In this edition of Market Mover’s weekly, we take a look at the US stock market showing a complex mix of optimism and caution. Consumer sentiment rose for the third straight month in February, reaching 79.6, marking a 30% increase since November but slightly below expectations. Despite positive sentiment, signs of re-emerging inflation were evident with the CPI and PPI indicating higher-than-expected levels, and retail sales saw their largest drop in nearly a year.
The stock market hit a record high, buoyed by investor optimism tied to low inflation expectations and strong labor markets. However, mixed data on inflation and retail sales created uncertainty about the Federal Reserve's next moves, suggesting a cautious approach amid mixed economic signals. The week ended on a cautious note, with major indices closing lower, reflecting ongoing inflation concerns and their potential impact on Federal Reserve policies.
Spotlight on WisdomTree India Earnings ETF: Capturing India's Market Growth
The WisdomTree India Earnings ETF (EPI) emerges as a key player among India-focused ETFs, leveraging India's growth potential. As of early 2024, EPI's year-to-date return reached 7.71%, with an annual gain of 26.03% in 2023 and a YTD increase to 8.39% by February 20, showcasing its robust performance against peers and broader indices. The ETF's strategy, highlighted by WisdomTree’s Global CIO Jeremy Schwartz, emphasizes earnings-driven stock selection, aligning with India's demographic and economic growth while managing valuation premiums. With over 400 holdings, including small-cap companies, and attracting nearly $400 million in net inflows, increasing its assets to about $2.3 billion, EPI demonstrates strong investor confidence. However, its 0.85% expense ratio and potential for election-related volatility are considerations for investors.
Expanding Beyond Big Tech: The Rise of the "Magnificent 80"
Bank of America's Savita Subramanian, head of U.S. equity and quantitative strategy, suggests a shift in the stock market landscape from the dominance of the "Magnificent Seven" tech giants—Amazon, Apple, Alphabet, Meta Platforms, Microsoft, Nvidia, and Tesla. She expects these companies to maintain their growth without significant slowdowns this year but predicts the broader S&P 493 will outperform them from June, especially in the fourth quarter, due to broader market profits, U.S. election volatility, and expected Fed rate cuts. Subramanian introduces the "Magnificent 80," fundamentally strong companies poised for growth and competitive dividend yields, including Ford and Chevron, signaling a strategic shift towards diversified investment in anticipation of a market rally.
Tech Titans Echo Historical Bubbles, Bank of America Warns
Bank of America's Chief Market Strategist, Michael Hartnett, compares the rapid ascent of the "Magnificent Seven" tech giants—Apple, Microsoft, Alphabet, Nvidia, Amazon, Tesla, and Meta—with historical financial bubbles, noting their nearly 140% surge since December 2022 and current trading at 45 times earnings. Highlighting factors like technological innovation and central bank easing, Hartnett points to AI advancements and recent market events as modern catalysts. Despite concerns over their steep valuations, these companies' strong fundamentals may justify their market positions. However, Hartnett warns of potential risks if financial conditions tighten and real interest rates rise from the current 2% to between 2.5% and 3%, echoing the cyclical nature of market bubbles and their impacts on global investors.
Nvidia's Surge Tipped to Continue with Bullish Forecast by Loop Capital
Loop Capital's Ananda Baruah projects a 65% increase in Nvidia's share price to $1,200, driven by its leadership in AI and the GPU market. Comparing Nvidia's growth to the late '90s internet boom, Baruah sees Nvidia at the forefront of a similar tech evolution. With a 47% rise since 2024 began and a 230% increase over the past year, Nvidia is highlighted as a key player in the expanding GPU computing sector. Despite potential competition, Nvidia's role in AI and cloud computing, along with a projected $150 billion GPU market in 2023, are viewed as pivotal to its future outperformance.
