Earnings will be the KEY next week. MSFT and AMD on Tuesday. META reports on Wednesday. AAPL and AMZN on Thursday. We will be fully into earnings next week....with a HUGE number of other big name companies reporting.
AND....yes....earnings are coming in GREAT even though you dont hear much about it in the day to day financial media. EARNINGS INSIGHT https://advantage.factset.com/hubfs/Website/Resources Section/Research Desk/Earnings Insight/EarningsInsight_072624C.pdf Key Data • Q2 2024, 41% of S&P 500 companies have reported, 78% reported a positive EPS surprise, 60% reported a positive revenue surprise. • Growth: Blended earnings growth rate for the S&P 500 is 9.8%. If it continues it will mark the highest year-over-year earnings growth rate since Q4 2021. • Guidance: 16 S&P 500 companies issued negative EPS guidance, 16 S&P 500 companies issued positive EPS guidance. • Valuation: Forward 12-month P/E ratio for the S&P 500 is 20.6. Above the 5-year average and 10-year average.
I agree completely. 'Get on with it': Why the Fed's first rate cut wouldn't be that big of a deal https://finance.yahoo.com/news/get-...-wouldnt-be-that-big-of-a-deal-140218850.html
I didn't get to pay a whole lot of attention last week, but I did get to see a bit of the noise on a couple of the down days. I thought it was a bit interesting the :hair on fire" response. It was another one of those "this is it" reactions as usual. This was the moment all of the pundits have been warning about....since forever. Waiting, waiting, waiting....for all of their little chatter to bear fruit. However, when you look back at the week, the general index was not as bad as it was portrayed. Yes, there were some individual companies that took a hit, but when you look at the bigger picture, many of them have been on a knock-out run for a couple of years. They have been smoking returns. I don't find it surprising or alarming that a pull back would occur. In fact, it would be quite normal. It is always something. If the market is going like gang busters....well, it has over run and went too far. If it flops and drops....well, it has oversold and over reacted. If it is muddling along and drifts either way....well, their is no interest in the market or some aversion to investing. The trap door to invest with emotions is always open. Take the long view. Everyone I know (myself included) that has invested reasonable and rational over the long haul is sitting with a portfolio much, much larger than when they started. This includes all of those times that were not so great and everything in between.
Next week, as mentioned will be more earnings. A chance to take another measurement of some of the companies you may hold or might be thinking about. Take a look under the hood for yourself and don't rely on what some talking head evaluates for you.
As to what Smokie said above....here is the week to come. Big Tech earnings, a Fed meeting, and the July jobs report: What to know this week https://finance.yahoo.com/news/big-...-report-what-to-know-this-week-113019417.html
Well not a bad start to the day today. I know I am in the green to start the day and the week since only one of my stocks is down ......AAPL.
I like this little article. Outstanding GDP Data Suggests it’s ‘Bounce Time’ for Stocks https://investorplace.com/hypergrow...gdp-data-suggests-its-bounce-time-for-stocks/ (BOLD is my opinion OR what I consider important content) "Key Takeaways: For the past two weeks, the stock market has been mired in its worst selloff of the year. Despite fantastic earnings from the tech sector, investors are caught in a selling frenzy on fears that the ‘AI Bubble’ is about to pop. But this morning’s encouraging GDP numbers should offer a reason for stocks to bounce back in a big way. Today’s new data showed that after a sluggish first quarter, the U.S. economy rebounded strongly, growing by an impressive 2.8% – far above expectations of just 2%. At the same time, the official GDP Price Index – a good measure of inflation – rose just 2.3% in the quarter, less than the 2.6% expected by economists and very close to the Fed’s 2% target. Our technical work suggests the ongoing stock market selloff is quite overdone. It should end soon, both in terms of time and price. And stocks will likely spend the rest of the summer rebounding with vigor. For the past two weeks, the stock market has been mired in its worst selloff of the year. Despite fantastic earnings from the tech sector, investors are caught in a selling frenzy on fears that the ‘AI Bubble’ is about to pop. But we think this morning’s encouraging GDP numbers should offer a reason for stocks to bounce back in a big way. Indeed, today’s new data showed that after a sluggish first quarter, the U.S. economy rebounded strongly, growing by an impressive 2.8% – far above expectations of just 2%. At the same time, the official GDP Price Index – a good measure of inflation – rose just 2.3% in the quarter, less than the 2.6% expected by economists and very close to the Fed’s 2% target. In other words, last quarter, the economy grew more than expected while inflation ran softer than expected. It was what economists call a ‘Goldilocks’ report. In Q2, the economy was hot enough to sustain good growth yet not enough to reignite inflation. That’s a perfect balance to strike. GDP Numbers Support Higher Stock Prices Now, considering this was such a ‘Goldilocks’ GDP update, it makes little sense for stocks – especially tech stocks – to keep falling. Indeed, over the past 10 days, tech stocks – as benchmarked by the Nasdaq Composite – have dropped more than 6.5%. That matches their biggest 10-day sell-off since the tech bull market started in late 2022. Why are stocks in the midst of their worst selloff in nearly two years while the economy is growing at a ‘perfect’ pace? Well, it’s all fear-based. And the fundamentals don’t support it… Especially considering that corporate earnings have been very good. Of course, only about 300 of the 3,000 stocks in the Nasdaq Composite have reported earnings so far. But those 300 have reported largely stellar earnings, with revenues climbing nearly 5% and profits rising more than 7%. With the economy chugging along and corporate profits rising at a healthy pace, the stock market shouldn’t keep falling for much longer. The Final Word When it comes to today’s stock market, the fundamentals are just too strong. They support higher stock prices. And we think that’s exactly what we’re going to get. Indeed, our technical work suggests the ongoing stock market selloff is quite overdone. It should end soon, both in terms of time and price. And stocks will likely spend the rest of the summer rebounding with vigor. We think that incoming bounce should be especially pronounced in AI-powered tech stocks. The investment implication? It’s time to buy the dip in tech." MY COMMENT Bottom line....if you are an actual long term investor.....forget the short term. Focus on staying invested and in the markets for the long term gains. Although....I dont trust much of the government data.
To continue the above. Volatility and the Tech Leadership Dip Countertrends tend to pair with pullbacks. https://www.fisherinvestments.com/e...entary/volatility-and-the-tech-leadership-dip (BOLD is my opinion OR what I consider important content) "After a rough patch in markets, Friday’s market returns brought a timely reminder: Volatility cuts both ways. Up and down. Here is another reminder: Volatility often brings sudden, short-lived leadership changes, which market lingo calls countertrends. They often come and go as quickly as the broader ups and downs. Extrapolating any of it forward is perilous, in our view. We point this out because stocks’ pullback—which amounts to a -4.2% global slide from July 16 through Thursday’s close—isn’t the biggest story about this volatile stretch. That would be Tech, down -9.8% globally since its last high on July 10, also through Thursday’s close.[ii] Its underperformance, coupled with value stocks’ newfound leadership, has spurred a cacophony of leadership shift talk. Overstretched Tech and Tech-like stocks are done, the chorus says, while the prospect of looser fiscal policy and maybe even lower rates give value the baton. In our view, it all smacks of reading too much into short-term market movement and seeking a fundamental cause where little exists. Folks did this with Utilities earlier in the year, and it didn’t really work out. That period shares something critical with the present: It paired a stock market pullback with a sector countertrend. This is actually pretty darned normal. When sentiment-fueled volatility hits, it manifests in multiple ways. There is the market downturn, yes. But there can also be sector or category effects. If sentiment turns on stocks, it often naturally turns hardest on the areas that were leading. That is where the so-called “profit-taking” (a rather meaningless term that assumes you don’t reinvest the money) will concentrate. And as a general rule, the category that leads in an up market tends to get hit hardest in pullbacks and corrections (short, sharp, sentiment-fueled drops of -10% to -20%). It is all part of the sentiment reset such moves constitute. In the spring, when Utilities shone briefly, stocks pulled back as the world digested the higher perceived probability of outright conflict between Iran and Israel in the Middle East. Traditionally defensive categories including Utilities and the old Telecom sector (now an industry within Communication Services) held up better, as they usually do when fear gets tight. Fed rate cut chatter also escalated at this time, boosting rate-sensitive areas—including Utilities. In time, the market resumed rising, and the bull market’s broader sector trends reasserted themselves. We suspect this latest countertrend will also pass as bad volatility gives way to more of the good volatility. Whether Friday was the start, it is impossible to know. But all this stuff tends to begin and end without warning, often when people least expect it. That goes for corrections and pullbacks, and we think it also goes for sector leadership. Yes, rotations happen mid-bull market. But they usually act more like dimmers than on/off switches. They happen in fits and starts, gaining some ground and then giving some of it back. This tends to happen to little notice or fanfare. You generally don’t get endless headlines shouting about a leadership rotation as one actually unfolds—too gradual, too sneaky. The last 10 days? Nowhere near gradual or sneaky enough, and far too much attention. Stocks are efficient and will price leadership rotation talk quickly … and if experience teaches us anything, it is that stocks will likely do something different than everyone suggests. Also, we have seen this movie before. Exhibit 1 shows MSCI World Index returns and the Tech sector’s relative returns since the long global bull market began on March 9, 2009. When the yellow line is rising, Tech is outperforming. This long stretch includes some interesting times. Its first few years featured value leadership, then Tech had a strong run early in the 2010s before disappointing again on a relative basis through mid-decade. At that point, you will see Tech began to lead in earnest. During periods of Tech leadership, the sector’s relative returns more often fall with the market when declines come. Pullbacks and countertrends, hand in hand. The short bear market that accompanied 2020’s initial lockdowns is an outlier, of course. What was bad for the broad market (lockdowns) was pretty ok for Tech, with many of its software companies benefiting from home working and home shopping. But then Tech underperformed during the 2022 bear market, which we think was a sentiment reaction to a host of fears (e.g., the war in Ukraine, hot inflation, spiking oil prices, rate hikes and more). And during this bull market, which began in October 2022, Tech’s relative return trends have ebbed and flowed in tandem with global stocks’ swings. Exhibit 1: Tech’s Evolving Relationship With the Broad Market Source: FactSet, as of 7/26/2024. MSCI World Index and Information Technology sector returns with net dividends, 3/9/2009 – 7/25/2024. MSCI World Index returns indexed to 100 at 3/9/2009. Tech relative returns indexed to 1 at 3/9/2009. In light of this, we think it would be too hasty and myopic to presume a lasting leadership rotation has suddenly arrived. The recent history of volatility and countertrends points more to the past 10 days being simple, normal wiggles. At some point, value will have its time in the sun. And at some point, Tech and Tech-like stocks won’t lead the pack. But this shift will probably happen in messier fashion, when few anticipate it. And even then, value leading doesn’t automatically mean Tech suffering. In a bull market, it would likely mean Tech and growth stocks in general rising, with value rising more. Probably with a lot of give and take to fool the masses, which seems to be the market’s second-favorite pastime … after delivering long-term growth." MY COMMENT AMEN. Rotations dont suddenly explosively happen in one day. That is simply MEDIA BS......which of course traders amplify to drive their trading activity. Also as noted above....."the chorus says, while the prospect of looser fiscal policy and maybe even lower rates give value the baton". Well again I call BS.....you cant have it both ways. For years now we have heard the constant blather that the big cap tech stocks went down because interest rates were up. That they are so interest rate sensitive. If that is true they should LOVE the rate cuts and go up even faster. The bottom line people that repeat this sort of "stuff" are either intentionally spouting BS......or....they really are ignorant and are simply repeating what they are hearing and seeing from others to look like they know what they are talking about. I tend to prefer the second explanation. I dont buy the interest rate sensitivity argument that is used to drive tech stocks down on a short term basis.......so....I dont believe that rate cuts will be negative to big cap tech either. I also dont believe we just saw a massive one week rotation in the markets. AND.....even if we did....do I care....NO. I dont change my investing thesis based on rotations or anything else as long as the companies I own are leading the world as the cream of the crop.
I have been talking about this in general on here for many months. DEMAND DESTRUCTION in the restaurant business. My daily observations of restaurant business reflected the same thing. ALL the places we go to are not as busy....including fast food. They raised menu prices too high too fast and killed a good chunk of their business. Some of these price hikes were justified....but much was NOT. A meal that used to cost $12 jumping up to $16 is crazy and we have seen that at many of our regular places. The price hikes far outstripped inflation. A number of our regular places paid the price and are now BELLY UP......they are gone. I dont buy the political argument....especially with the down home local type places we go to all the time.....that inflation is simply greed. BUT....many smaller restaurants went way too far with the price hikes and they are now gone. McDonald's misses Q2 estimates across the board, as consumers pull back on dining out https://finance.yahoo.com/news/mcdo...sumers-pull-back-on-dining-out-110302257.html I note that good old.....CMG.....killed it on their earnings. Of course the markets do not reward success over the short term anymore.
This is no doubt the reason for the drop in AAPL today. Apple's AI Features Rollout Will Miss Upcoming iPhone Software Overhaul https://finance.yahoo.com/news/apple-intelligence-miss-initial-launch-183849574.html
The markets and the averages have now definately backed off from the earlier gains. I now have four stocks that are RED.....and only a slight gain. NVDA is now slightly in the red. Here we are in the middle of a massive BULL MARKET......and the short term is more irrational than ever. Of course I should note....so is the financial media. The herd behavior on the part of the media is simply incredible. I see the same story-line of the day spouted across all media platforms nearly every day. There is typically ZERO original thought or analysis. In fact there is usually ZERO analysis at all....simply repeating of media talking points. it is EXTREMELY rare to see any sort of media discussion of fundamentals or business operations and results. If they do include a little bit of this discussion....it is by quoting some source. This leads me to the easy conclusion that most.......if not nearly all......of the day to day financial reporters are SIMPLY IGNORANT. In reality they don't have any real knowledge of business or investing. Pretty sad.
YES.....another day that I was out all day after mid morning and missed it all. Does not look like I missed much anyway. I ended down.......as is typical when NVDA is down by more than $1. BUT....I still had six of nine stocks in the green. I am content to simply do nothing and let NVDA get done with consolidating the pre-split gains. This consolidating and infilling by NVDA may last till the earnings in August. It is probably a healthy thing for the stock. I am sure.......some if not many...... investors will start to get antsy and will sell to try to lock in the NVDA gains. As for me I will hold and wait for earnings and beyond. After all this is a long term holding.....at least 2-5 years and hopefully much longer. Oh yes.....I also lost out to the SP500 today by 0.33%.
Speaking of NVDA......YES.....I know this sort of data is worthless and meaningless......but it is fun to think about. How Much Would $10,000 Invested in Nvidia Stock 20 Years Ago Be Worth Today? One well-placed investment 20 years ago would've made you a millionaire by today. https://money.usnews.com/investing/articles/nvidia-corp-nvda-stock-investment-worth-today (BOLD is my opinion OR what I consider important content) The size of Nvidia Corp. (ticker: NVDA) is staggering: It's the third-largest company in the U.S. by market capitalization, with a valuation north of $2.8 trillion. By that metric, the semiconductor company is larger than Warren Buffett's Berkshire Hathaway Inc. (BRK.A, BRK.B) and multinational conglomerates like Johnson & Johnson (JNJ). On top of that, Nvidia is still growing. The stock is already up a staggering 126.8% year to date through July 25, driven largely by growing demand for high-performance chips that power artificial intelligence. This followed an incredible 239% surge in 2023 that made NVDA the single best-performing stock in the S&P 500. That said, Nvidia hasn't always been a stock market darling. It went public in an initial public offering back in 1999 and has earned its current status as a tech star through decades of evolution and innovation. Here's some background on the company's history, and a bit of math on how much a $10,000 investment in NVDA stock 20 years ago would be worth today. Nvidia's 30-Year Journey Nvidia was founded in April 1993. Jensen Huang co-founded the company with Chris Malachowsky and Curtis Priem and remains its CEO. Back in 1993, Huang and the other co-founders realized that graphics-based computing would be a large opportunity in the coming years. Innovations in the video gaming market would give Nvidia a profitable niche while allowing the company to build up the research, development and patent base necessary to branch out into related fields. Nvidia launched the first model of its GeForce graphics card in 1999, the same year as its IPO. Over the years, GeForce has gone on to become the dominant brand in graphics cards for high-resolution gaming and video performance. Nvidia was hardly just a one-trick pony though, as its business has moved well beyond video gaming. Investors have reaped the rewards along the way. Nvidia split its stock in 2000, 2001, 2006, 2007, 2021 and 2024. All told, an investor who bought 100 shares of NVDA stock in the 1999 IPO would now own 48,000 shares of Nvidia thanks to all the share splits along the way. Shares started trading at around 4 cents apiece on a split-adjusted basis in 1999. And, again on a split-adjusted basis, shares were still going for less than 50 cents a pop as recently as 2015. That's when Nvidia's second act, cryptocurrency, really kicked into gear. As it would turn out, Nvidia graphics cards ended up being ideally suited for solving the cryptographic puzzles needed to mine Bitcoin and other leading proof-of-work-based cryptocurrencies. As cryptocurrency prices soared, digital asset-mining firms could afford to invest a lot more in Nvidia's graphics processing units, or GPUs, to mint more digital coins and tokens. Nvidia's revenues saw exponential growth, jumping from $5 billion in 2016 to more than $11.7 billion in 2019 amid the historic surge in the price of Bitcoin and related cryptos. While cryptocurrency-related graphics card demand has dried up some in recent years, Nvidia enjoyed a huge rise in demand for high-end gaming cards during the pandemic, as people were stuck at home with more time to pursue their hobbies. In addition, Nvidia's data center business has also enjoyed robust growth. This led revenues to further surge to $27 billion for fiscal year 2023. Today, with the jump in orders for artificial intelligence-related chips, it seems clear that generative AI and large language models will power the next act of Nvidia's tremendous growth story. Fiscal 2024 revenue surged 126% to $60.9 billion, and analysts expect another year of blockbuster growth in the current fiscal year, with revenue expected to surge more than 98% to $120 billion. There simply isn't another large-cap growth story like Nvidia in the stock market today, which is why its stock price has been going stratospheric in recent years. Nvidia Stock by the Numbers Between its 1999 fiscal year and fiscal 2024, Nvidia grew its revenue 385-fold. Interestingly, much of this growth occurred within the past few years as Nvidia made large strides outside of the video game graphics space. The company's net income grew by an even larger multiple: Fiscal 2024 net income was more than 7,200 times larger than it was in fiscal 1999. A $10,000 investment in Nvidia made in July 2004 would have grown to a stunning $10.05 million today. This works out to an incredible 41.3% compound annual growth rate for investors who held on over the past 20 years. This return demolished the S&P 500, which delivered an 8.3% compound annual growth rate over the same period. A $10,000 investment in the S&P 500, by contrast, would have turned into $49,707.42 over the same 20-year period. Nvidia: What Analysts and Investors Are Saying Famed investor Stanley Druckenmiller, while attending an investing conference in June 2023, discussed his purchase of Nvidia shares: "If it's as big as I think it is, Nvidia is something we are going to want to own for at least two or three years." While Druckenmiller conceded that the firm's valuation level was "lofty," he countered that objection by noting that: "I do believe, unlike crypto, AI is real … it could be as transformative as the internet." Druckenmiller – a billionaire who at one time managed money for George Soros – has seen those comments age well. While it may be too early to dismiss crypto entirely, AI-powered developments such as ChatGPT and image generation products seem likely to gain mass consumer adoption in a way that non-fungible tokens and blockchain never quite achieved. These impressive AI applications serve as the sort of must-have product that makes artificial intelligence seemingly more likely to sustain a long bull run than other recent technological developments. Right now, Nvidia appears to be in the early stages of what should be a sustained period of sharply rising demand as large enterprises race to deploy their own AI models. In this sort of AI arms race, the momentum factor could prevail over more fundamental-driven valuation analysis, at least in the intermediate term. Investors tend to do well when there is accelerating revenue growth and rising profit margins. Nvidia shares more than tripled in 2023, and are already up a tremendous amount in 2024. It's hard to argue that shares are a bargain today based on traditional valuation metrics. Nevertheless, analysts project an incredible 98.2% revenue growth rate for Nvidia in its current fiscal year, driven by an insatiable increase in AI-related investments. Given the strength of that underlying trend and Nvidia's tremendous long-term track record, it wouldn't be surprising if Nvidia continues to rally despite the elevated starting valuation." MY COMMENT WHAT could have been if we had all been smart enough to get in 20 years ago and hold on through it all. It is fun to see this data and dream. BUT....it is not about hitting that one big stock....it is all about good returns.....in a portfolio..... over a lifetime. AND....if you are lucky and have a bit of foresight....who knows.....you might at the same time stumble onto a stock like MSFT from about 1990 to 2002 or NVDA from about 2016 to now....in the process.
LOL......the so-called "rotation". Weekly Market Pulse: The Great Rotation https://alhambrapartners.com/weekly-market-pulse-the-great-rotation/?src=news (BOLD is my opinion OR what I consider important content) "The Great Rotation from large cap stocks to small cap and value stocks that started a few weeks ago, continued unabated last week. There’s a lot of skepticism out there as to whether this can continue, from Wall Street pros to the amateur pundits who dominate places like Redditt and Twitter (I refuse to call it X), but the market doesn’t seem to care; small cap and value stocks have trounced large cap stocks (growth in particular) over the last month. The more interesting question is whether this narrative makes any sense at all. What if the “great” rotation is merely correcting a short-term phenomenon that is only a year old and that prior to that period, there was no need for a great rotation? The narrative since the aftermath of the 2008 crisis has been that the S&P 500 was the winner you had to own, that owning anything else was a mistake. But is that true or is it just the story Wall Street wants to tell? What would you say if I told you that from the bottom of the 2008/9 bear market to the top just before COVID, small cap stocks outperformed the S&P 500? What would you say if I told you the best performing asset during that period wasn’t large or small cap stocks? What would you say if I told you all of those things are also true from the COVID bottom to the beginning of this year? What would you think if I told you that the outperformance of the S&P 500 is actually just a short term, recent phenomenon that started in 2023 and that this great rotation is nothing more than markets returning to normal as the AI hype fades? Well, all of that is true so if you been having a lot angst about whether you should own the S&P 500, take a deep breath and relax. You don’t. From the financial crisis bottom on February 9th, 2009 to the bull market top on February 19th, 2020, the S&P 600 and the CRSP small cap indexes both outperformed the S&P 500. What didn’t outperform was the Russell 2000 index of small stocks that most people take as the benchmark. But why is that the benchmark? No good reason I know of and when you look at it, one wonders why exactly it should be. Roughly 40% of the Russell index is unprofitable junk that will never be profitable. The median market cap is just $900 million and the smallest company has a market cap of just $10.8 million (PRST). The stocks in the index run from microcap junk to midcaps; the biggest holding has a market cap of $12 billion. And, as I mentioned above, small and large cap stocks were not even the best performing major asset during that time frame. That was the DJ REIT index which outperformed the S&P 500 by 85 basis points a year over that period. When Wall Street says that small cap stocks have underperformed, what they really mean is that the smallest, junkiest US stocks that trade publicly have underperformed. I don’t know about you but I am not exactly shocked by that. The S&P 600 and the CRSP small cap indexes both have financial viability screens which require that companies in the index be profitable; the Russell 2000 does not. There are differences between the S&P 600 and the CRSP index; the CRSP index has more than double the number of stocks of the S&P 600. But either of them are a major step up in quality from the R2000. There are times, I suppose, when it might make sense to own the junkier index, but if you want to stick to high quality merchandise (and we do) you should probably just remove the R2000 from your list of potential investments. Value stocks haven’t performed as poorly as advertised either unless you think your only option for large cap value is the S&P 500 value index. It is another index that is, in my opinion, poorly constructed and not representative of what value investors look for. There are some large cap value funds out there that have consistently outperformed the S&P 500 over long periods of time. We have, over the years, used two: Dodge & Cox Stock (DODGX) and Oakmark (OAYMX) both of which we own currently in our client accounts (although we have mostly shifted to Oakmark in recent years). Both of those funds have outperformed the S&P 500 by a wide margin this century. What’s really going on right now is that the market is correcting some of the AI hype and the bank crisis fears of the last year. Small, midcap and value stocks started to underperform when the mini banking crisis hit last spring. It was also around that time that AI stocks started to get noticed, although it wasn’t until this year they really took off. Now it seems that maybe the mini-banking panic and the promise of AI were both overblown. Since the week Silicon Valley Bank failed, regional bank shares are up less than 5% total, but since the week after SVB’s failure, they have outperformed the S&P 500. They have continued to catch up during this rotation, up over 20% just since July 1st. The post-COVID period has been similar with large cap value, small caps, and midcaps all keeping pace with or beating the S&P 500 through May of last year. Since the end of May last year, the real rotation was into the S&P 500 as it played catch up with the other parts of the market. The outperformance of large cap growth from the end of May last year until July 10th this year was impressive but in just two weeks, the gap has been closed considerably. And the gap wasn’t closed merely because small and mid cap stocks started going up; it was closed because large cap growth stocks came back to earth. The S&P 500 growth index is down 7.4% over the last two weeks while all the others have risen. That’s the kind of rapid downdraft you should expect in highly valued stocks and it’s why we’ve been avoiding the S&P 500. And no, this isn’t enough of a correction to get me interested in buying it. REITs have also started to perform better, primarily due to rising expectations for Fed rate cuts. REITs performed very poorly during the Fed rate hiking cycle, down 9% since the spring of 2022 while stocks are higher during that time. But since rates peaked late last year and the Fed signaled they expect their next move to be a cut, REITs have performed almost the same as stocks. If rates keep coming down I expect to see REITs recover some or all of the ground they lost to stocks during the rate hiking cycle. Real estate, of all kinds, was the only sector of the economy to really respond to the Fed’s rate hikes and I expect it to recover rapidly if and when rates come down. That may be more true of commercial real estate than residential because a lot of CRE loans are priced as a spread over SOFR (the LIBOR replacement), a short-term rate which is directly influenced by the Fed’s actions. The great rotation is nothing of the sort. It is just markets getting back to normal after a flight of fancy that is not as fancy now as was thought a few weeks ago. These thematic reveries seem to happen more frequently these days but most of them are chimeras, forgotten as soon as something newer and shinier comes along. Investing isn’t about rushing to get in on the next big thing. It’s about buying the things that are out of favor today, unloved stocks and markets that are cheap now with the potential to be more dear in the future. Just be aware that the future may not arrive in all parts of your portfolio at the same time. If you aren’t mad about at least one part of your portfolio all the time you aren’t properly diversified. The world isn’t always as it is portrayed. There is no great rotation that just started a couple of weeks ago. Take a look at the chart below and you’ll find that large and small cap value stocks have outperformed large cap growth stocks over the last three years. Mid and small cap value stocks have outperformed mid and small cap growth stocks over the last 5 years as well. That isn’t what most people believe but it is true. The outperformance of value stocks is not an emerging trend. It has already emerged and so has the trend toward smaller companies. The last year was the anomaly, not the last two weeks." MY COMMENT So.....there is your...."great rotation".
The flip side to the above. Why Tech Stocks Are Poised for a Strong Comeback Now From head to toe, the fundamentals supporting tech stocks right now are very good https://investorplace.com/hypergrow...-stocks-are-poised-for-a-strong-comeback-now/ "Earnings are strong......companies are spending billions to build and integrate new AI products and services......AI adoption at both the enterprise and consumer levels remains low and will only increase over the next few quarters and years. Inflation is falling toward the Fed’s 2% target. That should continue as well.......companies have stopped hiking prices.......commodity prices – like oil and copper – have been in a freefall. The outlook for Fed rate cuts is locked in, and will remain the case. With inflation back to nearly 2% and the job market starting to crack.......the Fed will cut rates multiple times over the next six months. The economy is growing at a healthy pace........the U.S. economy should only strengthen going forward."
NVDA.....well.....down over 12% over just five days. In fact down over 4% today alone. Why? I dont know, I dont see anything. Probably profit taking as market skittishness continues to take hold. The stock is at $107......a bargain compared to recent highs of about $135. BUT......I am not saying anyone should buy it....that is up to "you". To "me"......with their fundamentals lately......I have ZERO clue why or what people are thinking........NOR.....do I care.
The big story of the day.....which we will get after the market closes. Microsoft to report fiscal Q4 earnings as Wall Street eyes AI revenue and spending https://finance.yahoo.com/news/micr...t-eyes-ai-revenue-and-spending-205805875.html
Actually......I dont see much of anything going on today that is relevant to the markets. Some times the markets just want to go down. It does not matter why or if there is a reason. That is about where we are right now. The markets are trying to have a correction. In fact there are a good number of companies that are in correction........many on the big cap side of things.....and are in focus right now. It is the MEDIA story-line of the moment.....so this trend has momentum. Of course momentum driven trades are....short term "stuff". I do believe that this little story-line.....will once again.....cause us to ignore and basically squander a good earnings season. If we keep this up for long we will create a market where earnings do not matter......at least good earnings. Welcome to.....BIZARRO WORLD.
