I nailed the bull run on Wall Street while some of my fishing buddies have remained in the bear camp. Are people getting carried away? US stocks have experienced a remarkable bull market, fueled by a change in sentiment, increasing AI revenues, a resilient economy, and the Federal Reserve’s shift toward a more accessible monetary stance.
For business operators, the challenge of doubling sales within a year is well-known. Despite its massive scale in the multi billion-dollar range, Nvidia is demonstrating growth reminiscent of a dynamic startup. Nvidia much anticipated earnings came out stellar with EPS at $5.16 versus $4.64 expected and revenues at $22.1B versus $20.62B expected. The company’s net income jumped by a stunning USD12 billion (+769%) YoY.
The fervor for AI, with Nvidia, the most talked about stock in the financial world today, positioned as a central asset, influenced the broader market’s trajectory, led by the seven companies dubbed the Magnificent Seven. Speculative money that missed the runs last year has been chasing the mega-cap growth and technology stocks.
There is another “secret” I want to share here. Fund managers are the most bullish in two years. That was one, among many, takeaways from the February edition of BofA’s closely-watched Global Fund Manager survey.
With all the FOMO, maintaining focus becomes challenging. In momentum-driven markets, exuberance and greed can propel speculative actions to increasingly extreme levels. As markets consistently reach new all-time highs, media amplifies the excitement with bullish commentaries and headlines.
Although there are ample opportunities for profit in the coming months, a history of excessive volatility exists. So now what? I don’t expect a crash but of course, that doesn’t mean that the market can’t, and won’t suffer corrections along the way. My models own technology stocks and will continue to. I expect a “healthy” pullback on Wall Street in the coming weeks.
To enhance long-only positions in my work, I pair them with alternative investment funds that display low correlation with stock and bond markets. This approach aims to mitigate the impact of market volatility on the overall portfolio performance.