST), together with its subsidiaries, engages in the operation of membership warehouses in the US and more than a dozen other countries. The company offers branded and private-label products in a range of merchandise categories. Costco Wholesale Corporation was founded in 1976 and is based in Issaquah, Washington.

JPMorgan Chase & Co. (JPM) operates as a financial services company worldwide. It operates through four segments: Consumer & Community Banking (CCB), Corporate & Investment Bank (CIB), Commercial Banking (CB), and Asset & Wealth Management (AWM). The company also provides ATM, online and mobile, and telephone banking services. JPMorgan Chase & Co. was founded in 1799 and is headquartered in New York, New York.

Adobe Inc., (ADBE) together with its subsidiaries, operates as a diversified software company worldwide. It operates through three segments: Digital Media, Digital Experience, and Publishing and Advertising. Adobe Inc. was founded in 1982 and is headquartered in San Jose, California.

Stock Name Apple Inc Broadcom Inc JP Morgan Chase Costco Whole Corp Adobe Systems
Market Cap, (Bllns.) 2994.37 522.56 491.76 292.9 271.63
ValuEngine Rating 3 3 3 3 4
VE Forecast 3-mo. Price Return 2.88% 3.66% 0.92% 2.77% 3.62%
VE Forecast 1-yr. Price Return 0.86% -3.39% -3.26% -2.67% 6.34%
Last mo. Price Return 1.67% 18.65% 10.23% 12.29% -3.37%
Last 3 mo. Price Return 12.45% 34.39% 17.29% 16.84% 17.00%
Last 6 mo. Price Return 1.55% 29.41% 18.59% 24.15% 23.32%
Historic 1-Yr. Price Return 48.55% 100.11% 27.68% 44.59% 76.73%
Historic 5-Yr Ann. Price Return 28.96% 27.22% 6.78% 18.82% 17.80%
Volatility 30.12% 30.35% 28.51% 22.70% 34.20%
Sharpe Ratio 0.96 0.9 0.24 0.83 0.52
Beta 1.29 1.13 1.14 0.77 1.34
Undervaluation Percentile 77 90 57 80 71
P/B Ratio 48.18 21.78 1.95 11.2 103.48
P/E Ratio 30.79 29.01 10.36 43.8 46.65
P/S Ratio 7.81 14.59 2.19 1.19 14.00
PEG Ratio 4.19 2.32 8.57 3.55
EPS Growth 7.36% 12.50% -5.08% 5.11% 13.14%
Div. Yield 0.00% 1.88% 2.47% 0.62% 0.00%
Current ValuEngine reports on these stocks or ETFS can be viewed HERE


  1. I’ll bet you didn’t know that Broadcom (AVGO) now has the fourth highest market capitalization in QQQ after the stock rose more than 100% last year.  For the year ahead we rate it 3 (Hold) looking for another strong first quarter before it tails off.
  2. All four of these stocks are rated at least 3 by ValuEngine with ADBE rated 4 (Buy).
  3. 4 of the 5 have 5-year annualized price returns higher than that of QQQ’s 16.6%.  Only non-Nasdaq JPM underperformed both QQQ and SPY for that period.  JPM is also the only one of the 5 with weaker earnings growth than QQQ and SPY.
  4. Somewhat counterintuitively all five stocks (including AAPL) are considered undervalued by the ValuEngine valuation model.  Using traditional metrics, only JP Morgan Chase would be considered undervalued.
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  • ValuEngine maintains somewhat positive outlooks for both QQQ and SPY but only somewhere in the 3% – 5% range.
  • Election years in the 2000’s have been a mixed bag return-wise but are generally characterized by increased price volatility.
  • I’m personally looking for lots of volatility, a strong beginning and end but possibly as low as -10% by the end of September.
  • Statistically, timing the Stock Market is generally a loser’s game.  If you have a sufficiently long-time horizon and enough of a safety net, most investors would have been better off ignoring all market news and advice and to stay invested in broad equity market index funds.  
  • Historical reviews predict the past. We know past incidences of returns, we do not know probabilities of what will occur in the future.


By Herbert Blank
Senior Quantitative Analyst, ValuEngine Inc
All of the approximately 5,000 stocks, 16 sector groups, 140 industries, and 600 ETFs have been updated on www.ValuEngine.com
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