It’s Nvidia’s world and we’re living in it (if you believe the stock market). The S&P 500 (and Nvidia) recorded all new highs post the AI chip maker’s earnings. Be careful paying too much. The rapid rise in Nvidia’s market cap has only seen the market narrow further. And from mine, that makes it more subject to both volatility and risk. Deutsche Bank’s Jim Reid dimensioned the risk another way. He shows how the Top 10% of stocks in the S&P 500 constitute ~75% of the total capitalization. We have not seen that since 1929! The only other time we saw something similar was the dot.com bubble…
Has Tesla Lost its Halo?
This weekend I was reading The Art of Thinking Clearly by Rolf Dobelli. The book has a chapter called “The Halo Effect” – and references the company Cisco (CSCO) during the late 90s / early 2000’s. It was timely – as it drew parallels to my post comparing the former market darling to Nvidia (NVDA). I demonstrated both technical and fundamental similarities. However, another company came to mind. Tesla (TSLA). For the past few years – TSLA had what Dobelli calls the ‘halo effect’. However, is that now wearing off? And what implications does this have?
Lessons from 1999/2000
Momentum is a powerful force. Bet against it at your peril. John Maynard Keynes was believed to have said “…the market can remain irrational longer than you can remain solvent”. Sound advice. Those expecting (or worse betting) the market would reverse to start 2024 are probably questioning their decision. It’s been one record close after another. Higher highs beget higher highs.
Will Earnings Deliver on the Hype?
Q4 2023 earnings are starting to hit the tape. From mine, if the market is to continue rallying – it’s less about inflation and the Fed – it’s whether corporate America will deliver on 12% earnings growth in 2024. Coming into earning’s season – my view 12% felt ambitious – given the slowing economy and relative health of the consumer. This post talks more to the concentration in the market – the relative influence from NVDA – and why diversification will be key this year.
For a full list of posts from 2017…