Tag: Stocks

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The bubble that thinks: Sam Altman’s AI paradox

AI Bubble?

Sam Altman, CEO of OpenAI, has never been shy about bold predictions. But his latest remarks strike a curious chord reportedly saying: ‘Yes, we’re in an AI bubble’.

‘And yes, AI is the most important thing to happen in a very long time’. It’s a paradox that feels almost ‘Altmanesque’—equal parts caution and conviction, like a person warning of a storm while building a lighthouse.

Altman’s reported bubble talk isn’t just market-speak. It’s a philosophical hedge against the frothy exuberance that’s gripped Silicon Valley and Wall Street alike.

With AI valuations soaring past dot-com levels, and retail investors piling into AI-branded crypto tokens and meme stocks, the signs of speculative mania are hard to ignore.

Even ChatGPT, OpenAI’s flagship product, boasts 1.5 billion monthly users—but fewer than 1% pay for it. That’s not a business model—it’s a popularity contest.

Yet Altman isn’t calling for a crash. He’s calling for clarity. His point is that bubbles form around kernels of truth—and AI’s kernel is enormous.

From autonomous agents to enterprise integration in law, medicine, and finance, the technology is reshaping workflows faster than regulators can blink.

Microsoft and Nvidia are pouring billions into infrastructure, not because they’re chasing hype, but because they see utility. Real utility.

Still, Altman’s warning is timely. The AI gold rush has spawned a legion of startups with dazzling demos and dismal revenue. This is likely the Dotcom ‘Esque’ reality – many will fail.

Many are burning cash at unsustainable rates, betting on future breakthroughs that may never materialise. Investors, Altman suggests, need to recalibrate—not abandon ship, but stop treating every chatbot as the next Google.

What makes Altman’s stance compelling is its duality. He’s not a doomsayer, nor a blind optimist. He’s a realist who understands that transformative tech often arrives wrapped in irrational exuberance. The internet had its crash before it changed the world. AI may follow suit.

So, is this a bubble? Yes. But it’s a bubble with brains. And if Altman’s lighthouse holds, it might just guide us through the fog—not to safety, but to something truly revolutionary.

In the meantime, investors would do well to remember hype inflates, but only utility sustains.

And Altman, ever the ‘paradoxical prophet’, seems to be betting on both.

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Technical Signals: Cracks beneath the surface – are U.S. stocks beginning to stumble?

Stock correction?

There are increasingly credible signs that U.S. stocks may be heading into a deeper adjustment phase.

Here’s a breakdown of the key indicators and risks that suggest the current stumble could be more than a seasonal wobble. It’s just a hypothesis, but…

  • S&P 500 clinging to its 200-day moving average: While the long-term trend remains intact, short-term averages (5-day and 20-day) have turned negative.
  • Volatility Index (VIX) rising: A 7.61% surge in the 20-day average VIX suggests growing unease, even as prices remain elevated.
  • Diverging ADX readings: The S&P 500’s ADX (trend strength) is weak at 7.57, while the VIX’s ADX is strong at 45.37—classic signs of instability brewing.

🧠 Sentiment & Positioning: Optimism with Defensive Undercurrents

  • Investor sentiment is bullish (40.3%), but rising put/call ratios and a complacent Fear & Greed Index hint at hidden caution.
  • Historical parallels: Similar sentiment setups preceded corrections in 2021 and 2009. We’re not at extremes yet, but the complacency is notable.

🌍 Macroeconomic Risks: Tariffs, Fed Policy, and Structural Headwinds

  • Tariff escalation: Trump’s recent executive order raised effective tariffs to 15–20%, with new duties on rare earths and tech-critical imports.
  • Labour market weakening: July’s jobs report showed just 73,000 new jobs, with massive downward revisions to prior months. Unemployment ticked up to 4.2%.
  • Fed indecision: The central bank is split, with no clear path on rate cuts. This uncertainty is amplifying volatility.
  • Structural drag: Reduced immigration and R&D funding are eroding long-term growth potential.
  • 🛡️ Strategic Implications: How Investors Are Hedging
  • Defensive sectors like utilities, healthcare, and gold are gaining traction.
  • VIX futures and Treasury bonds are being used to hedge against volatility.
  • Emerging markets with trade deals (e.g., Vietnam, Japan) may outperform amid global realignment.
  • 🗓️ Seasonal Weakness: August and September Historically Slump
  • August is the worst month for the Dow since 1988, and the second worst for the S&P 500 and Nasdaq.
  • Wolfe Research reportedly notes average declines of 0.3% (August) and 0.7% (September) since 1990.
  • Sahm Rule: Recession indicator.

Now what?

While the broader market still shows resilience—especially in mega-cap tech—the underlying signals point to fragility.

Elevated valuations, weakening macro data, and geopolitical uncertainty are converging. A deeper correction isn’t guaranteed, but the setup is increasingly asymmetric: limited upside, growing downside risk.

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From Missiles to Tariffs: A desensitised stock market faces Trump’s new world

Markets desensitised to U.S. policy making

In years past, the mere hint of U.S. airstrikes or heightened geopolitical tension would send global stock markets into panic mode.

Yet, following President Trump’s re-election and his increasingly aggressive foreign policy stance, investor reactions have become notably muted.

From missile strikes on Iranian nuclear sites to an orchestrated ceasefire between Iran and Israel, markets have barely flinched. The question arises: are investors becoming desensitised to Trump’s geopolitical theatre?

Take the latest skirmish between Iran and Israel. After nearly two weeks of missile exchanges, Trump’s announcement of a ‘complete and total ceasefire’ barely nudged the S&P 500.

That calm came despite the U.S. launching pre-emptive strikes on Iranian facilities and absorbing retaliatory attacks on its military base in Qatar.

In another era, or under a different administration even, such developments might have triggered a broad risk-off sentiment. Instead, Wall Street just shrugged.

One reason may be fatigue. Trump’s approach – rife with tariffs, sanctions, and sudden reversals – has bred a kind of market immunity.

Investors, well-versed in the rhythm of Trump’s provocations, have begun treating them as background noise. His revived tariff agenda, particularly the threats aimed once again at China and EU auto imports, has likewise failed to prompt major selloffs.

Similarly, the ongoing Russia-Ukraine conflict, once a source of intense volatility, now registers as a strategic stalemate in the market’s eyes.

While Trump’s rhetoric surrounding Ukraine has shifted unpredictably, investors appear more focused on earnings, inflation data, and central bank signals than on diplomatic fallout and war!

This is not to suggest markets are indifferent to geopolitical risk, but rather that they’ve adapted. Algorithmic trading models may be increasingly geared to discount Trump’s headline-grabbing tactics, while institutional investors hedge through gold, volatility indices, or energy plays without dumping equities outright.

Critics argue this detachment is dangerous. Should a flashpoint spiral out of control, be it over Hormuz, Ukraine, or Taiwan, the slow-boiling complacency could leave portfolios badly exposed.

Still, for now, Trump’s policies are being priced in not with panic, but with complacency maybe.

The real story may not be what Trump does next, but how long the markets can continue to look away.

Trump announces he had brokered ceasefire between Israel and Iran?

Tensions between Israel and Iran reached a boiling point after 12 days of cross-border missile and drone strikes.

The situation escalated further when U.S. forces under President Trump launched targeted airstrikes on key Iranian nuclear sites, Fordow, Natanz, and Isfahan, prompting a direct Iranian missile response on a U.S. base in Qatar.

In a dramatic turn, President Trump announced what he called a ‘Complete and Total CEASEFIRE‘ – announced on Truth Social. According to Trump’s plan, Iran would begin the ceasefire immediately, with Israel to follow 12 hours later.

The truce would reportedly be considered complete after 24 hours if all attacks stopped.

While Trump touted the ceasefire as a triumph of ‘peace through strength’, analysts questioned the ceasefire’s enforceability – especially since missile exchanges reportedly continued despite the announcement.

Nonetheless, Trump claimed credit for halting the region’s slide into all-out war without committing to prolonged U.S. military involvement.

Critics argue Trump’s strategy relies more on military pressure and media theatrics than diplomatic engagement.

Supporters counter that his boldness forced both sides to the table. Either way, the world is watching to see whether this fragile peace endures – or erupts again in fire.

If this turns out to be a masterstroke in political brinkmanship – hats off to Trump, I guess. Whichever way you look at it, the precision U.S. strike on Iran was exactly that – precision. And, you have to take note.

Iran has been weakened, and this may even influence Russia’s war on Ukraine. Hopefully Israel with Palestine too – regardless of stock market reaction.

And that has to be a good thing!

But has Israel finished their war?

Despite all the noise regarding stock market reaction, one thing is for certain – the anxiety and worry for the people of the Middle East is unquestionable.

It’s not a happy time.

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S&P 500 slides into correction territory

S&P 500 enters correction

The S&P 500 has officially entered correction territory, marking a significant shift in market sentiment

The index, widely regarded as a benchmark for the health of large U.S. companies, has fallen over 10% from its February 2025 peak.

This downturn follows a series of escalating trade tensions, with President Donald Trump announcing a 200% tariff on European alcoholic products in response to the European Union’s levies on American whiskey.

The correction reflects growing investor concerns over the potential economic fallout of these trade disputes. The Nasdaq Composite, another major index, had already entered correction territory earlier, signaling broader market unease. The Dow Jones Industrial Average also experienced a decline, marking its fourth consecutive day of losses.

Economists warn that the ongoing trade war could exacerbate fears of a recession, as businesses face rising costs and uncertainty. The Federal Reserve’s recent inflation reports suggest price growth remains elevated, adding to the challenges.

While corrections are not uncommon, they often serve as a wake-up call for investors. Historically, only a fraction of corrections evolve into bear markets, but the current environment of trade tensions and inflationary pressures has heightened concerns.

As markets navigate these turbulent waters, all eyes remain on policymakers and their next moves to stabilise the economy.

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S&P 500 touches new record high!

Stocks rose on Wednesday 22nd January 2024 with the S&P 500 reaching a new all-time high, as technology shares including Nvidia and Oracle surged on optimism surrounding artificial intelligence and President Donald Trump’s new term in office.

The S&P 500 advanced after hitting an intraday record of 6,100.81, exceeding the last milestone touched in December 2024 before pulling back. The index closed at 6,086.37, slightly below its all-time closing high.

S&P 500 one-month chart as of Wednesday 22nd January 2024

S&P 500 one-month chart as of Wednesday 22nd January 2024

The S&P’s move to an all-time high comes as investors witnessed a December 2024 pullback. Despite the index ending last year with a 23% gain, the S&P 500 shed 2.5% in December 2024, as traders fretted that the Federal Reserve wouldn’t be able to cut rates as much as anticipated.

That lacklustre performance bled into the first few trading sessions of 2025, but some data indicating modest easing on the inflation front and good earnings results have helped the market recover.

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Are U.S. Stocks Overvalued?

The U.S. stock market has been a topic of much debate among investors and analysts, especially regarding its valuation levels. As of the end of 2024, several indicators suggest that U.S. stocks might be overvalued.

Buffet indicator

One of the most watched metrics is the Buffett Indicator, named after the legendary investor Warren Buffett. This indicator compares the total market capitalisation of U.S. stocks to the country’s gross domestic product (GDP).

Historically, a ratio above 100% is considered overvalued. As of September 30, 2024, this ratio stands at approximately 208%, significantly above the historical average and suggesting that the market is strongly overvalued.

P/E and CAPE

Another important metric is the Price-to-Earnings (P/E) ratio, which measures the price of stocks relative to their earnings. The cyclically adjusted P/E ratio (CAPE), popularised by economist Robert Shiller, provides a long-term view by averaging earnings over ten years.

The CAPE ratio for the S&P 500 is currently around 35, well above the historical average of 16-17. This high level indicates that investors are willing to pay a premium for stocks, which could be a sign of overvaluation.

Several factors contribute to these elevated valuations. Low interest rates have played a significant role, making bonds less attractive and pushing investors toward stocks. Additionally, the rapid technological advancements and growth in sectors like technology, AI, and healthcare have driven up stock prices. Companies in these sectors have experienced significant revenue growth, leading to higher valuations.

High valuations

However, these high valuations come with risks. The market’s current levels are pricing in a lot of optimism about future growth and profitability. Any economic slowdown, policy changes, or unforeseen global events could trigger a market correction. Investors must remain cautious and consider the potential for volatility.

On the other hand, some analysts argue that the current valuation levels can be justified by the robust corporate earnings and strong economic fundamentals. They point out that the U.S. economy has shown resilience in the face of challenges, and many companies have adapted well to the changing environment.

Summary

In conclusion, while U.S. stocks are currently expensive and may be overvalued by historical standards, it’s essential to understand the underlying factors and potential risks.

Investors should stay informed, diversify their portfolios, and be prepared for possible market fluctuations. As always, a balanced approach to investing, considering both the potential rewards and risks, is crucial.

Always do your own and careful – RESEARCH! RESEARCH! RESEARCH!

An seek professional financial advice.

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Markets heat up as the weather cools down!

Markets warm up

As the autumn chill of November sets in, the market seems to defy the temperature drop with a notable heated uptick in activity.

This phenomenon, often referred to as the ‘November Effect’, is a period where investors start to position themselves for end-of-year strategies, leading to increased market volatility and opportunity.

Historically

Historically, November has been a month where markets tend to show positive returns. Several factors contribute to this trend. Firstly, the anticipation of the holiday season boosts consumer spending, leading to higher revenues for retail companies. This optimism often spills over into the stock market, driving up share prices.

Secondly, institutional investors begin to adjust their portfolios to lock in gains for the year, a process known as ‘window dressing’. This activity can lead to increased buying, particularly in stocks that have performed well throughout the year, further driving market momentum.

Additionally, the release of third-quarter earnings reports in October sets the stage for November. Companies that have posted strong earnings results often see continued investor interest, propelling their stocks higher. Conversely, companies with weaker results might face selloffs, adding to market dynamism.

Tech resilience

Tech stocks, in particular, have shown resilience and growth potential, even amidst economic uncertainties. With advancements in AI, cloud computing, and cybersecurity, tech continues to be a focal point for investors. November often sees a renewed interest in these sectors, with investors looking to capitalise on year-end growth opportunities.

However, it’s essential to approach this period with a balanced perspective. While the ‘November Effect’ can present lucrative opportunities, it’s also a time of heightened market volatility. Investors should stay informed, diversify their portfolios, and consider both the potential rewards and risks.

As the weather gets colder, the markets heat up, creating a dynamic environment ripe with possibilities for those who navigate it wisely. The key lies in staying informed and alert, ready to adapt to the ever-changing market landscape.

Take informed financial advice from a professional qualified financial adviser.

And remember…

RESEARCH! RESEARCH! RESEARCH!

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S&P 500 and Dow hit new all-time

All time high

Stocks broadly climbed for a second consecutive session on 9th October 2024 with Dow & S&P 500 reaching new record highs

The S&P 500 and Dow Jones Industrial Average both closing at record highs, buoyed by a surge in technology stocks and a dismissal of geopolitical worries.

The S&P 500 increased to 5792, marking a new all-time high, while the Nasdaq Composite rose to end at 18291. The Dow Jones Industrial Average jumped 431 points to close at a record 42512.

Leading the rally were technology stocks, with Amazon and Apple each gaining over 1%. Super Micro Computer saw a significant 4% increase. The gains helped offset a rocky start to October, propelling the major indices into positive territory for the month.

Following the release of minutes from the Federal Reserve’s September meeting, which showed a 0.50% interest rate cut, stocks held onto their gains. The minutes indicated that a ‘substantial majority of participants‘ were in favour of the more significant rate reduction.

Record high reached for the S&P 500 on 9th October 2024

Record high reached for the S&P 500 on 9th October 2024

Record high reached for the Dow Jones on 9th October 2024

Record high reached for the Dow Jones on 9th October 2024

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Dividend stocks in the FTSE 100 and FTSE 250 – a basic overview

Passive income from dividend stocks

The FTSE 100 index comprises the 100 largest companies by market capitalisation. These companies are typically well-established and financially stable, making them reliable dividend payers. 

The average dividend yield for the FTSE 100 is around 3.97%.

Here are ten dividend stocks in the FTSE 100

British American Tobacco (BATS) – Known for its high dividend yield, often exceeding 7%. Not an ethical choice.

Rio Tinto (RIO) – A mining giant with a strong dividend history.

Imperial Brands (IMB) – Another tobacco company with a robust dividend yield. Not an ethical choice.

Legal & General Group (LGEN) – A financial services company with a consistent dividend payout.

GlaxoSmithKline (GSK) – A pharmaceutical company with a reliable dividend.

Vodafone Group (VOD) – A telecommunications company with a solid dividend yield.

HSBC Holdings (HSBA) – One of the largest banking institutions with a strong dividend.

BP (BP) – An oil and gas company known for its high dividend yield.

Unilever (ULVR) – A consumer goods company with a consistent dividend payout.

National Grid (NG) – An energy company with a reliable dividend history.

FTSE 250 Dividend Stocks

The FTSE 250 index includes the next 250 largest companies after the FTSE 100. These mid-cap companies often offer higher growth potential and, in some cases, higher dividend yields. The average dividend yield for the FTSE 250 is around 3.30%.

Here are ten dividend stocks in the FTSE 250

Harbour Energy (HBR) – An oil and gas company with a yield of 7.24%.

Tritax Big Box REIT (BBOX) – A real estate investment trust with a yield of 4.76%.

Investec (INVP) – A financial services company with a yield of 6.21%.

Greencoat UK Wind (UKW) – A renewable energy company with a yield of 7.48%.

IG Group Holdings (IGG) – A financial services company with a yield of 5.02%.

ITV (ITV) – A media company with a yield of 6.43%.

Abrdn (ABDN) – An investment company with a yield of 9.45%.

HICL Infrastructure (HICL) – An infrastructure investment company with a yield of 6.37%.

Direct Line Insurance Group (DLG) – An insurance company with a yield of 3.30%.

Drax Group (DRX) – An energy company with a yield of 3.81%.

Passive dividend income

Passive income from dividends
Dividend stocks in the FTSE 100 and FTSE 250 – a basic overview

Buying dividend stocks can offer several benefits to investors – key advantages are…

Regular Income

Dividend stocks provide a steady stream of income through regular dividend payments. This can be particularly appealing for retirees or those seeking passive income.

Potential for Capital Appreciation

In addition to dividends, these stocks can also appreciate in value over time, offering the potential for capital gains. This dual benefit can enhance overall returns.

Reinvestment Opportunities

Dividends can be reinvested to purchase more shares, a strategy known as dividend reinvestment. This can compound returns over time, significantly boosting the value of your investment.

Lower Volatility

Dividend-paying stocks tend to be less volatile than non-dividend-paying stocks. Companies that pay dividends are often more established and financially stable, which can provide a cushion during market downturns.

Tax Advantages

In many jurisdictions, dividends are taxed at a lower rate than regular income. This can make dividend stocks a tax-efficient investment option.

Inflation Hedge

Dividend growth can help protect against inflation. Companies that consistently increase their dividends can provide a rising income stream that keeps pace with or exceeds inflation.

Signal of Financial Health

A company that pays regular dividends is often seen as financially healthy and confident in its future earnings. This can be a positive signal to investors about the company’s stability and profitability.

Diversification

Including dividend stocks in your portfolio can add diversification. They often belong to various sectors, providing exposure to different parts of the economy.

Compounding Effect

The combination of regular dividends and potential capital gains can create a powerful compounding effect over time, significantly enhancing long-term returns.

Psychological Benefits

Receiving regular dividends can provide psychological comfort, especially during market volatility. Knowing that you are earning income regardless of market conditions can help maintain a long-term investment perspective.

Investing in dividend stocks can be a strategic way to build wealth and generate income. However, it’s important to research and choose companies with a strong track record of dividend payments and financial stability. 

Conclusion

Investing in dividend stocks from the FTSE 100 and FTSE 250 can be a strategic way to generate passive income while also benefiting from potential capital gains. These indices offer a diverse range of companies, each with its own strengths and dividend yields, making them attractive options for income-focused investors.

These are NOT recommendations – just observations. Go do your research. Interest rates will/do change quickly – go check. Thanks.

Remember to ALWAYS do your own careful and considered research…

RESEARCH! RESEARCH! RESEARCH!

Prices listed as of 9th October 2024

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Chinese stocks tumble amid stimulus benefit scepticism

China stocks drop

On Wednesday 9th October 2024, Chinese stocks experienced a sharp decline, with the Shanghai benchmark plummeting by 6.6%

Hong Kong’s index fell by 1.5%, in contrast to the mostly positive performance of other global markets.

Beijing’s recently detailed economic stimulus plans did not meet the high expectations set after the central bank and other agencies announced measures aimed at revitalising the struggling property sector and accelerating economic growth.

The Shanghai Composite Index fell 6.6% reversing a 4.6% gain from Tuesday 8th October 2024 when it re-opened following a weeklong national holiday.

The CSI 300 Index, which follows the top 300 stocks in the Shanghai and Shenzhen exchanges, relinquished 7.1% – ending a 10-day winning streak.

In Shenzhen’s smaller market, the benchmark tumbled by 8.7%.

The Hang Seng index in Hong Kong dropped 1.5% – and this coming after a steep decline of over 9% the previous day.

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China’s tech stocks rally to 13-month high on new stimulus

Tech stocks up China

Chinese technology stocks, such as the previously underperforming Alibaba, have surged this week, reaching peaks not observed in over a year

The stock surge follows the announcement of stimulus measures by China’s central bank to boost the world’s second-largest economy.

On Thursday 26th September 2024 in the U.S., Alibaba’s shares closed above $100 for the first time since August 2023.

Tencent’s shares ended at their highest point in over two and a half years.

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Chinese stocks up sharply after Beijing confirms stimulus measures

China stocks up

Chinese stocks continued to rise following state media reports that China’s top leaders have endorsed the government’s recent measures to bolster their economy.

The CSI 300 index in Mainland China continued its rally for a seventh consecutive day, reaching its highest point in about four months, subsequent to a meeting of China’s highest officials confirming the government’s latest economic stimulus actions.

South Korea’s Kospi index surged by 1.9%, driven by advances in semiconductor company SK Hynix, which declared the commencement of mass production of the world’s inaugural 12-layer HBM3E chip, utilised in AI applications.

See SK Hynix Newsroom report here

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Nikkei rises 3% to lead gains in Asia

Japan shares

Japanese stocks led gains across Asia on Friday 16th August 2024, poised for their best week in four years, with the Nikkei 225 climbing over 3% following a Wall Street rally.

The surge came as new economic data alleviated concerns of a U.S. recession.

In the U.S., retail sales saw a 1% increase in July, significantly exceeding the Dow Jones estimate of a 0.3% rise. Additionally, weekly jobless claims experienced a decline.

The rise in the Nikkei came after the biggest fall in history just days ago where it hit historic lows last seen in 1987 making it a remarkably fast recovery.

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Global stock market rout intensifies as Dow futures dip over 1200 points

Stock rout

U.S. stock futures slumped Monday 5th August 2024 as global markets sell-off centered around potential U.S. recession fears.

About one hour before U.S. stocks open – here’s the situation

Dow Jones Industrial Average futures dropped 1250 points following a 611point loss on Friday 2nd August 2024.

S&P 500 futures are down 4.6% after the benchmark lost 1.8% on Friday 2nd August 2024.

Nasdaq-100 futures lost 6% as big tech stocks take a hit in early trading.

Japan’s Nikkei 225 plunged 12% in its worst day since the 1987 Black Monday crash.

If the Dow Jones decline continues it would be the first 1000 point decline since September 2022.

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U.S. stocks slip as Nasdaq tumbles for worst day since 2022 – Tesla and Alphabet fall

Stocks in the red

Stocks sold off Wednesday 24th July 2024, blighted by underwhelming reports from Tesla and Alphabet – leading the Nasdaq Composite and the S&P 500 to post their worst sessions since 2022.

The S&P 500 index dropped to closing at 5427, while the tech-heavy Nasdaq slid around 3.65% to end at 17342. The Dow Jones Industrial Average shed 504 points closing at 39853.

Nasdaq Comp one day chart 24th July 2024

Nasdaq Comp one day chart 24th July 2024

Shares of Google parent company Alphabet fell 5% for their biggest one-day drop since 31st January, when they dropped 7.5%. Although Alphabet reported good numbers, YouTube advertising revenue came in below the consensus estimate causing share to dip.

Alphabet one day chart 24th July 2024

Tesla shares declined around 12% – their worst day since 2020 – on weaker-than-expected results and a 7% year-on-year drop in auto revenue.

Tesla one day chart 24th July 2024

Nasdaq Comp one day chart 24th July 2024
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Worst day for Nasdaq since 2022 as investors continue to rotate out of tech. S&P 500 slides – Dow gains

Nasdaq pull-back

On Wednesday 17th July 2024, the Nasdaq Composite and S&P 500 pulled-back as investors continued to shift from tech stocks to more interest rate-sensitive sectors.

The S&P 500 dropped 1.39%, closing at 5588. The tech-geared Nasdaq tumbled 2.77%, finishing at 17996, marking its worst session since December 2022 and ending below 18000 for the first time since 1st July 2024.

Conversely, the Dow Jones Industrial Average resisted the downward trend, gaining around 243 points, or to close at 41198. This advance led the index to close above the 41000 milestone.

Nasdaq Composite 17th July 2024 – one day chart

S&P 500 17th July 2024 – one day chart

Dow Jones 17th July 2024 – one day chart

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Dow rises more than 400 points to hit intra-day of 42000 then trims back before close

Stock rotation

Let the rotation begin

The Dow Jones Industrial Average surged on Friday 12th July 2024 as investors began to diversify beyond the technology sector.

The Dow closed at 40,000.90, after hitting a new all-time high of 40,257.

The Dow closed at 40,000.90, after hitting a new all-time high of 40,257.

The S&P 500 added 0.55% to 5,615, and the Nasdaq Composite went up 0.63% to 18,398. However, on Thursday 11th July 2024 the S&P 500 experienced its worst day since late April due to a major market rotation, with Nvidia dropping 5.6%.

Investors rotated from tech to industrial stocks in the Dow on Friday, hoping that slowing inflation might lead to a Federal Reserve rate cut in September.

The Dow gained 1.6% for the week, spurred by a report showing a 0.1% decline in the consumer price index for June. Recent reports suggest that the Federal Reserve might indeed consider a rate cut in September if inflation continues to slow.

While the AI growth has been dominant, other market catalysts, such as potential rate cuts, can also drive different sectors, including utilities.

Good earnings, improving economic news and the promise of a rate cut are combining to become the perfect storm for U.S. stocks.

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Common investing mistakes to avoid

Wise stock selection

Avoiding common investing and trading pitfalls is crucial. Here are some typical investing errors you should try to avoid.

Warren Buffett wisely cautions against investing in businesses that are not well understood. It is crucial to have a deep understanding of the company, its market sector, the broader industry, and its financial stability before committing to an investment.

Understand your investment

Take time to research whether it be a company, fund, unit trust or savings account. Make sure you understand what you are doing. Not understanding the investment is a massive failing.

Love the company, but resist falling in love with it. An emotional attachment to a specific stock can obscure your judgement. Keep in mind that investing should be a process of making rational decisions based on data, not on personal emotions.

Patience

Successful investing demands patience. Don’t anticipate immediate results; give your investments the necessary time to mature. Resist the urge to frequently check the markets and make hasty uninformed decisions.

Investment turnover

Excessive trading, known as churning, can result in significant transaction fees and tax consequences. It is advisable to adopt a long-term investment strategy and minimize superfluous trades.

Attempting to time the market

Consistently timing the market is a difficult task. Instead, the emphasis should be on the duration of market involvement. Steady contributions and maintaining investments yield benefits in the long-term.

Getting even

Clinging to underperforming investments with the hope of just breaking even can be harmful. It’s crucial to assess each investment on its own merits and be prepared to take losses when needed. Run the winners!

Diversify

Investing all your funds in a single stock or asset class heightens the risk. Mitigate this by diversifying your investments across various asset types, industries, sectors and regions.

Cut emotions

Fear and greed often result in unwise decisions. It’s crucial to remain disciplined, adhere to your investment plan, and resist the urge to make hasty decisions driven by emotions.

You

Always maintain honesty with yourself when investing. Do not persuade yourself of anything other than the FACTS regarding your investment choices!

Keep in mind that investing is a journey where learning from mistakes is an integral part of the experience. By steering clear of these common pitfalls, you’ll set yourself up for greater long-term success.

Spread out your investments. Diversify. Aim for the long term. Remove emotion. Let the winners run. And doe your RESEARCH!

RESEARCH! RESEARCH! RESEARCH!

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S&P 500 and Nasdaq close at new all-time highs again

S&P 500 and Nasdaq all at new highs!

The S&P 500 and Nasdaq Composite reached new closing highs on Tuesday 11th June 2024, propelled by Apple as the tech giant’s stock hit a record itself.

The S&P 500 index climbed to a new high to close at 5375, while the Nasdaq Composite finished the day at 17343. Both indices also hit new intraday highs. However, the Dow Jones Industrial Average fell by around 120 points to close at 38747.

S&P 500 reaches new all-time high on 11th June 2024

S&P 500 reaches new all-time high on 11th June 2024

Nasdaq Composite hits new all-time high on 11th June 2024

Investors seemed to be cashing in on Nvidia, a leader in artificial intelligence, and shifting focus to Apple, which recently introduced new features likely to drive a surge in iPhone upgrades.

Apple’s stock reached a new high during the trading session, its first since December 2023, with around a 7% increase. Nvidia’s stock declined by 0.7% as some profit taking ensued.

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Quality investing advice from one of the best, if not the best investor the world has ever seen!

A Wise Owl

Warren Buffett, renowned as one of history’s most successful investors, has imparted invaluable insights that can help steer you on your investment path.

Rule No. 1 is never lose money. Rule No. 2 is never forget Rule No. 1

This straightforward statement has significant connotations. Although the aim of investing is to make a profit, it is just as important to avoid losses.

By reducing choices that put your portfolio at risk, you enhance the chance of earning profits. Consider it protecting your capital before pursuing returns. In contrast to those who gamble on the stock market, Buffett prioritizes careful risk management.

It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price 

Rather than concentrating only on low-priced stocks, it’s wise to invest in outstanding companies with robust economic foundations and competitive edges. Although top-notch companies seldom seem inexpensive, their enduring profitability may warrant a fair premium. Notable firms that Buffett has backed include Apple, American Express, Coca-Cola.

Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble 

Be ready to grasp opportunities as they come. Instead of a small thimble, arm yourself with a bucket to gather the metaphorical riches. That is, capitalize on favorable market conditions and make smart investments when suitable chances emerge.

Invest in yourself 

Buffett advocates for self-improvement, highlighting the importance of effective communication, both written and verbal. Developing this skill can greatly enhance your value.

Diversify

Diversify your investments among various assets to mitigate risk. Look into index funds and exchange-traded funds (ETFs) – unit trusts, stocks and shares, gold and hold cash to achieve widespread diversification.

Start early

The effectiveness of compounding is maximized when you start investing early. Being consistently invested over time is more beneficial than attempting to predict market movements.

Automate

Establish automatic contributions to your investment accounts. Regular investments over time can result in significant growth.

The principles that capture the influence of fear and greed on investing were articulated by Warren Buffett.

Buffet advises: ‘Be fearful when others are greedy, and greedy only when others are fearful.‘ 

Fear and Greed

Fear

When investors collectively succumb to fear from ongoing stock market declines, they often resort to selling their shares, which in turn exacerbates the fall in prices.

Greed

In bull markets, it’s common for investors to exhibit excessive greed, pursuing rapid wealth and speculative trends.

Buffett’s wisdom

Warren Buffett, often referred to as the ‘Oracle of Omaha’, is known for his disciplined, long-term approach to investing. He specializes in value investing, which involves purchasing companies that seem to be undervalued by the market.

The rule

When others exhibit greed (buying aggressively), it’s prudent to exercise caution. On the flip side, when others are fearful (selling in a panic), it may be an opportune time to be greedy (buying at reduced prices).

Application

Fearful times

In times when fear prevails in the market, prices might plummet as a result of panic selling. Buffett advises exercising caution in these situations.

Greedy times

When others display excessive optimism (greed), it presents an opportunity to acquire undervalued assets.

Successful investing requires maintaining balance, adhering to fundamental principles, and steering clear of emotional extremes.

Investing is a marathon, not a sprint; hence, patience, discipline, and ongoing education are crucial.

Remember… ALWAYS do your own careful research! Or better still, take professional financial advice. Actually – just do both!

RESEARCH! RESEARCH! RESEARCH!

Disclaimer: this article is for informative purposes only! Do not trade nor invest unless you FULLY understand what you are doing – even then it is wise to take qualified financial advice.

Possible read: Buffet – The Biography (Amazon listing – other good outlets available)

Wikipedia: Warren Buffet

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How to Pick Stocks: A Beginner’s Guide

Investing in individual stocks can be both thrilling and profitable, yet it carries inherent risks. To make informed decisions, it’s important to adhere to some fundamental steps.

Define Your Goals

Before diving into stock picking, consider your investment goals

Invest for the longer-term, it works!

KIS – Keep It Simple! Keep your investment strategies as simple as possible.

Generate income – For regular payouts, consider focusing on dividend-paying stocks.

Preserve capital – If your primary goal is to keep pace with inflation and safeguard your savings, consider opting for lower-risk investments.

Grow capital – If you’re a young investor aiming for long-term growth, you might consider higher-risk stocks, being cautious with your selections.

Invest for the long-term

Choose your investment strategy

Value Investing – Consider purchasing stocks that are undervalued and have been neglected by the market.

Growth Investing – Invest in companies that exhibit signs of success and have the potential for further advancement.

Momentum Investing – Dispose of underperforming assets and invest in successful ones by following market trends. Be ruthless – there is no room for emotion!

Pound-Cost Averaging – Gradually invest money into the market to reduce the impact of volatility. Look into investing in funds or unit trusts.

Stay informed

Before selecting individual stocks, it’s crucial to stay informed about broader economic trends. Consult financial news websites and specialized magazines to gauge the performance of various industries. For example, economic volatility or significant global incidents, such as the emergence of a new virus variant, can affect the stock market.

Pay close attention to economic announcements from central banks, like interest rate changes. Monitor the newswires regularly and track market trends.

Explore industries you understand

Focus on investing in sectors you understand well. For instance, if your expertise lies in technology, look towards tech companies. If renewable energy is your area of interest, consider stocks in that domain. Knowledge of the industry can lead to more informed evaluations of companies.

Assess company fundamentals

When evaluating a specific stock, consider the following

Financial Health – Examine the company’s balance sheet, income statement, and cash flow. Scrutinize the levels of company debt. Observe the sales and purchases by directors. Determine if they are financially stable.

Earnings Growth – Verify whether the company has demonstrated consistent growth in its earnings over time.

Valuation – Comparing a stock’s price-to-earnings (P/E) ratio with that of its industry peers is crucial for assessing its market value relative to its earnings.

Competitive Advantage – A company’s competitive edge can stem from a unique product, a strong brand, or other distinctive factors. These elements can set a business apart and enable it to outperform its rivals in the market.

After a general market downturn – there is usually a good opportunity to pick-up good companies at a knock down bargain price.

Diversify your portfolio

It’s wise not to concentrate all your resources in a single area. Diversify your investments across various sectors and asset classes. Look into exchange-traded funds (ETFs) or mutual funds to gain wider market exposure. Consider precious metals such as gold maybe and keep cash on the sidelines for those occasional deals that crop up from time to time.

In summary

Selecting stocks involves thorough research, patience, and a vision for the long-term. Keep in mind that all investments carry some level of risk – past performance is not indicative of future outcomes. It is advisable to seek guidance from a financial advisor prior to making any investment choices.

Remember, investing involves risk, and it’s essential to do thorough research and consider professional advice before making any investment decisions. 

RESEARCH! RESEARCH! RESEARCH!

Good luck with your stock-picking choices.

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Surging tech stocks allow world’s largest sovereign wealth fund to post $110 billion profit in Q1

Wealth fund

Norway’s massive sovereign wealth fund reported a first-quarter profit of 1.21 trillion kroner ($109.9 billion) – bolstered by strong returns from its technology stock investments it was announced on Thursday 18th April 2024.

Established in the 1990s, Norway’s sovereign wealth fund, the largest in the world, invests the surplus revenue from the nation’s oil and gas sector. The fund has invested in over 8,800 companies across more than 70 countries to date.

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Japan’s Nikkei crosses 39000 barrier for the first time

Nikkei 225 index

Japan’s Nikkei 225 hit a record high of: 39098 on Thursday 22nd February 2024.

The rally was propelled by electronics, banking and consumer stocks as robust earnings and investor-friendly measures fuel a blistering rally in Japanese equities.

The Nikkei 225 jumped 2%, surpassing the previous record high of 38,915.87 reached in 1989.

Standout performance

Both the Nikkei and the broader Topix have been standout performers in Asia up more than 10% so far in 2024 after surging more than 25% in 2023. Their best annual gains in at least a decade.

Japan Inc’s solid third-quarter corporate earnings have prompted Bank of America analysts to upgrade their 2024 year-end forecasts for the Nikkei 225 to 41000 from 38500. They raised their forecasts for the Topix to 2,850 from 2,715.

The rally has also been supported by a weaker yen.

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Japan’s stock markets are on a tear but are the Zombies coming?

Nikkei 225 index

After a decade-long bull run throughout the 1980’s, the Nikkei 225 index reached an all-time high of 38,915 on December 29, 1989, the last trading day of the year.

Few could have imagined, on New Year’s Eve of 1989, that the index would be lower 34 years later. As the New Year arrived, the bubble burst.

And now, Japan’s stock markets are on a tear and closing in on that elusive 38195 high of 1989 – but there’s a catch – the Zombies are coming.

Zombie companies

Zombie firms are businesses that are unprofitable and struggling to keep afloat. They don’t have excess capital to invest and grow the business, or to pay down the loan capital.

Concerns about zombie firms are coming into focus as the Bank of Japan is tipped to raise interest rates in 2024 for the first time since 2007.

It comes as the Nikkei 225 rises to its highest point in almost 34 years

Japan’s stock markets have been on a meteoric run since the start of 2023, repeatedly breaching 33-year highs and outperforming the rest of Asia.

However, there are rising concerns that so called ‘zombie’ firms, which are unprofitable and struggling to keep afloat, could cut short that rally. The Bank of Japan is widely expected to raise interest rates this year, and that could easily tip many of these firms into bankruptcy, which could have a broader impact on the economy and stock market,

Nikkei 225 1-year chart 9th February 2024

Nikkei 225 1-year chart 9th February 2024

Bankrupt businesses

Zombie firms are nothing new in Japan. They first emerged after the stock ‘bubble’ and subsequent crash of the 1990s, when banks continued to support companies that would have otherwise gone bankrupt. 

The pandemic of 2020 accelerated the problem of zombie businesses, with the number of zombie firms in Japan reportedly jumping by around 33% between 2021 and 2022. 

At the end of 2023, Japan reportedly had around 250,000 companies that are technically zombie businesses

Some experts argue that zombie firms are a drag on Japan’s productivity, innovation, and growth, as they occupy resources and crowd out more efficient firms. The debate on how to deal with zombie firms is ongoing and may have implications for Japan’s economic recovery and future prospects.

Others suggest that zombie firms may have a positive effect, such as preserving employment, social stability, and industrial diversity.

Surely, there is no room for inefficiently run businesses making little or no profit in any economy.

Watch out for the Zombies!

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All hail the rally?

U.S. stocks rally

U.S. stocks have had a good year in 2023, and a great start to 2024 with new record highs being set.

Many major indices have recorded double-digit gains. However, some analysts have warned that the rally may not last, as it has been driven by a few large-cap technology and growth stocks, while many other sectors and regions have lagged behind. 

A stock market rally is a broad and rapid rise in share prices, often defined as a 20% increase from a recent low. 

This could indicate a lack of breadth and sustainability in the rally, and potentially signal a market pullback, correction or even a crash in the future.

Bull bear, bull?

Chartists with their technical analysis might see a pattern that points to a substantial upside, but they should not get too carried away with their own observations, right now would be a sensible time for markets to find level ground, if only temporarily. 

The bullish view is that the ‘laggards’ should catch up the ‘mega cap’ stalwarts once again. The bearish view is that the ‘mega cap’ stocks’ will realise they’ve gone too far and need to ride back to the rest of the market. Too few stocks in the same sector hold the balance of power – go check out the Magnificent 7 or even the old FANG stocks.

Catch-up

Either way, there ought to be an opportunity for underrepresented sectors and industries to gain lost ground.

The question is, will there be a pause to allow laggards to catch-up, or will the mega caps simply continue on their march?