How will AI-powered companies benefit from their next corporate earnings report? I will explain in detail what it brings.
video transcript
Brad Smith: While Meta and Twitter are vying for social, media is all about artificial intelligence with all the other big tech companies. The tech-heavy Nasdaq rose about 32% as investors flocked to see the promise of new technology. But how long will this rise last?
Now, Michele Schneider, Chief Strategist at Marketgauge.com, is on board. It’s an honor to be with you this morning. Michele, perhaps we start with the very question – how long can this last?
Michelle Schneider: What’s really interesting is that we started this year by looking at a very important moving average, the 23-month moving average. And the reason we actually looked at this is because he measured a two-year business cycle between the typical long business cycles, six to eight years.
And just about everything on the Nasdaq, and certainly the big AI stocks, have shown some expansion, really starting with the semiconductor sector. But it was the small-cap stocks that failed to clear.
So while everything else continues to rise to some degree, IWM can’t show any level of expansion if we use the small cap index or if we can see the S&P 600 as well. I came to think that point. And we’ve seen this historically.
The big tech looks around and says, “Wait a minute, nothing is catching up.” And that’s when you start to see the sales coming in. And then you start to see some smoothing between what happened in large caps and what happened in small caps, but at the moment it’s very divergent. It’s like a rubber band. I don’t think it’s sustainable.
Diane King Hall: So Michele, is the AI trade saturated now or not yet?
Michelle Schneider: At this point I would say, take our own portfolio as an example. We entered not because we were great geniuses from an ideological point of view, but from a purely mathematical point of view. If we just follow the technical part, we are in the AI field all year round and we are very focused on technology. So we were able to make a profit along the way.
So my question is, can you come in here? And in the current environment, given what we’ve seen in the last few days, I think small caps can’t win and are starting to weaken now. The consumer area appeared to be expanding its shrinking sphere of discretion. The Fed clearly intends to resume rate hikes. Probably not the best time to enter.
Brad Smith: With that in mind, where else would you turn your attention now?
Michelle Schneider: Well, I think this change, especially in agricultural commodities and even some soft commodities like sugar, gives us an opportunity to get involved in that area. Because the weather isn’t necessarily more cooperative in terms of weather. Droughts, El Niños, and floods occur, which often follow long periods of drought.
So we are looking there. We are looking at some of the basic ingredients. There has obviously been much debate about the expansion of solar space. Another announcement Biden made at that stage today was that there would be a $60 million cash injection. So I think anything related to the EV space is anything that supports the EV space, not necessarily the EV space itself. So we’ve been looking again at some basic industrial metals that have been really abused.
I think defense is always a good idea. And biotech, which has really been doing nothing this past year, could actually start to get a little better. We are looking for it too. Some of them, again, he beats in the IBB or XBI fields.
Diane King Hall: Okay Michelle, let’s broaden the conversation. In other words, there used to be a saying, “If it sells in May, it’s gone.” That didn’t happen. They said they will sell it in July. It should fly on sale in July.
Michelle Schneider: Good for you, Diane. use it.
Diane King Hall: Please, it’s okay.
Michelle Schneider: Well, July is a very interesting month as we’re half way through the year, isn’t it? And of course, when you look at these kinds of statistics, there’s no such thing as 100%. But in January it worked surprisingly well.
As soon as we enter January, the Nasdaq in particular broke the highs of its six-month calendar range. This means that the first 10 trading days in January form a range. And above that range, we had an advantage in that the follow-through happened, and that happened.
For small caps, meanwhile, it happened briefly, but hasn’t topped a six-month calendar high since. It will reset after 10 business days, around July 18th. Again, if these small caps continue to come under pressure and he falls below July lows once that point is reached.
And the Nasdaq can’t hit another six-month high like it did in January. After a period of optimism, we’re seeing very strong headwinds, so I think there’s a good chance we’ll see a sale in July. I had the first six months.
Brad Smith: We also know that trading volume usually drops during the summer months as well. But even with that low volume, do you expect to see some slippage over the rest of this summer, or perhaps some kind of instability back to neutral by the end of the summer? Do you have? Banks still bearish on outlook for S&P 500 through year-end.
It seems that many people are probably expecting such a slip to occur. And if it happened and continued during the third quarter, what does that mean for the fourth quarter?
Michelle Schneider: Well, I mean, I don’t think I’ve ever seen so many different demands on what’s going to happen in the market in the next six months. Some believe we will reach new highs. And they’re obviously using the booming housing market and the booming job market for all sorts of reasons. From a technical standpoint, basically what happens on Thursdays and Fridays, he hasn’t had two down days in a row on Thursdays and Fridays since May.
So people consider all these reasons very rosy. And, of course, there are banks whose primary focus is on this inverted yield curve. This has caused recessions almost every time, even if it didn’t happen when everyone expected it.
So I would say yes, we are definitely looking at it. We see it as a reversal trading range in particular. You may also use the S&P.
Forget small caps. If 4,400 to 4,500 turns out to be the upper end of the trading range, this is perfectly consistent with small caps reaching 1,900 but failing to cross it, and the market could fall further to 1,700. It makes sense to have Of course, that would bring the S&P back to at least 4,000 and possibly 3,800.
Diane King Hall: Michele, you said that many people want everything to stay rosy. Are you hoping for something different later this year?
Michelle Schneider: Well, again, for the first six months, I had nothing but reasons to be hilarious. Well, first of all, the Fed has certainly slowed the rate of change in terms of how much it will raise rates. And people expected some kind of pause and turn. And they themselves say they will cap the federal funds rate at 5/5 and 1/4%.
That gave the market an optimistic view. The economy seems to have contracted enough. Whether it was because of the yellow color or because they thought inflation had peaked, consumers kept buying in good spirits. And people thought inflation had peaked, so that was another matter.
All these reasons, especially the explosion of AI, gave the market six months of optimism. Market leading edge. So we have to consider where the optimism lies in the next six months. I’m not necessarily aware of it, because there are so many areas that could be cause for concern, such as the geopolitical situation, the social unrest situation and, of course, rising yields and inflation based on Mother Nature. . Controlling it is not so easy.
Consumers are therefore burdened. And let’s see if they can stay in the game. If we can do that, that’s reason enough for us to be fine. If you can’t do that, it’s not much.
