Markets Dodge Three Bullets

Fed, AAPL Earnings, Jobs Report: Stocks Unchanged

Tech Outperforming S&P By A LOT

No question: QQQ has done very well this year, as the AI-powered enthusiasm has benefitted the largest (NVDA, MSFT especially). However, we are now here.

Does this mean it cannot go higher? It doesn’t mean that at all. Overdone? Perhaps, but perhaps not. The arguments are difficult and you can build a very good case.

• MSFT AAPL NVDA are priced to perfection

• Yeah, but, at the margin, the growth and future are here, and they have ample amounts of cash to withstand any banking issues that you you may read about (see next article)

• With the banking sector turmoil, and the ripple effects of higher interest rates, this sector may be the safe have of the equity market.

Let’s Not Go Overboard

You can see that QQQ and SPY are basically equal to each other, and that over the past 24 months, they are down. What is different from 2 years ago? Interest rates are higher, there will be more on that in the last article of this newsletter.

The idea that stocks are a hedge against inflation? Hmmm.

Small Business Hurt By Banking Crisis

If you eliminate the impossible, you get what must be true. Regional banks (even large ones) face sharply reduced deposit bases, for a number of reasons. You can watch many videos that I have mentioned since the interest rate turmoil has begun. The ripple effect, one way or the other, would circle back and challenge small businesses.

Does this mean that risky assets are vulnerable? Not necessarily. Jae’s Rib Shack isn’t listed as a public stock, and employment/spending/income may not be immediately apparent. In other words, this might take awhile to become evident in the prices of risky assets.

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Ripple Effects Of Higher Interest Rates

Again, these are all points that have been made here, or on the YouTube Channel.

• Higher interest rates mean that the huge investors (pensions) have the ability to allocate money to receive the proceeds required to pay their obligations.

• Let’s take an easy example, your house. In order for your house to quickly appreciate, there needs to be a new buyer, or the threat of a new buyer. That can create the pressure required, for the buyer that has been waiting waiting waiting. The issue here is that now, that possible buyer (as per the image) may not re-enter stocks. This might put a cap on equity returns over the long run? Very possible.

• The past 20 years has been an era of TINA (there is no alternative). While that has manifested itself in many ways (real estate, stocks), the denominator has allowed this to occur. Now, however, the opposite is true, perhaps.