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It Wouldn’t be September Without a Few Bumps
September has started in a very typical September fashion. Down! It’s traditionally the worst month of the year in terms of returns. But that’s not a bad thing… As longer-term investors – it’s great when things go on sale. That’s when we get to sharpen our pencils on higher quality businesses. And for those who missed out four weeks ago (where you needed to act fast) – it’s possible you will get another chance this month. As I wrote recently – the rapid 10% surge in equities over 4 weeks did not fill me with a lot of confidence…
Thoughts on the Rest of the Year
Over the past year or so – one of the key investment themes has been “bad news is good news”. Bad news implied the Fed was more likely to cut rates. For example, after the market incorrectly assumed we would see 6 or 7 rate cuts at the start of the year – the Fed have finally come to the table. In other words, the economic risks (to growth) are sufficient enough for the Fed to act. This is important. What happens during this transition is “bad news is no longer good news”. History shows us when economic conditions worsen during an easing cycle – stocks perform poorly. Therefore, the market’s primary concern now is whether the Fed has waited too long?
Back to the Scene of the Crime.. And a Warning from PCE
Eight months down. Four to go. After shedding almost ~10% to start the month – the bulls managed to close the market at its highs. Whiplash anyone? The S&P 500 is back to the point where the markets panicked on a growth scare – however it raises a question: (i) can it break through previous resistance (the all-time high of 5669); or (ii) will it perform what traders call a “back and fill”? My guess is the latter – as we head into one of the weaker months of the year.
Nvidia Beats Expectations… But Disappoints on Guidance
Rarely has a single stock been so ‘hyped’ coming into earnings as Nvidia. The leading AI chip maker is widely seen as the ‘AI’ barometer… making their earnings more important than most. My expectation was they would handily beat Q2 revenue and earnings – however issue a softer-than-expected guide. It turns out that’s what we got. Make no mistake – this was another exceptionally strong quarter. And despite the softer guide – “only” falling 6.4% should be considered a good result. This post talks about whether Nvidia is still worth a bet post their results. The answer is it depends on your timeframe… but long-term (3+ years) the answer is absolutely yes.