This Weeks Topics
AI Is Transforming Finance, Governance, and Tech Giants
The banking sector is undergoing a significant transformation fueled by the adoption of artificial intelligence (AI). Major financial institutions like Citigroup, JPMorgan, and Bank of America are embracing AI to revolutionize their operations, from back-office tasks to customer interactions. By leveraging AI algorithms and machine learning, banks are streamlining administrative processes, enhancing operational efficiency, and extracting valuable insights from data to bolster risk management and compliance efforts. This strategic shift not only improves cost efficiencies but also enables the delivery of innovative, value-added services to customers.
Simultaneously, the AI landscape is witnessing a clash between ideologies, exemplified by Elon Musk's lawsuit against OpenAI. Musk's dissatisfaction with OpenAI's transition to a closed software model led him to develop Grok, an open AI model touted as a competitor to ChatGPT. Grok's unique features, including real-time data access and uncensored responses, challenge ChatGPT's dominance. While Grok excels in certain tests and offers a distinctive personality, its subscription-based model and lack of image processing capabilities present trade-offs compared to ChatGPT.
Beyond the rivalry, the lawsuit underscores broader questions about AI governance and regulation. The outcome will influence the trajectory of AI development, determining whether platforms remain open or adopt closed models, and the extent of censorship. As Microsoft integrates AI into its products, such as Copilot, the potential for exponential growth becomes evident. Analysts suggest that AI could be to Microsoft what the iPhone was to Apple, catalyzing significant momentum and driving cloud deal flow. With AI poised to reshape industries and governance, its implications for humanity are profound, emphasizing the importance of responsible development and regulation in the AI era.
Source: MarketWatch, ABC News, Built In, Business Insider
Indexes on Pace For Best Quarter in 5 Years
“The S&P 500 index SPX was on pace for a gain of about 9.4% in the first quarter, heading for its best three months to start a year since 2019, according to Dow Jones Market Data. The Nasdaq Composite Index COMP was aiming for an 8.6% gain for the quarter, while the Dow Jones Industrial Average DJIA was 4.8% higher for the same stretch, according to FactSet.
All three major U.S. stock indexes reclaimed record territory in the first quarter, after hitting a rough patch two years ago as the Federal Reserve began jacking up rates to fight stubbornly high levels of inflation.” The previous quote is from Joy Wiltermuth of MarketWatch. The Indexes have been crushing it this year as the market has reached new all-time highs and continued to act strong.
Source: MarketWatch
Market Rotation Into Cyclical Stocks
David Lebovitz, JP Morgan’s Asset Management Global Market Strategist, shared advice with Bloomberg this week about investing. He said, "I don't think that this is an equity market that you want to short, and I think you can begin to lean into those more cyclical parts of the market—the industrials and materials, the energy, the financials—and not just rely on mega-cap tech." In recent months, the market has witnessed a rotation, with energy and materials sectors outperforming others, noted Alix Steel, Bloomberg host.
Rotating assets into discounted industrial and energy sectors also serves as a hedge against a potential market reversal. Referring to inflation, Emily Roland, Co-Chief Investment Strategy at John Hancock Investment Management, said, “If we are seeing a real sustained re-acceleration… you want to own more equities on the value side. There's a catch-up opportunity there as those have lagged growth. They're on sale; sectors like industrials and energy deserve a look in portfolios if we are seeing a reacceleration in the data." Owning these value companies provides security against inflation if those numbers do begin to reaccelerate.
Source: Bloomberg Markets
What Will Cause The Next Market Correction?
The market has had one of its best first quarters of all time to start off 2024, this is great news but it also has a lot of people anticipating a steep correction. The thing is, market corrections generally don’t happen spontaneously, they need to have some sort of driving catalyst. A team of investment strategists from multiple firms looked into the nature of the last 27 S&P corrections of more than 10%. The strategists found that each of these corrections was set in motion by one of three things:
1. High and increasing unemployment
2. Increasing bond yields
3. A huge global event
The following chart is from the team of strategists mentioned earlier:
According to the team, the most likely catalyst for the next correction is rising bond yields. Joseph Adinolfi of MarketWatch wrote, “Over the past two years, equities’ sensitivity to higher yields has reached near-record levels last seen near the peak of the dot-com bubble on a rolling 26-week basis. This suggests stocks could still react negatively if long-term bond yields continue to climb, even though equities have been largely immune to the rebound in yields since the start of 2024.” Equities have been extremely touchy when it comes to rate yields, this is why the team believes that the next correction will be yield-induced.
Source: Market Watch
First-Quarter Earnings Season Will Be Pivotal For Market Direction
The market is currently seeing one of its best first quarters of the postwar era, although most analysts are still bullish on the direction of the market, it can’t keep going up forever without taking time to breathe. At some point the market will need a slight correction before it continues up on its way, an inflection point for this correction may be company first-quarter earnings reports.
In recent years investor decisions have been revolving around what the Fed is up to and what rates are at, we are slowly moving out of that market and into one that is based on company fundamentals (earnings, news, corporate activity). Michael Wilson, Chief Economist for Morgan Stanley, talks about how companies and the market are currently trading well above what their valuations warrant, companies are going to need to justify these valuations with strong reports during this earnings season. Wilson also says that we will need to see strong earnings from more than just the Mag 7 and a couple market leaders, we will need broad strength in order to justify the market being this high. “Looking forward, we believe a durable broadening comes down to whether other stocks/sectors can deliver on earnings growth,” Wilson said.
Market participants have been factoring in earnings in anticipation of strong earnings being reported in the coming weeks. Joseph Adinolfi of MarketWatch wrote, “Stock-market bulls justify these lofty valuations by betting that companies will deliver strong earnings growth this year and next. But the disconnect between expectations and reality has intensified,” A key word to think about from this quote is “betting”, as stated earlier, market participants are betting that strong earnings are coming, this means that if companies don’t deliver with stellar earnings across the board, it could cause a strong down move in the market as investors realize that valuations are not on par with the fundamentals.
It is always difficult to gauge how to put money to work when the market is at all time highs, we have to look at the prime movers of the market and gauge whether the moves they cause are justified. With the prospect of lower inflation and Fed rate cuts, investors have been putting their money to work in equities and have caused the market to push to new highs. The question remains, are these valuations inflated? This is what will need to be on the top of every investor’s mind as we move into earnings season.
Source: MarketWatch
Room for Upside Amid Strong Q1 Performance
The first quarter closed on Thursday due to the shortened trading week for Good Friday. Scott Lehtonen, journalist for Investors Business Daily (IBD), stated, “Set to wrap up the first quarter of 2024 Thursday, the S&P 500 is up about 10%, on pace for its best Q1 gain since 2019. The Dow Jones Industrial Average is up 5.5% for the period, heading for its strongest first-quarter performance since 2021. Finally, the Nasdaq is up 9.3% since Jan. 1.” The strong growth was propelled by various factors: strong earnings growth, expectations of three rate cuts in 2024, and hopes for a soft landing for the economy.
Despite the superb growth seen in Quarter 1, Alix Steel, Host of Bloomberg Markets, explains why she believes there is still potential for further growth. She states, "Now Bloomberg Intelligence also pointed out that at a sector level, you still have eight of the 11 groups that are trading at a discount compared to that pre-pandemic level. It's only technologies, materials, and industrials that have that premium, which suggests there is a lot more room for upside." Her insights underscore the ample potential for growth within sectors that have not yet returned to their pre-pandemic levels. It suggests that there may be opportunities for value in these sectors, excluding technology, materials, and industrials, offering potential for investors seeking value in the current bull market.
Source: Investor’s Business Daily, Bloomberg Markets
Incorporating Equities and Bonds for Balanced Portfolios
In a bullish market, diversification remains a key strategy for portfolio management, although opinions on the ideal allocation between bonds and stocks can vary among portfolio managers, especially considering the current state of the market. During the "Bloomberg Markets: The Close" show, two professionals shared their perspectives on where funds should currently be invested.
Christopher Ailman, CIO at CalSTRS, said, "America needs to have a balanced portfolio. And when the equity market runs like this, that's when people need to take some profits and actually rebalance. You can actually make a decent return out of a bond portfolio and I think it is time for people to have some bonds, not 100% of one or the other. I want bonds and I want equities." He highlights the potential for compelling returns from bond portfolios, particularly in the current market environment where they offer a less risky yet attractive yield.
A slightly different perspective was shared by Citi’s Head of Equity Trading Strategy. Stuart Kaiser said, "I mean, our view is you still want to stay in equities here. You know, equities have outperformed bonds significantly in the first quarter. But historically, when that happens, equities tend to outperform the next quarter as well… I don't think valuation is so high at this point that it should keep you out of equities. But you need to be a little more selective in terms of what you're picking."
Kaiser's perspective leans towards maintaining exposure to equities, citing historical trends of equities outperforming bonds after strong quarters. While Stuart Kaiser acknowledges that some companies have high valuations, he suggests that the overall market valuation should not deter investors from equity investment. However, he advises investors to exercise greater selectivity in choosing stocks. In both Ailman's and Kaiser's perspectives, they advocate for allocating funds to equities and building balanced portfolios.
Source: Bloomberg Markets
Navigating the Stock Market: Balancing Confidence with Caution
In recent weeks, the financial markets have consistently reached all-time highs, driven by bullish investors who are pushing the market upwards. This situation prompts the question: should investors remain on the sidelines with their funds, or should they enter the bullish market in hopes of capturing some of the gains? Juan Carlos Arancibia, an author at Investors Business Daily (IBD), offers guidance to address these pressing questions. He wrote, “The S&P is up 9.4% year to date, on pace for its best first-quarter performance since 2019. Whenever it rises at least 8% in Q1, the S&P 500 averages a gain of 9.7% for the rest of the year, according to Dow Jones Market Data. Going back to 1950, it also finishes the year higher 94% of the time.”
The data strongly indicates the likelihood of seeing some gains from this point until the end of the year across the S&P 500. However, it's crucial to keep in mind that historical trends do not guarantee future performance. Despite these positive indicators, there remains the possibility of a correction that could push the S&P lower. Investors should exercise caution and remain aware of potential market fluctuations and risks. Arancibia said, “The stock market's five-month uptrend remains on course, but watch out for potholes…the mere fact that indexes have been climbing without a break for five months is reason to be guarded.”
It is crucial to exercise caution when investing in such bullish conditions. A pullback could occur swiftly in response to various factors such as less-than-ideal economic data, a weak earnings season, or uncertainties surrounding events like the 2024 presidential election. While investors can still seek opportunities in companies demonstrating strong earnings potential, it's essential to avoid becoming overly exposed in equities. Diversification and risk management strategies can help mitigate the impact of market volatility and potential downturns.
Investing in Volatile Times: The Protective Power of Diversification
Amid a surge driven by technology, pushing stocks to unprecedented levels, investors are encouraged to think about diversification as a protective measure. Both the S&P 500 and the Nasdaq Composite have gone up nearly 10% in 2024, reaching record highs recently. Communications services and information technology are leading the market gains, showing strong increases of 16% and 13% respectively this year.
Darla Mercado's CNBC article, "Stocks trade near records, but chances are your portfolio isn’t sufficiently protected from a fall," quotes Charles NeSmith, a certified financial planner at Tobias Financial Advisors. Saying, “It is easy to get caught up in the mega-cap technology stocks, but investors have already forgotten the Nasdaq lost almost a third of its value in 2022,” Charles warns about the risks involved, mentioning the Nasdaq's significant drop of almost a third in 2022. NeSmith emphasizes the attractiveness of companies gaining market share but stresses the importance of spreading investments to reduce potential losses. Diversification is key, as it provides exposure to different types of assets that aren't strongly linked to stocks, thus lessening the impact of stock market ups and downs.
To demonstrate the benefits of diversification, Darla Mercado states, “Consider that the iShares Core Growth Allocation ETF (AOR), which is split 60/40 between equities and bonds, had a total return of -15% in 2022. The AOR felt the impact of falling bond prices as interest rates rose, but it still fared slightly better than the -18% total return for the S&P 500.” According to Morningstar, U.S. Treasuries and agency mortgage bonds are effective diversifiers for portfolios over the long run, with Treasuries being a safe choice during market instability. In the same article Andrew Herzog, a CFP at The Watchman Group, states, “Indeed, agency mortgage-backed securities are one way to offer investors some diversification in their portfolios,” Andrew highlights the importance of including mortgage-backed securities and short-term Treasuries in defensive bond portfolios, as they offer stability and decent returns. For beginners in investing, mortgage-backed securities are investments backed by a pool of mortgage loans, typically providing steady returns. Investors interested in mortgage-backed securities can consider ETFs like the iShares MBS ETF (MBB) and Vanguard’s MBS ETF (VMBS), which offer low expenses and modest returns in 2024.
Source: Investor’s Business Daily
Morgan Stanley & JP Morgan Strategists Hold Pessimistic Outlook
Bloomberg host Romaine Bostick highlighted the recent pessimistic perspectives shared by Morgan Stanley’s Mike Wilson and JP Morgan's Mislav Matejka. Bostick said, “Now, as for equities overall, two of the most pessimistic strategists out there say the stock rally looks a little spent and it could reverse if company earnings start to disappoint. Morgan Stanley's Mike Wilson says it's hard to justify higher index-level valuations given that 2024 and 2025 earnings forecasts have barely budged. JP Morgan strategist Mislav Matejka echoes that sentiment, expressing concern that profit growth could underwhelm. Mike Wilson expects the S&P to end the year at 4500; JP Morgan sees a drop to 4200. It's almost 20% below today's levels.”
As earnings season approaches, it's crucial for investors to closely monitor the reported numbers and assess whether they can sustain the current bull market. Wilson and Matejka's skepticism about the current market run is fueled by the fact that, according to Bloomberg Intelligence data, analysts now anticipate earnings-per-share growth of about 9% for the year, a decline from the 11% forecasted at the start of November. It's crucial to highlight that while Wilson and Matejka hold a skeptical outlook, this sentiment isn't universally shared across Wall Street banks. Many forecast that the markets will maintain their strength, with potential gains still on the horizon for the remainder of 2024.
Source: Bloomberg Markets
Momentum Stocks Outperforming the Market by Largest Margin Since 2008. Why Investors are worried.
Joseph Adinolfi of MarketWatch wrote, “As of Monday, the MSCI USA Momentum Index MTUM has outperformed the S&P 500 SPX by more than 11 percentage points during the first quarter of 2024, according to Dow Jones Market Data. It is up 20.8% since the start of the year, compared with a rise of 9.7% for the S&P 500. That’s the widest margin of outperformance for any quarter since June 2008, according to Dow Jones Market Data. A few months later, the collapse of Lehman Brothers ushered in the most acute phase of the financial crisis. Over the last two quarters, momentum has outperformed by an even wider margin of 13.8 percentage points, its strongest two-quarter streak relative to the S&P 500 since the six months that ended in March 2000, just as the dot-com bubble was hitting its peak.” It's great to see momentum stocks killing it, however, when momentum stocks have outperformed the market by this much in the past it has always been followed by a rather severe correction. This is what should worry investors.
Also from Adinolfi, “The MSCI momentum index is valued at nearly 29 times expected 2024 earnings of its components. That is its highest since late May 2021, when the meme-stock craze was in full swing.” Although a lot of the market’s current top momentum stocks such as Nvidia and Facebook have solid balance sheets and earnings, investors need to be wary of their penchant for sharp corrections. Several analysts have suggested moving money from these momentum plays into small- and mid-cap stocks that will follow/lag the S&P 500.
Source: MarketWatch
Celebrating First Quarter Gains and Considering the Road Ahead
As the first three months wrap up, Wall Street sees a strong start, indicating possibly good results for the financial quarter. Notably, the S&P 500 is set for its best performance in the first quarter since 2019, with a significant 10% jump, driven by hopes of rate cuts and the impact of artificial intelligence on business profits. Showing this positive feeling, Nvidia, a big player in AI, has surged over 80% in the first quarter, and the VanEck Semiconductor ETF has gone up almost 30%. Also, the Dow Jones Industrial Average is close to hitting 40,000 for the first time.
With these impressive gains, investors are thinking about whether the momentum will continue into the next quarter, worried about a possible market slowdown or correction. Concerns arise as some stocks show signs of being overbought, and there's worry about how higher interest rates might affect consumers and the economy overall. But looking back, there's some hope: data shows that in 10 out of 11 times when the S&P 500 had a first-quarter gain of 10% or more, it ended the year higher. In the CNBC article “Wall Street could be in for another good quarter after an exuberant start to the year, history shows,” Sarah Min quotes Ryan Detrick, chief market strategist at Carson Group, saying, “In 10 out of 11 prior instances when the S&P 500 registered a first-quarter gain of 10% or more, the broad market index was higher for the remainder of the year,” Detrick points to past patterns, suggesting a positive outlook for the market in the next few months, possibly leading to more gains.
Source: CNBC
Navigating the Cloudy Path Ahead for Snowflake (NYSE: SNOW)
Snowflake Inc. (NYSE: SNOW), renowned for its innovative cloud data management solutions, has been a subject of keen interest among investors since Warren Buffett's unexpected participation in its IPO, which set a record by raising $3.4 billion. Despite its strong growth and valuation peaks in 2020 and 2021, recent developments have introduced a mix of opportunities and challenges for prospective investors.
With its pioneering approach to cloud-based data storage and analysis, Snowflake gained an early advantage in the industry, achieving impressive revenue growth rates, including a remarkable 151% in 2022. However, as the company matures and competition intensifies, its growth trajectory has shown signs of moderation. Revised forecasts for fiscal 2024 predict a product revenue growth of 34%, down from earlier estimates of 44-45%, dampening investor enthusiasm.
Following the company's earnings report for the year ending 2023, which surpassed analyst expectations, Snowflake's stock experienced a significant drop from $230 to $180, signaling a potential buying opportunity. However, mounting operating losses, driven by escalating expenditures on employee stock compensation, remain a concern, impacting profitability and operational efficiency.
Despite partnerships with industry giants like AWS and notable milestones, including its historic IPO, Snowflake faces skepticism regarding its lofty valuations, trading at 19 times sales and 79 times free cash flow, even after a more than 40% drop in stock price. The recent announcement of CEO Frank Slootman's retirement, with Sridhar Ramaswamy poised to succeed him, adds an element of uncertainty to the company's transition into 2024.
Challenges loom from both internal and external factors, including competition from alternative cloud computing solutions and the withdrawal of long-term revenue targets. However, Snowflake remains a key player in data management, attracting clients from major corporations and boasting robust analytics capabilities.
While some analysts foresee short-term gains and a potential upside in the stock, caution prevails among many, questioning its long-term growth prospects and current valuation. With uncertainties surrounding its strategic direction and market dynamics, Snowflake's journey ahead may require careful navigation amidst evolving industry landscapes.
Source: Investor’s Business Daily
Intel, AMD, And Other Chip Stocks Struggle After News of China Phasing Them Out Of Use
It was reported this last week that the Chinese government will begin phasing out the use of American chips/semiconductors (specifically Intel and AMD) in Chinese government technology. Seeing as about 27% of Intel’s business comes from China and about 15% of AMD’s does as well, the market seems to be reacting to this news poorly. However, many analysts seem to think that it won’t have much of an effect on these companies.
One thing to keep in mind is that China has tried something similar to this before and it did not work out too well. Tae Kim of MarketWatch reported the following, “China issued a similar decree in 2019 to phase out U.S. computer equipment and software. It wasn’t successful. It is likely to fail again. The fundamental problem is that Chinese chip makers don’t have access to ASML Holding’s most advanced chip-making machines, known as extreme ultraviolet (EUV) lithography. Sales of EUV machines to China have been restricted since 2019. EUV is needed to produce advanced computer chips at scale and with acceptable yields for 5nm and below. Future AMD and Intel computer processors will rely on EUV machines. If China wants competitive modern computers that aren’t slow, it must continue buying American chips.” Kim doesn’t believe that China has the capabilities to make this work and that it shouldn’t affect these companies too much. Other companies have shouldered China’s policies just fine in recent years with little to no hindrance.
Another reason that this move may not be too detrimental to Intel and AMD is that this is only a move away for the Chinese government, not the Chinese consumer base at large. Most of the business that Intel and AMD have in the country is done through consumers or businesses using chips in the manufacturing of other products. It is still unclear how much these companies will be able to sell into the Chinese consumer base but it should still be a rather large amount.
Although this may seem like bad news, there are several reasons why companies such as Intel and AMD will be able to easily shrug off these restrictions and move forward.
Source: MarketWatch, MarketWatch
Meme Stocks: The Unconventional Investment Frontier
The resurgence of meme stocks has sparked another notable chapter in the investment realm. The convergence of Reddit, Trump Media & Technology Group, and GameStop stands as a prime illustration, characterized by a strong retail participation base. Trump Media, making its market debut following its merger with Digital World Acquisition Corp under the ticker DJT, commands an impressive market value of around $9 billion, rivaling prominent S&P 500 constituents like Caesars Entertainment and American Airlines. Interestingly, this value sharply contrasts with the company's modest revenue of around $3.3 million, alongside reported losses of $49 million in the preceding year.
Similarly, GameStop, despite posting modest profits and revenues totaling $5.2 billion, significantly trails behind Trump Media in market value at around $4 billion. Such differences underscore the intriguing dynamics within these meme stocks. Reddit, yet another significant player in this arena, has witnessed a remarkable surge in its market value, nearly doubling its initial public offering price within days of its debut. Yet, beneath these notable valuations lies a common thread—a substantial retail investor base. Often driven more by emotion than traditional metrics, these investors signify a departure from conventional investment approaches, placing emphasis on the product or founder rather than traditional fundamentals.
However, amidst the excitement surrounding meme stocks, the enduring principles of investing remain firm. While supporters of meme stocks may argue that fundamentals are unimportant, history shows their lasting significance. Fundamentals, including a company's earnings, assets, and future profitability, serve as the foundation of investment analysis. The undeniable truth remains: investing ultimately revolves around seeking a share in a company's profits and assets. As shown by the cautionary tale of GameStop's decline and the sobering predictions from industry analysts, the story of meme stocks, driven by strong retail sentiment, may grab attention in the short term but eventually give way to the unchanging principles of fundamental analysis.
Source: CNBC
Apple’s First-Quarter Woes
Apple shares started off the year by declining 11%, this is their third-worst recorded quarter in the last five years. Compared to other Magnificent 7 stocks, Google is up 8.1%, Amazon up 19%, Meta up 37%, Microsoft up 12%, Nvidia up 82%, Tesla struggling with a decline of 29%, and the broader market S&P up 10% . There are a few things currently plaguing Apple, declining sales in China, getting sued by the Department of Justice for antitrust violations, and a lack of focus/innovation in AI. Apple has struggled to find new catalysts for revenue growth, sales for phones and computers have been stagnant and seem to be slightly declining in certain areas.
Apple had been the S&P’s darling stock for a long time, but it now looks as if the influence that Apple has in the S&P is waning. In 2023 Apple reported four straight quarters of revenue decline, and that has only gotten worse in the early months of 2024. Apple used to be the largest U.S. company by market cap, its market cap is now over $500 billion lower than Microsoft’s.
Source: Barron’s and MarketWatch
Tesla Stock Jumps with Free Full Self-Driving Trials Announcement
On Tuesday, Tesla stock surged following the announcement of free trials for their Full Self-Driving software. Elon Musk tweeted that this feature would be offered to customers as a one-month free trial available this week, prompting stock prices to jump over 4% midday Tuesday. Despite this increase, Tesla remains down more than 15% in March alone.
Additionally, renowned investor Cathie Wood purchased millions of dollars worth of Tesla shares. Scott Lehtonen, an author at Investors Business Daily wrote, “Cathie Wood's Ark Invest funds bought more than 163,000 shares of Tesla stock Monday, or about $28.2 million worth using the closing price, per daily trade disclosures.” This move raised eyebrows among investors, sparking speculation about the value Cathie Wood sees in Tesla. Undoubtedly, Wood's actions played a role in the surge in stock prices on Tuesday.
Source: Investor’s Business Daily
Amgen's Innovative Venture: Charting a New Frontier in Weight Loss Drug Development
Amgen is taking a unique approach in the competitive field of weight loss drug development by introducing a groundbreaking injectable treatment called MariTide to address obesity in a new way. Unlike similar drugs from Novo Nordisk and Eli Lilly, Amgen's MariTide not only helps in reducing weight but also shows potential in maintaining weight loss even after the treatment ends. Additionally, the drug's potential for less frequent administration, possibly once a month or less, could provide greater convenience compared to current weekly options, potentially changing patient preferences in the rapidly growing weight loss pharmaceutical market.
As Amgen enters this arena dominated by industry giants, questions arise about the effectiveness and market position of MariTide. Analysts predict significant growth in the weight loss drug market, with estimates reaching up to $100 billion by the end of the decade, offering a compelling opportunity for newcomers like Amgen. However, the company's strategy depends on overcoming challenges from established competitors and addressing uncertainties regarding pricing and market acceptance.
Setting itself apart from existing approaches, Amgen's MariTide utilizes genetic research to regulate gut hormone receptors, offering a better method to control appetite and facilitate weight loss. While initial data from small-scale trials indicate the drug's effectiveness, larger trials are ongoing to confirm its long-term effects and tolerability. With Amgen's phase two trial on the horizon, investors and healthcare stakeholders eagerly await insights into MariTide's competitive advantage and its potential as a transformative solution for managing obesity.
Source: CNBC
Genesis Unveils Neolun: A Visionary All-Electric Concept SUV
Genesis, the luxury brand of Hyundai, is giving a glimpse into its future direction with the grand reveal of the Neolun, an impressive all-electric concept SUV. Showcasing innovation and modern design, the Neolun features a standout exterior design with long horizontal headlights and taillights, blending the brand's existing electric vehicle lineup with a more contemporary look.
Inside, the Neolun adopts a minimalist approach, moving away from the recent trend of large screens across the dashboard seen in other concepts. Instead, it highlights a central screen surrounded by physical buttons, along with a well-placed control panel and knob for easy access by the driver. Adding to its versatility, the SUV's front seats can swivel, transforming the cabin into a lounge-like space for rear passengers, enhancing comfort and the overall in-car experience.
Genesis describes the Neolun Concept as a forward-thinking model that represents the brand's future direction in terms of products, design principles, and technological advancements. While automakers typically use concept vehicles to gauge consumer interest and showcase upcoming developments, Genesis has not confirmed if the Neolun previews an upcoming large all-electric SUV for its lineup, which has been steadily growing in the U.S. market.
Reinforcing its position as a leading player in the luxury segment, Genesis reported a notable 23% increase in U.S. sales last year, reaching a milestone of 69,175 units sold. With an expanding retail presence and a commitment to delivering top-notch performance and innovation, Genesis is set to strengthen its market presence. Alongside the Neolun, Genesis has unveiled the GV60 Magma Concept, demonstrating its ambitious plans to develop high-performance versions for each model in its lineup, confirming the brand's dedication to pushing boundaries and redefining automotive luxury.
Source: CNBC
Gaming Giants Unite: ROGA Pioneers Responsible Betting in a Dynamic Landscape
In a significant collaboration, seven major gaming companies are coming together to establish a trade association focused on promoting responsible gaming practices, marking an important moment in the industry's development. FanDuel, DraftKings, BetMGM, Penn Entertainment, Fanatics Betting & Gaming, Hard Rock Digital, and bet365 will form the Responsible Online Gaming Association (ROGA), combining their resources to improve player welfare and integrity in the growing online betting sector. This group represents a substantial 85% share of the legal online betting market in the United States, highlighting the scale and importance of their joint commitment. With a combined investment exceeding $20 million, ROGA is ready to lead efforts to encourage responsible gaming behaviors and raise industry standards.
In the Article “Largest U.S. sportsbooks join forces to tackle problem gambling,” Authors Contessa Brewer and Jessica Golden quote Jennifer Shatley, appointed as executive director of ROGA, saying, “I’m incredibly excited to move this forward and to really do some impactful things and to really expand the knowledge through the research and to create these evidence-based best practices and to really empower players with information,” Shatley praises this collaborative initiative as a driver for meaningful change, emphasizing the use of research-supported insights to provide players with important information. The association's comprehensive agenda includes educational outreach, establishing best practices for responsible gaming, ethical advertising practices, and working together to address industry-wide challenges. Notably, ROGA's innovative approach involves setting up an independent hub to facilitate information exchange among members, with plans for a certification program to assess and reward responsible gaming efforts by participating operators.
The establishment of ROGA comes at a pivotal moment for the gaming industry, with online sports betting seeing significant growth nationwide since 2018. However, this expansion also highlights the urgent need to address issues like problem gambling. With an estimated 2 million adults in the U.S. facing severe gambling problems and many more affected to varying degrees, advocating for responsible gaming is of utmost importance. As regulatory scrutiny increases, industry players are increasingly urged to collaborate, regulate themselves, and maintain the highest standards of integrity to protect consumers and uphold public trust.
Source: NBC
Gold Glimmers as Bitcoin's Meteoric Rise Faces Resistance
As bitcoin keeps circling around the $70,000 mark, analysts at Wolfe Research suggest that gold might get a chance to surge ahead of the digital currency. Both gold and bitcoin have been moving together over the past month, reaching all-time highs while the stock market stays high. However, similarities with Bitcoin's 2021 path, where it rose quickly and then fell sharply, raise questions about where it's headed.
In CNBC’s article “Gold could start to overtake bitcoin as the cryptocurrency stalls at $70,000, says Wolfe Research” Tanaya Macheel quotes Rob Ginsberg, managing director at Wolfe Research, saying, “Bitcoin has historically traded like more of a ‘risk asset’ and often is where excess liquidity has found a home for the retail investor,” Ginsberg points out that Bitcoin has a history of being linked to risky assets and being a place for extra money, similar to what happened in 2021. While he doesn't predict a big 50% drop like before, Ginsberg thinks Bitcoin might face some resistance above $70,000, which could lead to it consolidating more.
In the same article Rob Ginsberg is also quoted saying, “The gold vs. bitcoin ratio is nearing support while oversold on a weekly basis,” said Ginsberg. “If our feeling on bitcoin is correct, and it continues to consolidate in this $60,000–$73,000 region, it may provide a good opportunity for gold to start outperforming.” Ginsberg is more positive about gold. The ratio of gold to bitcoin is getting close to support levels and is showing signs of being oversold every week, which means gold might do better than bitcoin. Ginsberg suggests that if Bitcoin stays between $60,000 and $73,000, it could help gold perform better.
Even though Bitcoin recently hit an all-time high of $73,679 before dropping to around $60,800, Ginsberg thinks it's ready to go up again. But he says there's a history of a lot of selling once it goes over $70,000, which could make it harder for bitcoin to keep going up. Despite the idea of bitcoin being "digital gold" gaining popularity over the past year and its connection with stocks weakening since March 2023, there are still uncertainties about where it's headed because the market keeps changing.
Source: CNBC
Home Depot's Pro Power Play: Building on Strength with SRS Distribution Acquisition
Home Depot's recent announcement of its $18.25 billion purchase of SRS Distribution not only showcases a strategic move to fortify its services for contractors, roofers, and other home professionals but also underscores the imperative for both existing stakeholders and new investors to take note of this significant development.
This strategic step highlights Home Depot's clear goal of tapping into the highly lucrative professional market, which is projected to experience substantial growth in the coming years. As the company plans to utilize a mix of cash reserves and debt to finalize the deal swiftly, it signifies a proactive approach toward capitalizing on emerging opportunities in the professional segment.
With already half of its business stemming from professional clients, this new move aims to not only expand Home Depot's role in meeting the intricate demands of construction projects but also position it strategically amidst shifting consumer behavior, where more homeowners are opting out of DIY projects. CEO Ted Decker's vision for this acquisition is to bolster Home Depot's market presence significantly, potentially unlocking a staggering $50 billion increase in opportunities.
Moreover, the acquisition of SRS Distribution, headquartered in McKinney, Texas, with operations spanning 47 states, 11,000 employees, and 760 branches, presents a compelling synergy with Home Depot's existing pro-focused efforts. The offerings catering to professionals in landscaping, pool installation, and roofing seamlessly complement Home Depot's strategic objectives of targeting professionals, as outlined by Decker.
In CNBC’s article “Home Depot is acquiring specialty distributor SRS for $18.25 billion in huge bet on growing pro sales,” Melissa Repko quotes the CEO Ted Decker saying, “With the separate customer base, different channels, different purchase occasions, we feel good that this will go through,” Despite potential regulatory hurdles, Decker's confidence in the deal's fruition stems from the distinct customer bases and purchase patterns, underpinning the strategic alignment of the acquisition with Home Depot's long-term growth trajectory.
In the backdrop of slowing sales growth post-pandemic and evolving consumer behavior focusing more on essentials and experiences, Home Depot's pivot towards bolstering its pro-business through strategic acquisitions and expansions holds paramount importance. While there may be initial projections of decreased earnings per share, Home Depot remains steadfast in its belief that the acquisition will ultimately yield higher cash earnings per share, emphasizing the enduring value of the deal.
In essence, Home Depot's commitment to meet changing customer needs while navigating industry changes strategically underscores its resilience and foresight. With its keen eye on emerging opportunities, the company stands poised to capitalize on evolving market dynamics, delivering sustained value to shareholders and cementing its position as a leader in the retail and construction sectors.
Source: CNBC
McDonald’s and Krispy Kreme Forge Pathbreaking Collaboration
McDonald’s and Krispy Kreme have announced an ambitious collaboration aimed at shaking up the fast-food scene. They plan to introduce Krispy Kreme doughnuts in McDonald’s outlets across the country by the end of 2026. This partnership, revealed on Tuesday, makes McDonald’s the exclusive fast-food partner for Krispy Kreme in the U.S., sparking a significant 24% rise in Krispy Kreme shares during morning trading.
Krispy Kreme intends to expand its reach dramatically by leveraging McDonald’s extensive network, using its efficient "hub and spoke" model for production and distribution. With around 13,500 McDonald’s locations in the U.S. and plans to open 900 more by 2027, Krispy Kreme aims to serve nearly 6,000 McDonald’s restaurants. For those not familiar with business operations, the "hub and spoke" model centralizes production in a main facility (the hub) and distributes products to smaller locations (the spokes), making operations more efficient. CEO Josh Charlesworth is confident that this collaboration will significantly improve Krispy Kreme's distribution network, reaching more customers.
In return, McDonald’s expects to enhance its bakery and breakfast offerings with Krispy Kreme doughnuts. This partnership fits well with McDonald’s strategy to offer more attractive options on its menu alongside its popular coffee, meeting changing consumer tastes. After successful trials at select McDonald’s outlets, which exceeded expectations, the nationwide introduction of Krispy Kreme doughnuts promises a bright future for both chains, potentially reshaping the fast-food landscape and opening new growth opportunities.
Source: CNBC
IPO Market Anticipates Increased Activity in Second Half of 2024
When there is a strong level of Initial Public Offering (IPO), it indicates investors' willingness to take on riskier investments, reflecting their confidence in the economy. These emerging companies, often younger and more innovative, inject new life into the markets with fresh ideas and technologies, potentially offering above-average growth prospects over time. However, in recent years, particularly in 2023, there has been a slowdown in IPO activity. Harrison Miller, an author at IBD wrote, “The number of U.S. IPOs dropped to 102 in 2023. The total value of shares sold fell to $15.76 billion from $20.92 billion in 2022. That's well below the 2021 high of 906 U.S. IPOs with an offering total of $286.98 billion, according to S&P Global Market Intelligence.”
One reason for this decrease in IPOs is investors becoming more cautious about higher-risk assets due to the recent Special Purpose Acquisition Company (SPAC) bust. Miller wrote, “At least 21 companies that went public via SPAC mergers went bankrupt in 2021… High-profile SPAC bankruptcies included WeWork, Bird and EV maker Lordstown Motors.” Preston Brewer, legal analyst at Bloomberg Industry Group said, "The SPAC bust, combined with a down market for IPOs generally, has made investors more cautious…There's greater emphasis on quality, including profitability, which negatively impacts IPOs as they tend to be riskier than other equities."
Recently, a couple of successful large IPOs have helped restore confidence among investors and companies preparing to go public. On March 21st, Reddit began trading on the New York Stock Exchange (NYSE), experiencing a remarkable 48 percent surge on its debut. Similarly, on March 20th, Astera Labs, an AI tech firm, soared over 70 percent on its first day of trading on the public markets. With these successful IPOs, Miller highlights that the “IPO pipeline is reportedly bulging with new filings. But the IPO calendar remains thin into April.” Although the pipeline is bulging, an increase in IPO numbers isn’t expected until late 2024 and into 2025.
Miller recorded Preston Brewer's words: “Initial public offerings are typically growth stocks that can be hurt by high interest rate environments. Improving inflation data combined with Federal Reserve rate cuts could fuel optimism and bolster IPO activity, Brewer said. He believes activity will likely increase in the second half of the year, "and 2025 ought to build on that momentum." If the Fed maintains its trajectory of three rate cuts this year and inflation data improves, it could prove advantageous for the IPO market. However, any deviation from this course could foster continued skepticism, potentially causing companies to delay filing for an IPO.
Source: Investor’s Business Daily
Oil Market Dynamics
Oil market dynamics are poised for significant shifts as Brent crude oil approaches the $100 per barrel mark, fueled by Russia's unexpected decision to deepen production cuts, potentially driving prices even higher by September, according to JPMorgan analysts. The move, surprising many, underscores Russia's commitment to the OPEC+ alliance, prompting projections of Brent prices hitting $90 by April and potentially reaching $100. The implications extend to the U.S. with potential gas price surges to $4 per gallon by May, posing challenges for the Biden administration ahead of the November elections. Meanwhile, the energy sector, buoyed by rising oil prices, has emerged as a top performer in the market, with energy stocks rallying approximately 10.3% in March. Morgan Stanley analysts see further potential for the sector's catch-up trade, emphasizing attractive valuations and robust free cash flow, prompting recommendations for stocks like ConocoPhillips and Occidental. Despite this bullish sentiment, the market remains susceptible to geopolitical factors and potential U.S. responses to oil price surges, highlighting the intricate interplay shaping the oil market's future.
How the 2024 Election Year Will Affect the Stock Market
This year’s presidential election in November has many investors wondering and many worried how this will impact their portfolios. This year is likely to be a rematch between Trump and Biden. Trump is slightly ahead in the polls although the race is pretty tight right now. The S&P 500 is up over 9% this year when we are only three months in, which is just under the yearly return of the S&P 500. This is typically unusual in an election year with larger swings of volatility occuring during the second half of the year, with a total average return of 9.1% in an election year. So this raises the question: what does it mean if Trump wins or Biden wins?
In thoroughly looking at the historical data, there is no statistical advantage of having a Democratic president rather than a Republican president in market returns. After a president is elected the market tends to end higher than when they started their term. This occurs naturally as the economy grows, not being affected by which party sits in the White House. The graph below further demonstrates this, demonstrating that volatility is subject to happen in the year prior to an election and slightly after a presidential party switch.
Source: Fisher Investments Reviews
In an election year we see they generally “are positive over 80% of the time with 11.4% average returns'' (Fisher Investments). In terms of “playing” the market or “timing” the market you are better off just holding your money where it is. We see that just about every 4 year presidential term we see higher highs. Recessions and depressions are just out of their control. We tend to see positive returns across the board with the 3rd year of a presidential term offering the best returns. It demonstrates that congress midterms also have an effect on markets which we will touch on later.
Source: Fidelity
Furthering this point, Invesco demonstrated the power of compound investing and “Bipartisan” (not favoring a party). Invesco created a study where they pulled money out of the Dow Jones during a Republican presidential term and back in during a Democratic presidential term in one fund and vice versa for another fund. The results are shown as follows with a slight increase in Democratic returns, but not enough to be significant. If you just held your money acting in “bipartisan” you would have had a substantially better return. We see markets have no favor over one party, or in the results of a presidential election, however there are some relationships during election years that do affect the stock market.
Source: Invesco US
The elections of the house of representatives and the senate members pose to show more of a cause and effect relationship within overall market return. When one party holds the majority vote in congress it is easier to pass bills onto the president, in that party's favor. If the president is of the same party as congress this can be even worse as it is less likely to be vetoed and made law just because it is in favor of that one party. As Richard Armour put it “politics, it seems to me, for years, or all too long, has been concerned with right or left instead of right or wrong.” It doesn't matter if the bill is the right thing for America, sometimes it is just what the contra party does not want, which is far worse. The overall returns of the S&P 500 when Congress is dividend or no party has a majority we see higher returns above 13% whether or not the president is Democrat or Republican. We want to see a more divided congress as it passes bills that both sides can agree on and are likely better for America overall.
Source: Fidelity
The saying “don’t fight the Fed'' is what should be on the minds of investors during the election. It doesn't matter what the president wants to do with the economy, monetary policy always wins over fiscal policy. It doesn't matter where the president wants to steer the economy, the Fed holds the reins of the market. The Fed holds the power in controlling rates, restricting or letting growth run free. For example Clinton (D) and Reagan (R) both took credit for a good economy in good times when the fed rates fell. Both Bush Sr. and Jr. (R), (R) suffered returns during periods of Fed restricting and a recession. Trump (R) as well fought against Fed restricting. He made the most of it and ended with higher highs at the end of his presidency, and now it has rolled a little into Biden’s (D) administration. When understanding the political party make up and the decisions of the Fed we can better estimate the future of the market. Remember “the Fed holds the power.”
If Biden wins and the political party seats in congress stay relatively the same, not much will change. If Trump comes back and wins the fight, things are not as certain and that leaves us to believe there to be more volatility for the market. For starters in 2017 Trump initiated tax cuts as part of the “Tax Cuts and Job Act” in favor of large business and working class individuals,
and are to expire in 2025. If Trump is put back in office he is likely to change this and even make a new act come 2025, whether it is even better for large business we aren't certain. Once again, uncertainty leads to volatility. The fight for fossil fuels has been back and forth between the right and left. If Trump is in office we can expect oil and gas stocks to increase. Trump also initiated several tariffs, many against China and Mexico. Globalization is likely to decrease in outside markets with U.S. markets to perform better. Goldman Sachs published 40 stocks that they believe would perform well if Trump is re-elected. Some include:
● XOM (Exxon Mobil)
● CVX (Chevron)
● JPM (JPMorgan chase)
● AXON (police equipment)
● FLR (border wall construction)
Source: 40 Stock Picks to Buy to Earn Higher Profits Than the Market: Goldman (businessinsider.com)
All these stocks are likely to have large upside gains mostly in the first year or so if Trump were to win, being a relatively short term play. Remember that it is not about which party is in the presidential seat and more so who holds the power in congress, and even more so how the Fed wants to move the economy. Overall it is wise to play the long term game and not be too worried about short term changes. Keep money invested during the short term volatility of the market as time in the market always beats timing the market.
Trump Media's Stock Soars on Nasdaq Debut
The much-awaited launch of Donald Trump's social media venture sparked a surge in market activity, boosting its share price by over 50% shortly after trading began under the DJT ticker on Tuesday morning. Amid rapid changes in prices, trading of Trump Media & Technology Group's stock paused briefly before resuming, with a significant volume of over 6.5 million shares traded by 9:50 a.m. ET.
This increase marked an important moment, as the DJT ticker returned to the Nasdaq stock market nearly thirty years after it was first used by the former president for his publicly traded hotel and casino business in 1995. Despite being removed from the New York Stock Exchange previously, the reintroduction of the DJT ticker carries significant symbolic meaning for Trump Media, emphasizing Donald J. Trump's key role as the company's former Chairman and Director, along with his time as the 45th President of the United States.
The start of DJT trading, as highlighted by Trump Media, shows a strong demand for platforms promoting free speech, countering perceived censorship by Big Tech. Trump Media's recent merger with Digital World Acquisition Corp. led to its public listing. With a market valuation exceeding $8.4 billion by mid-afternoon, Trump Media proudly names Trump as its majority shareholder, with notable figures like his son, Donald Trump Jr., serving as directors. However, despite the high market valuation, the company's financial reports paint a more cautious picture, revealing revenue figures of less than $3.5 million over the initial three quarters of 2023, overshadowed by reported losses exceeding tenfold.
Trump Media Group Combines Business And Politics in a Way Never Before Seen
Trump’s media group entered the public market last week and has been making headlines. The stock has already gained 24%, giving Trump’s media group the valuation of $8.4 billion. This IPO of sorts has the potential to not only make Trump a lot of money, but influence the outcome of the election this November.
Trump holds 78.8 million or 58.% of the company's shares, this has become an extremely lucrative holding that has skyrocketed him onto the Bloomberg Billionaires list.
With Trump facing legal fines and penalties, this large increase in net worth, despite it currently being just paper gains, could have huge impacts for the candidate. This is also an unprecedented situation, Matt Peterson of Barron’s reports, “Meanwhile, Trump’s significant holdings in a public company give individuals, companies, and even governments a new, direct path to influence the candidate’s bottom line. There are many rules governing political donations to candidates and their fund-raising organizations, but far fewer checks on buying shares in a company controlled by a candidate.” Trump seems to have, purposely or accidentally, discovered a sort of political donation loophole. The company going public and being so successful thus far has given people an opportunity to make money and support the candidate, Howard Fischer, partner at Moses Singer law, said, “We’ve never had a situation in which the economic and political interests of a figure have combined in this way.” People can now put money directly into Trump’s hands. Ron Bonjean, co-founder of ROKK solutions, said, “This is a huge opportunity for Trump to take advantage of both financially and politically that we haven’t seen a political figure do ever in American history.” Trump can legally promote the stock at his rallies and as part of his campaign tour and it is just about impossible for anyone to make the case that Trump has violated any sort of campaign donation laws.
This isn’t the first time that candidates have mixed business with politics. A good example would be President Obama’s books that all became best-sellers. Trump’s case is different from these; no candidate has ever taken a company public with their name on it in the months leading up to an election.
A lot of Trump’s followers have hopped on the train of this new cultural phenomenon, this means that some have invested money without taking a look at the risks involved. Trump's company is valued in the billions of dollars but generated revenue of $3.4 million in the first nine months of last year. It also had operating expenses of $10.6 million and interest expenses of $38 million in that same time frame. So the company has an outlandish valuation despite having crap financials and operating at a deficit. Granted, this new wave of cash could help the company to get legit and really turn into a money making machine. The other thing to keep in mind is that many of these “investors' ' may not even care about the money, they want to support the President and be part of what will probably be an iconic cultural moment.
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