Emerging Economies Drive Growth in Global Shipping and Trade

Approximately 80% of all S&P 500 companies have reported fourth-quarter earnings as of today, and of those, 75% have reported earnings per share (EPS) above estimates. That’s well above the 10-year average, according to FactSet.

The reason I bring this up is because many investors and pundits appear to believe that the only stocks doing well right now are the so-called Magnificent 7 (Apple, Alphabet, Amazon, Meta Platforms, Microsoft, NVIDIA and Tesla).

No doubt about it, these tech giants are doing an inordinate amount of the market’s heavy lifting. NVIDIA was the best performing S&P 500 stock last year, rising nearly 240% in an artificial intelligence (AI)-fueled rally, and so far in 2024, the chipmaker is up almost 50%.

This one name doesn’t tell the full story, though, and investors who are sitting on the sidelines may be paying a steep opportunity cost.

Or maybe not. This week, we learned that Japan and the U.K. have fallen into recession, with Japan losing its status as the world’s number three economy to Germany. Contagion is a real risk.

That’s why I always advocate for portfolio diversification; specifically, I recommend a 10% weighting in gold, with 5% in physical bullion (bars, coins and jewelry), the other 5% in high-quality gold mining stocks, mutual funds and ETFs. Rebalance at least once a year.

There’s a chart that I update semi-frequently comparing the performances of gold and the market so far this century. As of the end of last year, gold was still outperforming the S&P 500, with gold delivering a CAGR (compound annual growth rate) of 8.46%, beating the S&P 500’s 7.07%. (The dragons appear on the chart below in observation of China’s Lunar New Year. Happy Year of the Dragon!)