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Morning Research Notes - 01.08.24
The S&P 500 experienced its biggest gain since early Feb on Wednesday, as a combination of strong earnings reports and a dovish hold in rates by the Fed, buoyed investor sentiment. The price of spot gold increased by 0.7% to $US2428.08 per ounce. Meanwhile, Brent crude saw an increase of 2.8%, bringing its price up to $US80.79 per barrel. The price of iron ore saw an increase of 2.5%, rising to $US101.55 per Tonne. Volatility, as measured by the VIX index, increased by 6.57% to US$17.69.
Wall Street experienced strong gains on Wednesday as the Federal Reserve kept rates steady, hinting at a potential cut in September. Tech stocks, led by Advanced Micro Devices (AMD) and NVIDIA, surged on strong Q2 results and positive market sentiment. However, Microsoft’s stock fell slightly due to slower-than-expected cloud revenue growth. Meanwhile, Meta Platforms posted its earnings post-market. In other news, Starbucks met expectations despite a decline in global sales and T-Mobile US raised its full-year forecast, leading to a rise in its stock.
The ASX 200 posted robust gains on Wednesday, closing 1.72% higher, with the trend reflected across all major sectors. Healthcare, Utilities and Financials enjoyed modest gains of 0.75%, 0.15% and 1.66% respectively, whereas Materials and Info Tech saw substantial growth of 2.2% and 2.52%, respectively. The trend of appreciating prices was not limited to shares as commodities also experienced strong gains. Aluminum, Copper, Zinc and Nickel increased, with prices rising by 4.19%, 2.33%, 2.49%, and 3.54%, respectively.
Spluttering China the big risk to Rio Tinto’s new growth era, Oil rises as killing of Hamas leader stokes geopolitical risk, ASX rallies over 1pc after inflation data; Rio, CBA advance. (Source: AFR)
Chart of the day
The rise of NVIDIA in the global equity markets over the past three years, known as the “AI effect”, has created a significant valuation gap. Investors who held NVIDIA and maintained their conviction have outperformed index benchmarks, while those who missed out or sold too early have lagged. The divergence between the S&P 500 Index and the S&P 500 Equal Weighted Index underscores the importance of risk management and asset allocation. The AI revolution extends beyond NVIDIA, with the sector now spanning multiple GICS categories, blurring traditional industry lines. In this rapidly changing landscape, a disciplined approach to valuation is crucial. Even promising growth stories can turn into poor investments if acquired at excessive valuations. The AI narrative serves as a microcosm of broader market dynamics, highlighting the importance of maintaining conviction, understanding sector-wide trends, whilst staying disciplined on valuation.
Source: Livewire
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