Listen in podcast app and follow below for the podcast topic arc.
Opening riff - re: dog days of sports but NFL is around the corner
Market update from Joel & Comments on consumer sentiment bifurcation
Meta, Google and Microsoft
H1-B Visa Holders
The Content Creator Economy - boost from writer/actor strike?
Prof Galloway and Adam Grant commentary
Recommendations
Listen on Apple, Spotify, or Google Podcasts.
📈📊Market Update💵📉
Q2 closed with some pretty mind-numbing performance numbers from the Nasdaq.
Few people predicted that the first half of the year would produce such a phenomenal performance from the tech sector.
This week, Datatrek had a great performance roundup in their daily newsletter that i will highlight below:
After lagging US large caps in Q1 and Q2 2023, rest of world stocks (ACWX) outperformed in July. After leading in the first half of 2023, the S&P 500 trailed every other widely followed measure of US stock performance in July. That the Nasdaq Composite outperformed is no surprise; it has been doing so all year. But mid and small cap indices of every description, as well as the Dow and even-weight S&P, did better in July than the 500. Sector, style, and market cap rotation was the story in July.
The “catch up trade” we have been discussing over the last month is in full swing. A scan down the rightmost column in the table above shows that July’s leaders are still 2023’s laggards. That does not happen by accident. The US market narrative is changing.
#2: Major developed and emerging economy equity market indices in comparison to the S&P 500:
Emerging Markets were July’s standout region after lagging badly in Q1 and Q2.The rally in Chinese stocks helped, but so did gains in South Korean and Brazilian equities. There is growing hope that China’s economic policymakers will soon act to boost the country’s flagging economy. This is helping South Korean stocks as well. MSCI Brazil is 18 percent weighted to Energy, a winning group last month with oil’s sudden price surge.
European and Japanese stocks continued to underperform last month, just as they did in Q2. While both areas did well in Q1, they have not been able to find their footing since then. In the case of European stocks, that is a bit surprising since their Q1 outperformance was largely based on initial enthusiasm over China’s economic reopening. Worries about a slowing local economy are weighing on Europe’s equity markets, except for the Netherlands, due to its 22 percent weight in global tech company ASML.
#3: US large cap sector performance:
Of the 3 sectors heavily weighted to US Big Tech, only Communication Services continued its 2023 streak of outperformance in July. That was due to Alphabet (+10.0 pct) and Meta (+11.0 pct), largely because of strong Q2 earnings reports. US large cap sector leadership shifted in July to Energy, Financials, and Materials.All 3 came into Q3 badly underperforming the S&P 500. Hopes for a continued economic expansion have given them a tailwind, as have rising oil prices. This is good news, since it shows markets are now more forcefully rejecting recession fears. We continue to favor large cap Financials, especially the banks.
#4: Big Tech’s changing role in the ongoing US large cap rally, with the data for each name’s point contribution to the S&P 500:
US Big Tech stocks’ contribution to the S&P 500 in July was largely in line with their collective weighting (28 percent) rather than being the lion’s share of the gains as they were in Q1 and Q2. As with the prior points, this shows that the US equity rally is broadening out. It’s not that Big Tech is a drag on US large caps – far from it, in fact. But other groups, as noted above, are having their day (finally).
#5: Growth versus Value investment styles for US small and large cap stocks:
In July, Value came back into favor in US large caps, but not small caps. As is so often the case with these labels, the devil is in the sector-specific details. For example, Energy (a top performer last month) is 6.5 percent of large cap Growth but just 1.5 pct of large cap Value. Strange, but very true. As for small caps, Financials (another big July winner) are 25.8 percent of Value but just 6.5 pct of Growth. At least that differential makes some sense, unlike Energy in large cap Growth/Value.
Twitter links from the pod:
🎙Podcast & YouTube Recommendations🎙
Where to start investing in AI - Odd Lots with Josh Wolfe from Lux Capital
The history of Disney and Picasso - Founders Podcast
A good primer on LK-99 in this weeks episode of All In
🔮Best Links of The Week🔮
The Role of Gold in a portfolio - Unlimited Funds
Calgary Real Estate is on fire - Some data from the Calgary Harold
CROE downgrades the home sales forecast. The story of Canadian and US realestate remains an inventory problem. WE NEED SUPPLY - The Globe and Mail
Sparkline Capital - Investing in AI: Navigating the Hype (17 pages) Kai Wu's latest research applies lessons from the dot-com bubble to the AI craze today, showing how “intangible value” can help investors navigate the hype cycle. He then analyzes the AI exposure of popular ETFs and which employers stand to benefit from the impact of Generative AI on their workforces.We've shared a lot of Wu's research before, but this is a must-read.
The Online Creator Economy gets a big boost from Hollywood strikes: While Hollywood writers and actors stay on strike, online creators get a boost on their increasingly abundant audience followings and market power. The Washington Post has a detailed piece worth perusing. Meanwhile, Goldman Sachs has a new report here seeing this market go from $250 billion to almost $500 billion in four years. - Michael Parekh
Strong Quarterly Results & AI Focus by Meta, Google and Microsoft: All three tech mega cap companies reported robust results this week, with the stocks responding well, especially Google and Meta. Microsoft also had a strong report, and the three companies now collectively trade at almost a $5 trillion market cap. Amazon and Apple report their results on August 3rd next week. Focus as expected, was on the AI plans by each company, and the companies were proactive outlining their plans in the months to come. Investors were unfazed by the billions in continued capex investment by the companies in AI and other initiatives, for now. - Michael Parekh
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