1.
Before You Buy the Invesco QQQ ETF, Here Are 3 Others to Try First
2024-10-06 10:26:00 by Adam Levy, The Motley Fool from Motley FoolInvestors looking for a quick and easy way to invest in the biggest and fastest-growing technology stocks in the world have flocked to the Invesco QQQ Trust ETF (NASDAQ: QQQ).
The ETF tracks the Nasdaq-100 index, which consists of the largest non-financial companies listed on the Nasdaq stock exchange. The Nasdaq is historically the exchange of choice for tech companies, so it should be no surprise that the majority of the index consists of technology stocks.
The Invesco fund has dramatically outperformed the S&P 500 index over the past decade, producing a total return of 435% compared to just 248% for the broader index. Still, investors should consider a few other options before putting their money into the popular ETF. Here are three to try.
1. QQQ's little sister
Invesco launched a new ETF in 2020 called the Invesco Nasdaq 100 ETF (NASDAQ: QQQM). It tracks the same Nasdaq-100 index as QQQ, but it offers investors a 5 basis point discount on the new shares versus the older ETF.
Where QQQ charges 0.20% of assets each year, the new Nasdaq-100 ETF charges just 0.15%. While that difference might not seem like much, it adds up over time, and there's no reason for investors to leave money on the table.
Invesco isn't offering a lower-priced ETF to investors out of the goodness of its heart. The company faces a lot more competition than it used to when it launched the QQQ Trust back in 1999. While it could easily rack up assets under management at any price in the early 2000s, it needs to offer much more competitive pricing today.
But there are billions locked into the older ETF. Investors with substantial unrealized capital gains may be willing to give up a few basis points in order to delay taxes by not selling. Additionally, the larger asset base makes the fund more liquid, which is attractive for big investors or frequent traders.
If you plan to buy and hold an ETF tracking the Nasdaq-100 index, though, QQQM is a no-brainer compared to QQQ.
2. A contrarian ETF focused on fundamentals
If you take a look under the hood of the Invesco QQQ Trust, you'll find a heavily concentrated portfolio. The top 10 holdings account for over 50% of the entire fund. What's more, many of the biggest holdings trade at high prices that aren't aligned with their fundamental financial performance.
One way to offset the high concentration and prices found in the QQQ Trust is to invest in the Schwab Fundamental U.S. Large Company ETF (NYSEMKT: FNDX). The ETF tracks an index that ranks and weights securities by fundamentals -- adjusted sales, operating cash flow, and cash returned to shareholders. The result is a portfolio with far less concentration and a lower overall price relative to the fundamentals.
The Schwab fund sports a P/E ratio of just 19.4 times compared to the Invesco fund's 39.5 times P/E. While it still has substantial stakes in some of the biggest names in the Nasdaq-100, it also integrates more value stocks into the portfolio. In fact, the focus on fundamentals tilts the fund toward more large-cap value stocks than the growth-stock-focused Invesco fund. But that diversification may pay off for investors in the long run.
The Schwab ETF sports an expense ratio of 0.25%, higher than the Invesco QQQ ETF. But the contrarian play could pay off for patient investors.
3. A small-cap value ETF
The biggest draw of the Invesco QQQ Trust ETF is its strong track record of returns. But one group of stocks has an even better track record than the large-cap growth stocks found in the Nasdaq-100. Small-cap value stocks have historically produced the strongest returns out of any segment of the stock market. The S&P 600 index, which tilts toward small-cap value, has outperformed the Invesco QQQ Trust ETF since its inception in 1999, despite the Nasdaq ETF's incredible performance over the past decade.
The Avantis US Small Cap Value ETF (NYSEMKT: AVUV) is one of the best ways to invest in small-cap value stocks. Instead of investing blindly in all small-cap stocks trading at a valuation metric in the lower half of a small-cap index, the fund screens stocks based on profitability to weed out those that may be value traps. It then invests in the remaining companies based on market capitalization. With over 700 stocks in the portfolio, no single investment makes up more than 1% of the fund.
While the Avantis fund is technically an actively managed fund, it shares many more characteristics with passive indexing than active management. The strategy has a great track record of performance based on the founder's previous experience at investment firm Dimensional. The Avantis fund has nearly doubled its benchmark index's return since its inception in 2019.
For long-term investors seeking exposure to a piece of the market that can offer stronger returns than the S&P 500 or the Nasdaq-100 for many years to come, the Avantis US Small Cap Value ETF could be a great option.
Should you invest $1,000 in Invesco QQQ Trust right now?
Before you buy stock in Invesco QQQ Trust, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Invesco QQQ Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $765,523!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 30, 2024
Adam Levy has positions in American Century ETF Trust-Avantis U.s. Small Cap Value ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Before You Buy the Invesco QQQ ETF, Here Are 3 Others to Try First was originally published by The Motley Fool
2.
US jobs report crushes expectations as economy adds 254,000 jobs, unemployment rate falls to 4.1%
2024-10-04 13:10:17 by Josh Schafer from Yahoo FinanceThe US labor market added far more jobs than projected in September while the unemployment rate unexpectedly ticked lower, reflecting a stronger picture of the jobs market than Wall Street had expected.
Data from the Bureau of Labor Statistics released Friday showed the labor market added 254,000 payrolls in September, more additions than the 150,000 expected by economists.
Meanwhile, the unemployment rate fell to 4.1%, from 4.2% in August. September job additions came in higher than the revised 159,000 added in August. Revisions to both the July and August report showed the US economy added 72,000 more jobs during those two months than previously reported.
Wage growth, an important measure for gauging inflation pressures, rose to 4% year over year, from a 3.9% annual gain in August. On a monthly basis, wages increased 0.4%, in line with August's reading.
The key question entering Friday's report was whether the data would reflect significant cooling in the labor market, which could prompt another large Fed interest rate cut. Robert Sockin, Citi senior global economist, told Yahoo Finance that the better-than-expected jobs report makes it less likely the Fed moves with the "urgency" it did at its September meeting when the central bank cut interest rates by half a percentage point.
"This pushes the Fed out a lot," he said, adding that it's uncertain the Fed will make a 50 basis point cut again this year.
Read more: Jobs, inflation, and the Fed: How they're all related
Following the report, markets were pricing in a roughly 5% chance the Fed cuts interest rates by half a percentage point in November, down from a 53% chance seen a week ago, per the CME FedWatch Tool.
"Looking at the labour market strength evident in September’s employment report, the real debate at the Fed should be about whether to loosen monetary policy at all," Capital Economics chief North America economist Paul Ashworth wrote in a note to clients on Friday. "Any hopes of a [50 basis point] cut are long gone."
Futures tied to major US stock indexes rallied on the news. S&P 500 futures (ES=F) put on nearly 0.8%, while Dow Jones Industrial Average futures (YM=F) added roughly 0.5%. Contracts on the tech-heavy Nasdaq 100 (NQ=F) moved 1.1% higher.
Renaissance Macro head of economics Neil Dutta wrote in a note following the release that September's jobs report was "undeniably good news" for the equity market.
"At the end of the day, the Fed is still cutting policy rates even as the economy grows," Dutta wrote.
Also in Friday’s report, the labor force participation was flat from the month prior at 62.7%. Food services and drinking places led the job gains, rising 69,000 in the month. Meanwhile, healthcare added 45,000 jobs, and government jobs ticked higher by 31,000.
Earlier this week, data from ADP showed the private sector added 143,000 jobs in September, above economists' estimates for 125,000 and significantly higher than the 99,000 seen in August. This marked the end of a five-month decline in private-sector job additions.
"This is a pretty healthy, widespread rebound," ADP chief economist Nela Richardson said. "And probably unexpected by many people who thought the job market was on a downward slide. This month, of course, gives pause to those kinds of assessments. Hiring is still solid."
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
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3.
Is Invesco QQQ Trust a Millionaire Maker?
2024-10-04 11:05:00 by Neil Patel, The Motley Fool from Motley Fool
Investors are likely familiar with the S&P 500, an index of 500 large and profitable U.S.-based businesses. This is often viewed as the bellwether for how the overall stock market is performing.
However, the Invesco QQQ Trust (NASDAQ: QQQ) deserves attention from investors, since it has crushed the S&P 500 in recent times. This exchange-traded fund (ETF) could continue to supercharge returns. But is it a millionaire maker?
Portfolio composition
The Invesco QQQ Trust differs from the S&P 500 because it tracks the performance of just 100 stocks. These are the biggest nonfinancial companies on the Nasdaq stock exchange, known as the Nasdaq 100 Index.
Investors should understand what areas of the economy shine brightly in this ETF. The information technology sector commands a hefty 50.3% weighting in the Invesco QQQ Trust. Businesses that are part of the "Magnificent Seven" combined make up a notable 42.5% of the whole portfolio. Therefore, the performance of these stocks has a big influence.
This has been a benefit in the past few years. Companies in this group of seven are driven by powerful tech-enabled tailwinds, which has boosted their prospects. Digital advertising, cloud computing, digital payments, electric vehicles, online shopping, and streaming entertainment are some trends to pay attention to.
The average investor who wants exposure to these tailwinds doesn't need to pick single stocks. Buying and holding the Invesco QQQ Trust provides adequate exposure.
Fantastic performance
While it's crucial to know what this ETF holds, investors are certainly more worried about performance -- what matters when it comes to generating long-term wealth.
In the past five years, the Invesco QQQ Trust has produced a total return of 169%. A $10,000 investment made in September 2019 would be worth almost $27,000 today. That's an impressive gain for a passive investment vehicle, and it trounces the S&P 500.
What's also worth mentioning is the cost of owning this ETF. The expense ratio is just 0.20%. This means that for every $10,000 you invest, just $20 is earmarked for annual dues. That's hard to beat.
Cathie Wood and her firm ARK Invest have received a lot of attention in recent years. Investors like the focus on owning innovative and disruptive companies, which is similar to the strategy of the Invesco QQQ Trust.
However, the ARK Innovation ETF, ARK Invest's main fund, charges an expense ratio of 0.75% but has only returned 16% in the last five years. The performance has disappointed greatly, even though this fund costs nearly four times as much as the Invesco QQQ Trust.
Getting to $1 million
In the past three months, the Invesco QQQ Trust has experienced two notable dips, and there's no question this ETF will likely have more volatility than the S&P. It's more concentrated in tech stocks, which see higher ups and downs.
Investors might be wondering if it's still a good time to invest while the QQQ trades close to its all-time high. It's crucial to never forget that time in the market matters more than anything else. It can be enticing to trade in and out of stocks to avoid the lows, but trying to time the market is a losing activity.
From its inception in 1999 to today, the Invesco QQQ Trust would have turned a $90,000 initial outlay into a cool $1 million. I think it's reasonable to assume a similar rate of return in the future. This means that investors who are able to adopt a long-term time horizon, and for those who can put in more cash upfront, getting to $1 million is a realistic outcome, perhaps even in a shorter period than 25 years.
Should you invest $1,000 in Invesco QQQ Trust right now?
Before you buy stock in Invesco QQQ Trust, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Invesco QQQ Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $728,325!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 30, 2024
Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Is Invesco QQQ Trust a Millionaire Maker? was originally published by The Motley Fool
4.
Here Are My 2 Favorite ETFs in October
2024-10-04 09:22:00 by Geoffrey Seiler, The Motley Fool from Motley FoolThere is little doubt that the best way for the average person to create wealth over the long term is through investing. While over 60% of Americans own stocks, most of that is through buying into funds that own multiple stocks. The direct ownership of stocks accounts for a little over 20%.
For most people, investing in stocks through vehicles such as exchange-traded funds (ETFs) is a great option. Let's look at two ETFs I'd be buying this month with cash I have available for investing.
1. Vanguard S&P 500 ETF
The Vanguard S&P 500 ETF (NYSEMKT: VOO) is a classic, and for good reason. The ETF tracks the performance of the S&P 500 stock index, which tracks the stock performance of roughly 500 of the largest public companies traded in the U.S. (as ranked by market capitalization (market cap)). When investors talk about the performance of the stock market, they are quite often referring to the performance of the S&P 500 index.
The Vanguard S&P 500 ETF has generated strong returns over the years. Over the past decade, the ETF has had an average annual return of 13.3% (as of the end of September 2024). Over the past five years, it's been even stronger, up an average of 15.9%. Meanwhile, the ETF is up nearly 20% year to date.
While investors may fret about investing in the ETF with the S&P at all-time highs, they shouldn't. In fact, according to a study from J.P. Morgan, since 1970, investors actually would have seen better returns investing only on days the S&P hit an all-time high compared to any random day.
After one year, investing at all-time highs would result in an average annual return of 9.4% versus 9% on any random day. After two years, investing only on days the S&P 500 hit an all-time high would result in a 20.2% gain versus 18.5% investing on any random day.
This speaks to how bull markets tend to last much longer than bear markets, with the medium bull market lasting three times longer than the average bear market.
An S&P 500 ETF should be a core holding in any investor's portfolio, and the Vanguard ETF is a great option with a minuscule expense ratio of 0.03%, meaning investors get to keep virtually all their gains with little payment going to the fund.
2. Invesco QQQ ETF
Technology continues to change the world, so perhaps it is not surprising that many of the world's largest companies today come from the tech sector. As such, I think it is a good idea to add a little more tech exposure to one's portfolio.
One way to do that is with the Invesco QQQ ETF (NASDAQ: QQQ), which tracks the Nasdaq-100 index. This is a very tech-heavy weighted index, with nearly 65% of its portfolio in the tech sector and over 13% in consumer discretionary stocks, which include some pretty tech-adjacent names, such as Amazon and Tesla.
The ETF has been a huge winner over the past decade, outperforming the S&P by a fair amount. As of the end of August, its annual average return over the past 10 years is 21.2%. The ETF has outperformed the S&P 500 index 87% of the time over the past decade and 83% over the past five years.
The ETF's 10-year cumulative return (including dividends reinvested) is 437%. If you invested $10,000 in Invesco QQQ 10 years ago, it would be worth $53,700 today, and a $10,000 investment for the Vanguard S&P ETF would be worth $35,110 based on its 249.54% 10-year cumulative return.
While the Invesco QQQ ETF carries more risk due to its high concentration in a single sector, I think it is set to continue to outperform over the next decade. The artificial intelligence (AI) revolution is still in its early days, and this trend will likely help power many of the top tech names higher in the years to come. The Invesco QQQ ETF, meanwhile, is a great way to play this trend, with a low expense fee of 0.2%.
I'd buy both the Vanguard S&P 500 ETF and Invesco QQQ ETF this month and continue to consistently invest in both over time through a dollar-cost averaging strategy. This strategy is ultimately a great way to create wealth over the long term.
Should you invest $1,000 in Vanguard S&P 500 ETF right now?
Before you buy stock in Vanguard S&P 500 ETF, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard S&P 500 ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $728,325!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 30, 2024
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, JPMorgan Chase, Tesla, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
Here Are My 2 Favorite ETFs in October was originally published by The Motley Fool
5.
Why Gen Z bets big while boomers play it safe: A generational breakdown of market returns
2024-10-03 16:31:39 by Jared Blikre from Yahoo FinanceListen and subscribe to Stocks in Translation on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
It's a Goldilocks moment for investors.
As the books are closed on September, the S&P 500 (^GSPC) has delivered a solid 20% return so far this year. Meanwhile, bonds are up a respectable 4.7%. And cash is yielding a similar percentage return — even after the Fed began cutting rates a few weeks ago.
But new research from Jack Manley at JPMorgan Asset Management uncovers hidden pitfalls, particularly for those entering their investment years during periods of high cash yields (much like the present). His findings suggest that all investors, regardless of generation, are heavily shaped by the market environment they grew up in.
Manley's methodology, rooted in demographic and behavioral analysis, assumes individuals begin investing 20 years after their generation's inception. For example, baby boomers started investing around 1966, Gen X in 1985, millennials in 2001, and Gen Z in 2017.
Over the decades, boomers have weathered all sorts of market turmoil, from the inflation crises of the 1970s to multiple tech booms later in life. With average annual stock returns around 10.2% and bond returns of 6.2%, their experience reflects a period of high growth and volatility.
As Manley explained in an episode of Stocks in Translation, “the Fed paid pathological attention” to the inflation crisis, and the entire experience had a profound effect in shaping boomers' cautious and diversified approach to investing — despite the strong returns.
For Generation X, the journey has been one of boom-bust cycles. But the older cohort of this group largely began investing amid a secular boom in markets. Entering adulthood during the 1980s, they witnessed the rise of tech but also faced brutal recessions, from the dot-com bubble to the 2008 financial crisis.
With returns hovering around 11.6% for stocks, their approach is cautious but optimistic. As Manley noted about the current market environment, “strong balance sheets are very important right now.” This may resonate with Gen X’s preference for financial resilience in uncertain times.
Millennials are the most educated generation, as measured by the percentage with bachelor's degrees or higher. But they have not fared as well in stock market returns, averaging around 8.0%, according to Manley.
When millennials came of investing age in 2001, the S&P 500 peaked, ushering in the dot-com bust. After stocks roared back amid a housing boom, the global financial crisis created a double top in the benchmark in 2007 that would not be eclipsed until 2013 — leaving millennial investors underwater for a dozen years.
Their outcomes, as Manley highlights, are the worst among the four generations in both stocks and a 60/40 blended portfolio. This underperformance has driven some to believe that traditional investing is “pointless” unless they make "large, risky bets," such as in cryptocurrencies.
This lack of faith in financial markets has led millennials to embrace higher-risk strategies at the expense of diversification, reflecting their desire for outsized returns.
Gen Z has had the best generational stock market performance (14.1%) but the worst bond returns (-0.5%), which combine to stoke the risk engine that modern markets seem to have become.
Coming of age in a rather eventless year, 2017, they would soon face Volmageddon (2018), a pandemic (2020), stimulus checks, the Reddit/GameStop retail revolution (2021), NFTs (2021), the near-death of cryptocurrencies (2022), and the most aggressive Fed hiking in four decades (2022-2023).
“Generation Z has had a very lopsided experience,” wrote Manley, explaining further that it "may lead to a lack of interest in diversification and a lack of experience with true bear markets, which could result in panic if fortunes turn in the other direction."
With their portfolios concentrated heavily in high-risk assets like crypto, Gen Z has yet to experience the full brunt of a secular bear market (like millennials faced) — making them particularly vulnerable when economic conditions shift.
The current moment has had an unusual influence on cash as well. One of the key trends Manley discusses in his research is its rising popularity, driven by peak CD rates recently nearing 5%.
"Because of the strong yield and minimal risk associated with CDs today, many investors have decided to allocate more heavily to cash," said Manley. But he warned, "[I]nvesting at peak CD rates in the past has resulted in underperformance relative to other fixed income instruments."
Historical data shows that during previous rate hikes, investing heavily in CDs underperforms against stocks or bonds.
Manley advised considering the opportunity cost of cash in a portfolio, adding, "[T]here may be better options for deploying excess capital than in CDs." Allocating too much to cash can hinder long-term growth, especially in a diversified portfolio.
While what we invest in often make up the bulk of the investing conversation, Manley emphasizes the banal (but underrated) importance of tax strategy, especially for younger generations like millennials and Gen Z. As many advisors point out, the government is every investor's silent partner.
On Yahoo Finance's podcast Stocks in Translation, Yahoo Finance editor Jared Blikre cuts through the market mayhem, noisy numbers, and hyperbole to bring you essential conversations and insights from across the investing landscape, providing you with the critical context needed to make the right decisions for your portfolio. Find more episodes on our video hub or watch on your preferred streaming service.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
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6.
etf.com Launches New Subscription Plans for All Users
2024-10-03 12:00:00 by etf.com Staff from etf.com
etf.com has announced the launch of new subscription plans for all users seeking U.S. based news, insights, tools, and more related to exchange traded funds.
“Following the success of our subscription launch to our international users, we are now expanding our offerings globally,” explained etf.com CEO Mike Morelli. “These plans are part of our commitment to delivering premium content for ETF investors, including newly launched tools designed to assist financial advisors and retail investors alike in their investment decisions.”
The new plans became live for all users Thursday morning and gives subscribers access to award-winning investing tools including Compare ETFs, ETF Screener, model portfolios and Markets Monitor dashboard. Subscribers will gain access to exclusive content across all our media platforms.
etf.com’s subscription model will also include early access to new tools, such as ETF Pulse tool, which will enable ETF investors to stay informed about ETF trends by providing performance insights and flow analysis.
“This new subscription launch is going to accompany an increase in ETF news and content both off and on the site,” said etf.com Editor-in-Chief Kristin Myers. “All subscribers are going to be a part of a growing etf.com community where members can expect exclusive content, newsletters, events, and more."
The model offers two different subscriber tiers including Content+ and All Access, providing users with the option to be billed on a monthly or annual basis.
etf.com readers can check out the different subscription offerings here or etf.com Subscription.
7.
China and Middle East tensions push commodities into the spotlight: Morning Brief
2024-10-02 10:00:49 by Jared Blikre from Yahoo FinanceThis is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:
The chart of the day
What we're watching
What we're reading
Economic data releases and earnings
Risk markets are off to an ominous start this October.
After a blistering rally over the first nine months that led the S&P 500 (^GSPC) to its best performance since 1997, the benchmark just had its worst day in three weeks on Tuesday.
Geopolitical tensions and an Iranian missile strike on Israel are dominating headlines, pushing crude oil prices higher as fears of supply disruptions escalate. The first strike by the International Longshoremen's Association since 1977 — threatening supply chains once again and potentially shuttering ports from Houston to Boston — isn't helping.
But there’s another key driver adding structural bullishness to commodities: China’s largest stimulus package since the pandemic, with the promise of more to come.
Last week, China unleashed a suite of monetary and fiscal easing measures, catapulting China's benchmark CSI 300 Index (000300.SS) 27% from its September lows into fresh bull market territory.
New support for China's beleaguered housing market this week adds to prior measures — including support for Chinese-listed stocks — which all told now total over $500 billion (though estimates vary widely).
These aggressive actions are already reverberating through global commodity markets. Iron ore futures have surged over 20% in China, leading Jim Bianco, president of Bianco Research, to weigh in on X:
"The Chinese finally stimulating domestic demand gives hope that they will start to consume more. This idea is significantly contributing to this unfolding rally in industrial metals."
Connecting the dots, it's a short trip to higher energy prices. As Bianco notes, "The Chinese consume more energy than the US or the EU."
Institutional investors have been caught flat-footed all around. According to the BofA September Global Fund Manager Survey, China's growth expectations had fallen to a record low. Any shorts have likely been sent scrambling.
Meanwhile, WTI (WTI) and Brent (BZ=F) crude oil are surging with Iran's missile attack on Israel, with the former jumping nearly 8% Tuesday.
But US consumers might not feel the pinch in oil and gas prices, as OPEC+ was already on track to increase production by 180,000 barrels per day, starting in December. The move, spearheaded by Saudi Arabia, would increase their market share at the expense of lower prices.
For US stock investors, there may be a trade to capitalize on in the confusing geopolitical melee. In a separate report published Tuesday, BofA Global Research upgraded the Materials sector (XLB) to Overweight, saying that the sector has the highest correlation to China’s economic growth.
BofA noted that large-cap materials suffered the most when the Federal Reserve aggressively raised rates starting in 2022. It also highlighted the sector’s underweight positioning by long-only managers, both of which leave room for a potential re-rating as China’s demand accelerates.
"Underinvestment in manufacturing, single-family [homes], [and] mining over [the] last decade should drive [materials prices] higher," noted the bank.
Commodities, it seems, are primed to have a moment.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
8.
Here's how AI is set to disrupt healthcare — albeit slowly
2024-10-01 18:22:09 by Jared Blikre from Yahoo FinanceListen and subscribe to Stocks in Translation on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
The third quarter just wrapped, and the pure AI trade of Nvidia (NVDA) and its chip cohorts suddenly finds itself a net drag on overall S&P 500 performance — which itself surprised investors with a solid 5.5% return.
Nevertheless, generative AI is still hot and slowly moving into real-world applications.
Abby Yoder, US equity strategist at JPMorgan Private Bank, highlighted that healthcare, which is notoriously slow-moving, may be an upcoming candidate for AI-driven innovation.
"Healthcare has underperformed seven of the last eight years," Yoder pointed out in a recent episode of Stocks in Translation, despite the sector being the only one in the S&P 500 to boast positive annual earnings growth over the past 21 years.
But Yoder sees AI as a potential key to unlock a long-awaited shake-up that could bring long-term growth back to the sector.
Healthcare stocks have struggled in recent years, a trend Yoder attributes to legacy constraints of old systems and obstacles that make it difficult for new technologies to take root. The byzantine web of players, rules, regulators, and more has so far prevented significant AI adoption, which has the potential to address inefficiencies in insurance approvals, manual record-keeping, and claims management, all of which drag on productivity.
There are some ripples of change, however. Companies like Google and Microsoft are diving into this space, partnering with hospitals and startups to create AI tools that lighten this burden.
On the diagnostic side, AI is being used to streamline medical imaging, cutting down time for tasks like identifying patterns in medical data, which improves both speed and accuracy in patient care. The goal is not to rid the world of human radiologists and technicians, but empower them with 21st-century tools that lighten their load and accelerate patient diagnoses and recoveries.
AI proponents say it's not just about cutting costs; it’s about revolutionizing patient care. By using vast datasets of clinical information, the promise of AI is to someday help predict patient outcomes more effectively, modeling care before it happens to anticipate complications and select treatments.
The other great hope for medical AI bulls is the immense promise for drug discovery.
According to Morgan Stanley's healthcare forecast, the company's head of US biopharma research Terence Flynn estimates that “[every] 2.5% improvement in preclinical development success rates could lead to an additional 30-plus new drug approvals over 10 years," which would represent around $70 billion.
Before the long tail of AI promises in healthcare are realized, Yoder emphasized that there are strong areas of growth in healthcare right now, like the strong performance of GLP-1 drugs, which have put a few pharma stocks in the same league as their AI counterparts in the Magnificent Seven. Past diabetes treatment and obesity, there's still lots of potential for broad preventative care applications — particularly with type 2 diabetes, Yoder noted.
The data from the trials looks promising. "[The] rate of stopping you from turning into a type 2 diabetic is north of 98%," she said.
But despite AI’s potential, significant roadblocks remain — and trust is a big one.
Over 55% of healthcare professionals believe AI isn’t ready for primetime medical use, according to a GE Healthcare survey of 7,500 clinicians around the world. And only 26% of US responsdents think AI can be trusted — lagging the 42% of those who responded globally. With actual life-or-death stakes, this represents a major hurdle, along with the web of legacy technology that would need to be integrated. Much of the infrastructure, like electronic medical records, is outdated and not built for seamless AI integration.
Another area facing delays is AI-driven surgery. While AI-powered robots already assist in remote telesurgeries, humans are still driving the bus, and the concept of fully autonomous surgical procedures is still far from reality.
Despite the industry's inertia and barriers to change, Yoder remains optimistic about healthcare’s growth potential as a long-term investment. And should something happen to the economy and the Fed's soft landing, the sector has a key advantage: It's a defensive large-cap space with low volatility. As Yoder noted, not only is healthcare spending ticking up as a percentage of the GDP, but when a recession hits, healthcare keeps chugging along.
On Yahoo Finance's podcast Stocks in Translation, Yahoo Finance editor Jared Blikre cuts through the market mayhem, noisy numbers, and hyperbole to bring you essential conversations and insights from across the investing landscape, providing you with the critical context needed to make the right decisions for your portfolio. Find more episodes on our video hub or watch on your preferred streaming service.
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9.
Jobs Report to Test Stock Bull and Fixed Income ETFs
2024-10-01 12:00:00 by Kent Thune from etf.com
With the recent Personal Consumption Expenditures Price Index (PCE) in the rear-view mirror, the next big test for stocks’ all-time highs and fixed income ETFs is Friday’s jobs report.
Earlier this month, the Federal Reserve's preferred inflation measure indicated that price increases are easing towards the Fed's 2% target. That’s shifting more attention to the central bank's other key goal: maintaining maximum employment.
Speaking at the National Association for Business Economics annual meeting Monday, Fed Chair Jerome Powell noted that the labor market remains in "solid shape" and pointed out that the Fed is reducing interest rates partially to sustain that strength. However, signs the labor market is slowing have emerged.
Unemployment has steadily risen throughout 2024, and it now stands at 4.2%, its highest point in nearly three years. Job creation has also weakened, with two of the smallest monthly job gains recorded this year, and job openings in July hit their lowest since January 2021.
As this week’s key jobs report approaches, the primary concern is the pace at which the labor market slows.
The monthly U.S. nonfarm payrolls report jobs report will be released by the Bureau of Labor Statistics (BLS) at 8:30 a.m. Eastern Time Friday.
Why Investors Will Be Watching Friday’s Jobs Report
Investors will closely watch Friday's U.S. nonfarm payrolls report because it provides crucial insights into the labor market, which directly influences Federal Reserve policy. The report includes data on job creation, the unemployment rate, and wage growth, which are key indicators of economic health.
If the labor market shows stronger-than-expected growth, that may cast doubt on the size and frequency of coming rate cuts, as the Fed aims to prevent the economy from overheating. Conversely, weaker-than-expected job numbers may prompt the Fed to consider further or deeper cuts, potentially boosting markets, especially bond prices.
In addition, wage growth data is significant because higher wages can fuel inflation by increasing consumer spending, causing additional concern that inflation may remain sticker than expected.
Jobs Report Outlook for Stock and Fixed Income ETFs
The stock and bond markets may react differently to Friday’s jobs report based on whether the unemployment rate comes in higher or lower than expected.
- If unemployment comes in higher than expected: This would signal a weakening labor market, potentially indicating an economic slowdown. For stocks, especially cyclical or growth-oriented sector ETFs like the Consumer Discretionary Select Sector SPDR Fund ETF (XLY) and the Invesco QQQ Trust ETF (QQQ), respectively, this could trigger a negative reaction as concerns about reduced consumer spending and economic activity grow. However, rate-sensitive ETFs like the iShares 20+ Year Treasury Bond ETF (TLT) may react positively since a softer labor market could lead the Federal Reserve to pause or cut interest rates sooner, lowering yields and boosting bond prices.
- If unemployment comes in lower than expected: A stronger-than-expected labor market suggests robust economic growth, which would bolster investor confidence in equities, especially in sectors like consumer discretionary and industrials. However, bond prices might fall as investors anticipate that the Fed could maintain or raise rates to manage inflation, driving yields higher.
In summary, stock prices generally react favorably to stable job growth, while the bond market closely watches the implications for Fed policy on interest rates, which have an inverse relationship with bond prices.
10.
SMH vs. FTXL: Which Semiconductor ETF Is Better?
2024-09-27 22:08:11 by TipRanks from TipRanksAfter a brief dip this summer, semiconductor stocks are heating up again, as mainstays in the space like Micron (MU) post blowout earnings due to strong AI-related demand. The memory chip giant reported scorching 93.3% year-over-year revenue growth, and guided to record revenue of $8.7 billion for the upcoming quarter, well above analyst expectations.
Micron’s results gave a jolt to the sector and illustrate that AI demand is still strong. Investors can achieve diversified exposure to the semiconductor sector as a whole via an ETF, and there are many funds with different approaches to the space.
Let’s take a look at two popular semiconductor ETFs with different strategies — the Van Eck Semiconductor ETF (SMH) and the First Trust Nasdaq Semiconductor ETF (FTXL). Ultimately I land on SMH as being the best semiconductor ETF for investors.
Van Eck Semiconductor ETF (SMH)
SMH is the largest and most popular semiconductor-specific ETF, and with good reason, as I’ll explain below.
The $23.4 billion fund tracks an index called the “MVIS US Listed Semiconductor 25 Index”, which is intended to reflect the aggregate performance of companies involved in semiconductor production and equipment, according to Van Eck. Notably, SMH’s index methodology favors the largest companies in the industry, a key point which we will come back to later.
SMH is a fairly concentrated bet on semiconductors. The fund holds just 25 stocks, and its top 10 holdings account for 71.5% of assets. You can see an overview of SMH’s top 10 holdings below using TipRanks’ holdings tool.
As readers will note above, SMH has a massive 20.1% position in shares of Nvidia (NVDA). However, this large position has served it well, as Nvidia stock has risen nearly 200% in the past year.
The strong performance of Nvidia and other top holdings like Taiwan Semiconductor (TSM) and Broadcom (AVGO) have driven excellent returns for SMH stock and its investors. The ETF has been a monster performer over the past decade. As of August 31, 2024, SMH generated an annualized return of 22.5% over the past three years, an incredible annualized return of 34.8% over the past five years, and an enviable 26.6% 10-year annualized return. Those numbers trounce the broader market and even the tech-heavy but more generally allocated Invesco QQQ Trust (QQQ) over each time horizon.
Is SMH Stock a Buy, According to Analysts?
Turning to Wall Street, SMH earns a Strong Buy consensus rating based on 21 Buys, five Holds, and zero Sell rating assigned in the past three months. The average SMH stock price target of $296.38 implies about 16% potential upside from current levels.
I’m bullish on SMH based on its outstanding long-term performance, its portfolio of high-performing semiconductor stocks, and its bullish analyst outlook.
First Trust Nasdaq Semiconductor ETF (FTXL)
Now let’s take a look at the First Trust Nasdaq Semiconductor ETF (FTXL), another popular name in the space with $1.4 billion in AUM.
According to First Trust, FTXL invests in the Nasdaq U.S. Smart Semiconductor Index and seeks to replicate the holdings and weightings of this index. FTXL uses a modified, factor-weighted index “designed to provide exposure to U.S. companies within the semiconductor industry.” These factors include trailing 12-month return on assets, trailing 12-month gross income, and momentum.
This factor-weighted approach means that FTXL is a bit more diversified than SMH in that it holds 31 stocks with its top 10 holdings accounting for a lower 60.4% of net asset value. You can check out an overview of FTXL’s top 10 holdings from TipRanks’ Holdings Tool in the chart below.
As you can see, FTXL also holds Nvidia, but with an 8.3% weighting as opposed to SMH’s larger weighting of over 20%. Conversely, FTXL has more exposure to Intel; its second-largest holding, with an 8.6% position. Unfortunately, shares of Intel (INTC) are down 30.4% over the past year, which is one reason why FTXL has substantially outperformed SMH in recent times.
Over the past three years, the FTXL ETF has generated a solid annualized return of 11.6% (as of August 31), which is strong but lags far behind SMH’s 22.5% annualized return over the same timespan. Over the past five years, FTXL’s annualized return is better at 23.9% but still lags SMH’s exceptional 34.8% annualized return over that period. FTXL launched in 2016 so it does not yet have a 10-year track record of performance to compare to SMH’s.
It’s always important to evaluate fees, and FTXL is a bit more expensive to hold than SMH, with an expense ratio of 0.60%. SMH carries an expense ratio of 0.35%.
Is FTXL Stock a Buy According to Analysts?
Wall Street analysts afford FTXL a Moderate Buy consensus rating based on 26 Buys, six Holds, and zero Sell ratings assigned in the past three months. The average FTXL stock price target of $111.37 also implies 16% potential upside from current levels, same as SMH.
Overall, FTXL is a good ETF with a solid performance track record, but I am less bullish on it due to the fact that it has significantly lagged SMH’s performance over the past three and five years and also has a higher expense ratio. I land on a neutral rating here.
The Favored ETF Between SMH and FTXL
In my opinion, SMH is the clear winner in comparing these 2 popular semiconductor ETFs with different methodologies. While past performance is no guarantee of future results, the biggest semiconductor ETF has delivered stellar returns over the past three, five and 10 years, much more than FTXL.
While FTXL stock has been a decent performer, it has not been able to keep up with SMH stock. Based on this consistent gulf in results, it seems clear that SMH’s index methodology of favoring the largest semiconductor stocks has allowed it to capture more upside than FTXL’s factor-weighted approach. FTXL stock hasn’t capitalized as much on the strong performance of leading semi stocks like Nvidia and has also had more exposure to laggards like Intel. Of course, should Intel stock rebound, possibly due to a rumored takeover, FTXL’s performance could surge higher.
Nonetheless, based on these results, it seems that in the semiconductor space, going with the fastest horses is the better approach. I’m bullish on SMH as the best-in-class semiconductor ETF due to its superior performance, portfolio of strong semiconductor stocks, and its lower expense ratio.
11.
Advisors' Surging ETF Use Led by Active Funds: Fidelity
2024-09-26 18:03:27 by DJ Shaw from etf.com
Financial advisors continue buying ETFs for their clients in increasing numbers, according to a recent Fidelity survey that found gains largely coming from purchases of more expensive actively managed funds as opposed to passive funds that generally track an index.
Purchases of active exchange-traded funds more than doubled among financial advisors since 2022, the Fidelity Institutional report on portfolio construction trends found. Based on over 3,000 professionally managed investment portfolios reviewed in the second quarter, the report states that 29% of advisors now have allocations to actively managed ETFs, up from 13% in 2022.
Among advisors using active ETFs, the average allocation is 17%, Fidelity’s analysis shows, with a particular focus on fixed income.
Active ETF Growth Driven by Fixed Income
Fidelity attributes the growing popularity of ETFs to advantages such as better tax efficiency, lower costs, and intraday liquidity compared to other investment vehicles. The report shows that 68% of incoming portfolios utilize both mutual funds and ETFs, while 74% of target portfolios include both vehicles.
Index funds remain the most popular product among advisors, especially for domestic equities, according to Fidelity's data.
The average portfolio reviewed contains 13 holdings from 6 different asset managers, with underlying blended fees of 50 basis points, the report notes.
Fidelity’s analysis reveals that 24% of portfolios with large-cap exposure utilize only passive products, which could lead to unintended concentration in a handful of mega-cap stocks.
The report indicates that advisors have been reallocating from fixed income to equities to take on risk and participate in the market.
Fixed income allocations remained at 29%, the lowest in 2 years, according to Fidelity's data.
While investment grade allocations were at a two-year high last quarter, they have dropped to 80% in the second quarter, the report shows.
In the equity space, the report revealed that the average equity sleeve of a portfolio was 68% in the second quarter.
Seventy-nine percent of the equity sleeve is allocated to U.S. equities versus 21% in international, Fidelity’s analysis shows.
Within U.S. equity, the average portfolio has 66% allocated to large-cap, 22% to mid-caps and 12% to small caps, which is largely unchanged from previous quarters, according to the report.
Fidelity’s data indicates that advisors continued to increase their allocation to sensitive sectors—including communication services and technology—along with growth allocation.
The report shows that growth allocations reached 42% of the equity sleeve, a high over the last two years, with 35% in core and 23% in value.
Fidelity notes that both a soft landing and recession are good scenarios to own bonds in, as the diversification provides protection in the event of slower than expected growth.
12.
What China's biggest stimulus since the pandemic means for US investors: Morning Brief
2024-09-25 10:00:39 by Jared Blikre from Yahoo FinanceThis is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:
The chart of the day
What we're watching
What we're reading
Economic data releases and earnings
China just announced its biggest economic stimulus since the pandemic, which is reverberating in stocks and commodities worldwide.
After the details of the monetary stimulus and support for the stock market were announced Tuesday by the People's Bank of China (PBOC), the nation's benchmark index, the CSI 300 (000300.SS), surged 4.3% — its largest jump since July 2020.
The country's currency, the renminbi (CNH=X), dropped 0.6% — the most since the Japanese yen imploded in early August.
In the US, stocks rose, but the biggest effect was felt in commodities. Silver futures (SI=F) skyrocketed over 4.5% to a decade-plus high. Copper futures (HG=F) — already on a nine-day tear — notched a 10th straight win as it surged to a two-month high.
The stimulus, China’s latest attempt to pull its economy out of a slump caused by a shaky property market and deflationary pressures, includes over $325 billion in measures, mostly via monetary — as opposed to fiscal — channels.
For banks, the PBOC cut the amount of money required to set aside for loans — the reserve requirement ratio — by half a percentage point, freeing up about $142 billion in short-term liquidity.
The plan also lowers short- to medium-term interest rates and makes mortgage relief a top priority.
According to PBOC governor Pan Gongsheng, these moves will benefit around 50 million households, saving them $21.3 billion annually in interest expenses.
For China's ailing stock market (the CSI is down 40% from its 2021 peak), a $71 billion stock market stabilization program was introduced to allow securities firms, funds, and insurers to access funding for stock purchases through a swap facility.
But before investors start celebrating, it's helpful to know that China’s track record with these big stimulus pushes has been mixed to poor.
In 2008, the country's massive infrastructure spending led to unsustainable debt. Fast-forward to 2015, and a stock market crash wiped out gains despite similar interventions. And during the pandemic, the Chinese property sector collapsed after another stimulus effort fueled a bubble.
The question on everyone’s mind: Will China add fiscal stimulus to that record?
If Beijing starts throwing more government money at the problem, particularly for infrastructure, that could have global ripple effects.
Commodities would likely see another big push, impacting everything from US manufacturing to energy sectors. There could be major shifts in supply chains and pricing for raw materials (yes, again).
As Bloomberg’s chief Asia economist Chang Shu put it, “Delivering all these measures at once is highly unusual," going on to say that it "speaks to the urgency felt in Beijing to head off deflationary risks and get growth on track for this year’s 5% [national growth] target.”
And that urgency is why many are speculating that fiscal policy could be the next lever Beijing pulls.
So, what does this all mean for US investors?
Inflated commodity costs don't necessarily make it to the consumer level of inflation. However, pernicious swings in inflation could be on the horizon, as China's measures could push commodity prices higher — especially if Beijing keeps pulling levers. For US businesses, this means higher input costs, unpredictable consumer demand, and planning headaches, especially for smaller firms.
In the words of Macro Compass founder Alfonso Peccatiello in a note to clients, “We are not risking a second inflation wave. We are rather looking at more inflation volatility over the next decade.”
Click here for the latest stock market news and in-depth analysis, including events that move stocks
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13.
Pacer ETF Bets on Nasdaq 100 Dividend Yield
2024-09-24 21:48:42 by Jeff Benjamin from etf.com
Most investors probably don’t buy the growth-oriented Nasdaq 100 Index for the dividend income, but the latest strategy from Pacer ETFs is designed to change that.
The Pacer Metaurus Nasdaq-100 Dividend Multiplier 600 ETF (QSIX) offers six times the dividend yield of the underlying index, which currently adds up to 4.2%.
That is not a bad yield, especially when coupled with the potential growth of the index.
The dividend boost is accomplished through the purchase of futures contracts going out over the next four years. And in exchange for that extra dividend yield, the QSIX only tracks about 85% of the underlying index, which means a slight lag in growth.
Sean O’Hara, president of Pacer ETFs in Malvern, Pa., said the tradeoff is more than worth it.
“We’re basically deconstructing the price return and the dividend return, and when we put it back together the equity return is lower, but the dividend return is higher,” he said.
With fewer than half the companies in the Nasdaq 100 currently paying a dividend, O’Hara acknowledged that this is not normally the place investors would turn for dividend income.
Will Fast-Growing Companies Pivot to Dividends?
However, he is betting on the fastest-growing companies in the index turning to dividends at some point in the next few years in order to offload some of the cash on their balance sheets.
The ETF’s current formula uses 15% of the index’s beta as collateral to acquire the futures contracts over the next four years to replicate 600% of the annual dividend yield of the Nasdaq 100.
O’Hara believes that alone should be enough to attract investors eager for dividend yield and satisfied with 85% of the equity performance.
But what O’Hara said isn’t factored into the price he’s paying for the dividend futures contracts is the probability of cash-rich non-dividend-payers introducing dividends.
“That is not currently in the dividends futures price, and I think it’s one of the more valuable pieces of QSIX,” he said.
Pacer, which manages nearly $47 billion across 55 ETFs, already has a track record with the strategy through the Pacer Metaurus US Large Cap Dividend Multiplier 400 ETF (QDPL), which offers 400% of the dividend yield of the S&P 500 Index.
Introduced in July 2021, QDPL has grown to more than $500 million.
“We had some success with QDPL, and we thought, ‘where else can we do this?’” O’Hara said.
14.
Data shows US economy pacing for 'healthy' growth — but new 'headwinds' loom
2024-09-23 14:50:41 by Josh Schafer from Yahoo FinanceThe US economy appears on track for another solid quarter of growth, new data showed Monday, while also pointing to potential "headwinds" in the manufacturing sector and with price pressures.
S&P Global's flash US composite PMI, which captures activity in both the services and manufacturing sectors, came in at 54.4 in September, down from 54.6 in August. Economists had expected the index to tick down to 54.3.
Chris Williamson, the chief business economist at S&P Global Market Intelligence, said the data shows the US economy is pacing for "healthy" growth in the third quarter, which will come to a close at the end of September.
“The sustained robust expansion of output signaled by the PMI in September is consistent with a healthy annualized rate of GDP growth of 2.2% in the third quarter," Williamson said in the release.
After a better-than-expected update on retail sales in August, economists have been expecting a solid third quarter of growth for the US economy. As of Sept. 18, the Goldman Sachs economics team had been tracking third quarter GDP at 3%, while the Atlanta Fed's GDPNow tool saw 2.9% annualized growth.
Federal Reserve Chair Jerome Powell last week also cited the still-healthy economy as a reason to cut interest rates and not get behind the curve.
"The US economy is in good shape," Powell said. "It's growing at a solid pace. Inflation is coming down. The labor market is in a strong pace. We want to keep it there."
There were some signs of slowing within Monday's S&P Global data, however.
The services component of S&P's report showed the index registered 55.4 this month, down from 55.7 in August. Meanwhile, manufacturing activity continued to lag, falling to a 15-month low of 47 from 47.9 the month prior.
Any reading above 50 for these indexes represents expansion in the sector; readings below 50 indicate contraction. Additionally, prices charged rose at the fastest rate in six months, which Williamson noted could be cause for concern on the inflation front.
“The early survey indicators for September point to an economy that continues to grow at a solid pace, albeit with a weakened manufacturing sector and intensifying political uncertainty acting as substantial headwinds," Williamson said. "A reacceleration of inflation is meanwhile also signaled, suggesting the Fed cannot totally shift its focus away from its inflation target as it seeks to sustain the economic upturn."
Read more: Cell phones, furniture, used cars: Here's where prices are easing up as inflation cooldown continues
The survey's future output index, which measures optimism about economic output in the year ahead, hit its lowest level since October 2022 too.
“Business sentiment, demand, hiring and investment are being subdued by uncertainty surrounding the Presidential Election, casting a shadow over the outlook for the year ahead at many firms," Williamson wrote.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
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15.
This 1 Simple ETF Could Turn $500 a Month Into $500,000
2024-09-21 12:26:00 by Jake Lerch, The Motley Fool from Motley FoolAnyone can turn $500 into $500,000 -- if you have the time and the patience.
Don't believe it? Read further to discover the secrets of how consistent savings and long-term stock market returns can add up to a half-million bucks.
Getting started
First things first: In order to grow a nest egg, you must save. So, let's imagine a hypothetical investor who has it within their means to save $500 per month.
Next, let's imagine a base case where our hypothetical investor poured this $500 per month into a five-year certificate of deposit (CD) that paid 5% annually. Furthermore, let's also assume that our hypothetical investor could roll their nest egg every five years into a new CD with the same 5% annual rate.
| Time Period | Value of Nest Egg |
|---|---|
| Year 5 | $33,907 |
| Year 10 | $77,182 |
| Year 20 | $202,902 |
| Year 25 | $292,867 |
Calculations by author.
As you can see, after five years, our investor's nest egg will have grown to nearly $34,000. In 10 years, it would be worth more than $77,000. And in 25 years, their nest egg will have grown to almost $300,000.
Not bad. But the stock market can put those 5% annual returns to shame. Here's how.
How to use a basic index fund to grow a nest egg
Let's start by identifying a simple, well-known index exchange-traded fund. I like the Invesco QQQ Trust (NASDAQ: QQQ). It's chock-full of technology stocks like Microsoft, Apple and Nvidia. It also offers some diversification. It has holdings in PepsiCo, Amgen, Costco Wholesale, Starbucks, and CSX, to name just a few.
At any rate, what's of particular interest is the fund's annual returns. Because over the last 10 years, this fund has generated a compound annual growth rate (CAGR) of 17.2%.
Granted, the last 10 years have been excellent for the stock market -- and for tech stocks in particular. So, if we extend the performance window back to 1999, giving us 25 years of data, the fund's CAGR slips to 9.1%.
To be conservative, let's use this lower CAGR of 9.1% and see how 25 years of investing could help our hypothetical investor turn $500 into $500,000.
How stock market returns measure up
By applying a 9.1% CAGR to the nest egg, we begin to see how a seemingly small change in annual return can truly ramp up investment returns.
| Time Period | Value of Nest Egg (9.1% CAGR) | Value of Nest Egg (5% CAGR) |
|---|---|---|
| Year 5 | $37,457 | $33,907 |
| Year 10 | $95,354 | $77,182 |
| Year 20 | $323,171 | $202,902 |
| Year 25 | $536,981 | $292,867 |
Calculations by author.
At first, the difference is small -- almost imperceptible. Five years in, the investment nest egg has only generated about $3,500 more.
However, after 10 years, the difference is more apparent. By then, there is an almost $20,000 difference between the two nest eggs.
By year 20, there's no mistaking the point -- a larger annual return changes everything. After 25 years, the investment nest egg is 83% larger than the money market nest egg.
In summary, the basic index fund outperformed CDs by nearly $250,000. But that's not all. Remember, in this scenario, we've used a very conservative growth rate for the index (9.2%). We've also used a very optimistic interest rate for CDs (5%). Over many periods of time, the stock market has outperformed CDs by an even greater margin.
That's why investing in a simple index-tracking ETF is one of the best ways to grow wealth. And it's one way to turn $500 a month into $500,000.
Should you invest $1,000 in Invesco QQQ Trust right now?
Before you buy stock in Invesco QQQ Trust, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Invesco QQQ Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $722,320!*
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Jake Lerch has positions in Invesco QQQ Trust and Nvidia. The Motley Fool has positions in and recommends Apple, Costco Wholesale, Microsoft, Nvidia, and Starbucks. The Motley Fool recommends Amgen and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
This 1 Simple ETF Could Turn $500 a Month Into $500,000 was originally published by The Motley Fool
16.
Analyst outlines best options market plays post-triple witching
2024-09-20 21:53:17 by Julie Hyman from Yahoo Finance VideoFriday’s market close marked the end of a “triple witching” session where $5.1 trillion in stock index futures, stock index options, and stock options expire simultaneously. September’s triple witching comes the same week as the Federal Reserve kicks off its rate-cutting cycle and a rebalancing of the S&P 500 (^GSPC). eToro US investment and options analyst Bret Kenwell joins Julie Hyman and Josh Lipton to discuss the options playbook after the big day for options traders. “Today was one of the four big expiration dates of the year when it comes to the options market, and you saw that action leading up to today's session with so much back and forth," Kenwell tells Yahoo Finance. “We had a late day pop in stocks, and a lot of that plays into the expiration, but I think what's really interesting is when you look at the seasonality in September, it tends to be pretty bad for US stocks, and when you really dial into that seasonality, you see a lot of it comes in the so-called back half of mid-month…so that leaves the door open at least to see some choppiness, some profit taking, or some outright seasonal weakness kind of going into the end of the quarter.” Kenwell says he’s expecting strength in the tech sector after “tech has sort of fallen by the wayside amid all this, you know, breadth expansion...suddenly it's gone from the favorite stocks, the leadership group to being, I think it's the fourth or fifth best performer of the year.” Kenwell says there were “a lot of put sales into some of the Magnificent Seven names or a lot of the semiconductor leaders” during downturns earlier in the month. He adds “I don't know that that's necessarily the best way for a retail investor to play. It's probably a more reasonable way to play at this point would be by either buying calls or if they wanted to reduce that cost and limit their upside a bit. Call spread would be a great way to get into it.” For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime. This post was written by Naomi Buchanan.
17.
SPY's Big Outflows Hamper State Street: Morningstar
2024-09-20 19:29:18 by Jeff Benjamin from etf.com
In the race for ETF supremacy, third-place State Street Global Advisors is being hamstrung this year by its flagship fund, the $558 billion SPDR S&P 500 ETF Trust (SPY).
The world's first and largest exchange-traded fund has bled a net $26.9 billion so far this year, pinching State Street's overall flows and widening its standings in the league tables behind larger rivals, No. 1 BlackRock Inc. and No. 2 Vanguard Group.
According to the latest data from Morningstar, SSGA’s net ETF inflows this year through August totaled $8.1 billion, including net outflows of $3.9 billion for U.S. equity ETFs and $300 million for municipal bond ETFs. BlackRock's iShares took in $145.5 billion over the same period while Vanguard led all firms with a $174.8 billion haul.
"Recent flows have been shaky for State Street Global Advisors," the Morningstar report said. "Whiplash flows to and from SPDR S&P 500 Trust ETF SPY and tepid interest in sector equity ETFs have weighed on State Street’s bottom line, too.
At more than $3 trillion across 414 ETFs, iShares is the largest issuer, followed by Vanguard with $2.6 trillion across 86 ETFs. SSGA has $1.3 trillion under management across 137 ETFs.
Matthew Bartolini, head of SPDR Americas Research at State Street Global Advisors, took issue with the Morningstar data, claiming it as “a little bit of an incomplete report.”
“There are seasonality and structural trends that typically drive flows into SPY in the November and December timeframe,” he said, adding that the ETF took in “$50 billion last year during those two months.”
SPY a "Unicorn"
“SPY has the fourth-most flows of any ETF, and it is a unicorn; a legit one of one,” he added. Bartolini said SPY’s size and liquidity has established it as a “very diverse use case, related to optionality and derivatives trading.”
“SPY trades roughly $25 billion a day,” he said. “No other ETF has ever come close to it, nor ever will.”
Ryan Jackson, senior manager research analyst at Morningstar, confirmed that “SPY has definitely seen better inflows and asset growth at the end of the year.”
According to Morningstar, from 2014 through 2023, SPY’s average fourth-quarter net inflow was $16 billion.
Jackson acknowledged the variability of flows into SPY as a unique trading vehicle, but said SSGA is also losing ground to iShares and Vanguard due to a smaller footprint in the increasingly popular categories of fixed income and actively managed ETFs.
Worst Year Since 2018?
On that point, Bartolini responded that, “Our fixed income lineup is pretty broad based and our active lineup, which is more in the fixed income arena, covers core and core plus.”
“The (Morningstar) flow numbers are not a complete picture,” he added.
The report said that State Street is on track for its "worst year of ETF flows since 2018."
18.
Forget Nvidia: This Top ETF Could Turn $25,000 Into Over $1 Million
2024-09-20 08:27:00 by David Jagielski, The Motley Fool from Motley Fool
Nvidia is a stock that's been synonymous with generating high-powered returns in recent years. The chipmaker is a big player in the artificial intelligence market, as its chips are the go-to option for many tech companies building out their chatbots and other next-gen products. But Nvidia also isn't a cheap investment -- its market cap is around $3 trillion. Trying to earn a high return with a stock that's already one of the most valuable companies in the world won't be easy, especially with expectations being so high for the business at this point.
If you want to earn a big return and turn $25,000 into more than $1 million, there is a safer and better way to do so -- assuming that you're willing to be patient. An exchange-traded fund (ETF) can allow you to generate some massive gains over the years, while also allowing you to keep your risk fairly low. You won't be overly exposed to just a single stock, the way you would be if you only bought shares of Nvidia.
An ETF that can be ideal for growth investors is the Invesco QQQ Trust (NASDAQ: QQQ). Here's why it can be a no-brainer buy.
The Invesco fund gives investors broad diversification in many growth stocks
If you want exposure to the top growth stocks in the world, odds are you'll look to the Nasdaq exchange, where many top tech stocks trade. The Invesco fund will narrow the list even further, however, giving you exposure to just the top 100 non-financial stocks on the exchange. This means you'll avoid some of the riskier stocks on the Nasdaq. Instead, you'll get access to some of the best and brightest growth stocks in the world.
Nvidia is one of the top holdings in the ETF, but it only accounts for 8% of its total weight. The ETF also holds shares of Costco Wholesale, Alphabet, Amazon, and many other big-name stocks. Although it's heavily skewed toward tech stocks (they account for half of the fund), other sectors of the market are represented in the fund as well, including healthcare, industrials, and consumer discretionary stocks. Collectively, these stocks can help you generate strong and steady returns over the years.
How the ETF can help grow your portfolio to $1 million
For a $25,000 investment to turn into $1 million or more, it will need to grow to 40 times its original value. To accumulate that kind of return, you'll want to focus on the long term, such as a period of 25 to 30 years. That way, you aren't setting your expectations too high or focusing on risky small-cap stocks that may appear to have a lot of upside.
Over a period of 25 years, you would need to average a compounded annual growth rate (CAGR) of approximately 15.9% for an investment to grow to 40x its original value. But if you're able to remain invested for 30 years, the necessary CAGR falls to 13.1%.
Historically, the Invesco ETF has been a strong investment to hang on to. When including dividends, its total returns over the past decade have totaled 417%, which equates to a CAGR of 17.9%. That doesn't, of course, mean that it will generate those types of returns over the next couple of decades, but it's indicative of the strength of the growth stocks it possesses in its portfolio, and their ability to generate massive returns. Even at a slower growth rate, the fund has the potential to make you a millionaire with a $25,000 investment, as long as you're willing to be patient and hang on for the long haul.
The Invesco QQQ Trust makes for a great option for any investor
Whether you track growth stocks or just want a diversified portfolio, the QQQ fund can be a great investment to add to your own holdings. It has a fairly low expense ratio of 0.2%, and with exposure to top growth stocks, it's a no-brainer investment that can be suitable for just about any type of investor. It can also be a great default investment to put money into, especially if you don't want to have to track individual stocks.
Should you invest $1,000 in Invesco QQQ Trust right now?
Before you buy stock in Invesco QQQ Trust, consider this:
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Costco Wholesale, and Nvidia. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.
Forget Nvidia: This Top ETF Could Turn $25,000 Into Over $1 Million was originally published by The Motley Fool
19.
SEC Updates Rules for $55T Equity Markets
2024-09-19 19:24:27 by DJ Shaw from etf.com
The Securities and Exchange Commission has approved updates to rules governing the $55 trillion equity markets, SEC Chair Gary Gensler announced in a statement on Wednesday.
These changes are designed to “enhance competition, efficiency, and fairness, benefitting investors and capital formation alike,” Powell said.
The updates come nearly two decades after the last comprehensive review of national market system rules in 2005, the statement noted. The changes come as transaction volume in listed equities has doubled in the last five years and tripled in the last 17 years, data in the statement showed.
"There's been a significant increase in everyday investor participation in the markets," Gensler said in a statement, adding that 58% of American households own stocks.
Key changes include relaxing the one-penny minimum quotation increment to half a penny for many stocks.
This reduction in “tick size” will allow stocks to be priced more efficiently and competitively, potentially lowering costs for investors and improving liquidity, the SEC explained.
Lowering Exchanges' Maximum Fees
The new rules also lower the maximum fee that exchanges can charge for accessing the best bid or offer from three-tenths of a penny to one-tenth of a penny.
This change addresses concerns raised by market participants about price transparency, market complexity and potential conflicts of interest, Gensler’s statement said.
Additionally, the updated rules implement a new definition of a round lot, replacing the 120-year-old standard of 100 shares.
The new definition introduces a tiered system (100, 40, 10, or 1 share) based on share price, which could lead to better pricing for investors, according to the announcement.
The reforms also aim to provide greater transparency on quotes for orders smaller than a round lot, known as “odd lots,” the SEC disclosed.
The SEC chair highlighted that approximately 74% of share volume is currently being quoted at less than 1.5 pennies, up from 54% in 2005.
Gensler said that these reforms “will help promote greater transparency, competition, fairness, and efficiency in our $55 trillion equity markets.”
20.
The Fed just convinced markets it's not behind the curve
2024-09-19 17:14:19 by Josh Schafer from Yahoo FinanceThe Federal Reserve's half-percentage-point interest rate cut could have shaken markets had it exacerbated investor fears that the central bank was preparing for an economic slowdown.
Instead, Fed Chair Powell appears to have convinced investors the central bank is cutting rates to keep the economy on track, not to save it. Stocks surged Thursday following Powell's press conference after the rate cut decision.
"Chair Powell had one job at his post-FOMC press conference today: convince markets that a 50 bp cut was consistent with a thoughtful policy adjustment rather than a sign that the Fed is worried it is behind the curve," DataTrek co-founder Nicholas Colas wrote in a note to clients Wednesday night. "He accomplished that goal ... This is consistent with prior mid-cycle markets, where equities can continue to rally."
Investors had been increasingly expecting a soft landing, where the Fed's aggressive tightening cycle ends with inflation falling to the 2% target without a significant downturn in the economy. On Wednesday, Chair Powell reiterated that scenario remains in play.
Powell remarked the US economy is "in good shape." He pointed out that risks to further cooling in the labor market have risen. But the Fed is cutting with that in mind.
"The labor market is actually in solid condition," he said. "And our intention with our policy move today is to keep it there."
To Colas, the comments change little about the market narrative.
"[The Fed] decision doesn’t actually change very much about the current market setup," Colas wrote. "We know that rates are coming down. We know that the US economy is in reasonably good shape. We know the labor market is cooling but not yet tipping over. While the Fed may have been somewhat clumsy in how it conditioned markets to expect today’s decision, that’s now in the past."
In the day following Chair Powell's press conference, the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) rushed to new record highs, while the Nasdaq Composite (^IXIC) rose over 2%.
Markets are showing familiar price action too, with the largest tech stocks leading the charge higher on Wednesday. Nvidia (NVDA), Apple (AAPL), and Meta (META) all rose just under 4%. The Information Technology sector (XLK) as a whole rose just under 3%, outpacing the S&P 500's 1.7% gain.
Citi US equity strategist Scott Chronert described the rotation into large-cap tech on Thursday as "a catch-up move" into a section of the market that will likely benefit from interest rate cuts but hadn't been leading the rally since the S&P 500's last record close on July 16.
Chronert pointed out that further deterioration in the labor market remains a key risk to the current rally, as it would potentially imply a recession. This could still bring some choppiness to trading action if economic data surprises to the downside.
"We're going to have to be navigating still [if this is a] soft landing versus, gosh, there's still some lingering hard-landing risk out there," Chronert told Yahoo Finance.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
21.
ETFs' Drain on Mutual Funds Shows No Sign of Slowing
2024-09-18 20:04:30 by Jeff Benjamin from etf.com
Exchange-traded funds continue to gobble up market share from mutual funds, according to the latest report from Morningstar.
Investors poured a net $69.3 billion into ETFs while pulling $43.2 billion from mutual funds. That continues a longer-term trend, including the first eight months of the year, in which ETFs raked in $588.1 billion and mutual funds bled $217 billion, the report said.
In terms of where the money is going, the data show a growing appeal for fixed income in August as the financial markets braced for the first interest cut by the Federal Reserve in more than four years.
According to the Morningstar report, active and passive taxable bond mutual funds and ETFs combined for $33 billion worth of net inflows in August, effectively carrying mutual fund and ETF inflows to $26 billion in August.
While U.S. equity fund inflows were essentially flat during the month, international equity funds recorded their worst month of the year in terms of asset flows, with approximately $8 billion moving out the door in August.
Municipal bond funds also had a strong month, taking in $5.54 billion and marking the first time more than $5 billion flowed into the funds in consecutive months in three years.
On a year-to-date basis through August, No. 2 issuer Vanguard Group is leading with $174.8 billion in net inflows, followed by BlackRock's iShares, as the No. 1 issuer has hauled in $145.5 billion. State Street, issuer of the SPDR funds and the third-largest ETF manager, has brought in $8.1 billion this year.
Ryan Jackson, senior manager research analyst at Morningstar, attributed the State Street’s woes to a combination of factors, including “the variability of flows into and out of” the popular SPDR S&P 500 ETF Trust (SPY).
Other factors hampering State Street when competing against the likes of BlackRock and Vanguard, Jackson added is the smaller bond ETF footprint at a time when bond ETFs are gaining appeal and a fewer active ETFs.
22.
Major ETFs Climb After Fed Slashes Interest Rate
2024-09-18 18:25:53 by James Rubin from etf.com
Major equity ETFs jumped after the U.S. central bank cut its benchmark interest rate by half of a percentage point, amid growing concerns that slowing growth had become a bigger worry than inflation.
The $554 billion SPDR S&P 500 ETF Trust (SPY), the world's largest exchange-traded fund, climbed 0.5% after the decision. The second and third largest funds, the Vanguard S&P 500 ETF (VOO) and iShares Core S&P 500 ETF (IVV), which both have over $500 billion in AUM and track the S&P 500 index of major stocks, moved in sync with SPY. The tech-focused Invesco QQQ Trust (QQQ) rose 0.7%.
Each of the funds had traded flat-to-lower earlier in the day.
The Federal Reserve sliced the federal funds rate to 475-500 bps, which seemed unlikely just a week ago. But analysts trying to predict the Fed's next move swung heavily toward a larger cut after a mildly encouraging Consumer Price Index reading last week and as economic data has increasingly raised the prospect of a steep recession.
In a statement, the Federal Reserve said that it was confident that inflation was headed "sustainably" toward the bank's goal of an annual 2% increase, but that "the economic outlook is uncertain."
"The Committee is attentive to the risks to both sides of its dual mandate" to keep inflation in check without undercutting the jobs market, the bank said. "In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent," the bank said.
In a press conference after the announcement, Fed Chair Jerome Powell said that the "recalibration" of the bank's "policy stance will help maintain strength of the economy and the labor market and will continue to enable further progress on inflation."
He said that if the economy "evolves as expected, the median participant [in the policy decision] projects that the appropriate level" for interest rates will be "4.4% at the end of this year and 3.4% at the end of 2025." But he also noted that the bank was "not on any preset course," and that it would "continue to make...decisions meeting by meeting."
The Fed last cut the rate in July 2020 to help stimulate an economy reeling from massive shutdowns tied to the Covid-19 pandemic.
As inflation soared to its highest levels in four decades, the central bank adopted a more hawkish stance, raising rates 11 times starting in July 2022 with the last increase 14 months ago.
Criticism of Fed Hawkishness
More recently, however, as data showed the economy slowing and sluggishness in the once-torrid job market, the bank has been criticized for keeping rates high for too long. Powell and other central bankers repeatedly vowed to base their decisions on data showing that inflation was firmly under control.
But last month, Powell indicated that conditions had changed enough to merit a policy change.
"With an appropriate dialing back of policy restraint, there is good reason to think that the economy will get back to 2% inflation while maintaining a strong labor market," Powell said at the annual conference of central bankers in Jackson Hole, Wyoming.
UPDATE (Sept. 18, 2024, 3:56. p.m. ET): Adds Powell quote after latest Fed policy decision.
23.
Gold is having a moment — but silver is poised for its own: Morning Brief
2024-09-18 10:00:38 by Jared Blikre from Yahoo FinanceThis is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:
The chart of the day
What we're watching
What we're reading
Economic data releases and earnings
Gold might be hitting record highs, but silver is starting to turn investors' heads once again.
The metal — at once precious and industrial — has surged for four straight days, poking above $31 per ounce for the first time since July.
While the 10% gain this week is already the best since the early pandemic days of August 2020 — and is enough to secure a two-month high — investors likely have their sights set much higher.
There are a few reasons why the second-place metal has potential. First, silver has slightly outperformed gold this year, but gold prices are still elevated with respect to silver on a historical basis when looking at the so-called gold-silver ratio.
When the multiple of gold to silver reaches 80, many investors will look for buying opportunities in silver, betting that the ratio will mean revert. Currently, it stands at 84 but was above 90 only weeks ago as gold was surging. According to DataTrek's Nicholas Colas, the historical average of the ratio since 1990 is 70, which means silver has room to run long-term versus gold.
Technical analysis of silver prices also reveals long-term pent-up bullish potential, and the two looming peaks in silver's history at about $50 per ounce could act as magnets for a breakout.
Silver prices surged and shook the investing world in 1980 when Nelson Bunker Hunt, William Herbert Hunt, and Lamar Hunt attempted to corner the market on silver. The Hunt Brothers' market manipulation scheme succeeded in inflating prices by 700% after they acquired about one-third of the world's silver supply.
The trade ended in tears for the brothers, but the price target had been set.
After plummeting to $3 in the 1990s, silver mounted another rally as the global financial crisis kicked into high gear in the late oughts.
Amid the QE 1 and 2 boom years, silver futures hit another peak just shy of $50 per ounce in April 2011 — an appreciation of nearly 170% over the prior year.
Since that second trip to $50, the price again fell and has rallied in fits and starts. The pandemic sparked a rally in 2020 that took silver to $30, and this year, it's managed to cross the $32 mark.
According to Goldman Sachs, $32 is the big level to watch for silver, which the bank said is "on the verge of a multi-month breakout." The bank also noted that options on the iShares Silver Trust (SLV) had one of the biggest volume days in years last Friday.
The bank cited Federal Reserve monetary policy on the verge of its first rate cut in years. But the real appeal may lie with the evolving demand for artificial intelligence, as silver is critical for chip fabrication. Silver investors will be closely monitoring how chip demand evolves this earnings season.
Yet another market narrative about Fed rates and AI.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
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24.
Investors increasingly expect a soft landing ahead of the Fed's crucial decision
2024-09-17 15:02:27 by Josh Schafer from Yahoo FinanceInvestors are growing increasingly confident that the global economy can achieve a soft landing, in which inflation retreats without a large drawdown in economic activity.
In Bank of America's August Global Fund Manager Survey, released on Tuesday, 79% of respondents said a soft landing is the most likely outcome for the global economy in the next 12 months. This marked the highest percentage of respondents projecting such an outcome since May 2023.
For now, economists largely feel the economy can maintain this path. Recent data has shown signs of cooling in the labor market. But layoffs remain low, and a rapid rise in the unemployment rate has slowed. Meanwhile, inflation continues to fall toward the Fed's 2% target, while a fresh reading on August retail sales released Tuesday showed consumer spending is holding up.
"We still have significant consumer demand," Bank of America Securities senior US economist Stephen Juneau told Yahoo Finance. "We're not really seeing investment slow down sharply. So where's that kind of hard landing coming from? We just don't see it ... in the data right now."
He added, "We do see some normalization. We see some cooling. But that's a soft landing ... So we think that's very consistent with the data."
Bank of America's survey noted that confidence in a soft landing and interest rate cuts from the Federal Reserve drove an increase in global investor sentiment for the first time since June.
The survey's release comes one day before the Fed is expected to cut interest rates for the first time since 2020. A debate has raged on Wall Street over the past month about the extent to which the Fed will cut when it announces its next move at 2 p.m. ET on Wednesday. As of Tuesday morning, markets were pricing in a 67% chance the Fed cuts interest rates by 50 basis points, compared to 33% odds that Fed opts for a smaller 25 basis point cut, per the CME FedWatch Tool.
Read more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards
The best outcome for stocks? A 50 basis point cut that doesn't raise concerns about the probability of the Fed achieving a soft landing, Morgan Stanley chief investment officer Mike Wilson wrote in a note to clients on Sunday night.
This type of move from the Fed, he said, would be "purely an 'insurance cut' ahead of macro data that is assumed to stabilize."
"The bond market may be suggesting that a higher for longer interest rate stance may be a risk to the soft landing outcome at this point," Wilson wrote. "This doesn't mean the Fed can't get ahead of it, but they may need to move faster to keep investors' hopes alive."
"If the market prices less Fed easing because the economy proves resilient, equities will rise despite higher bond yields," Goldman Sachs chief US equity strategist David Kostin said while laying out a 12-month target of 6,000 for the S&P 500 (^GSPC).
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
25.
Retail sales top Wall Street estimates in August
2024-09-17 12:32:19 by Josh Schafer from Yahoo FinanceRetail sales surpassed Wall Street's estimates in August as investors kept a close eye on any signs of a slowdown in consumer spending. The data comes as the Federal Reserve's two-day policy meeting kicks off in Washington, with the central bank widely expected to cut interest rates as economic growth slows and inflation lessens.
Retail sales rose 0.1% in August. Economists had expected a 0.2% decrease in spending, according to Bloomberg data. Meanwhile, retail sales in July were revised to a 1.1% increase from a prior reading that showed a 1% increase in the month, according to Census Bureau data.
"The stronger than expected retail sales data for August suggest that, boosted by rapid wealth gains and falling energy prices, consumers continue to spend freely despite the labour market slowdown," Capital Economics North America economist Olivia Cross wrote in a note to clients on Tuesday.
August sales, excluding auto and gas, rose 0.2%, below consensus estimates for a 0.3% increase. The control group in Tuesday's release, which excludes several volatile categories and factors into the gross domestic product reading for the quarter, increased 0.3% in August, in line with estimates.
Inside the report, miscellaneous store retailers were the largest gainers, with sales rising 1.7%, while a 1.2% decline in sales at gasoline stations pulled down the overall headline number.
"With consumption still very healthy, for now, recession fears appear overblown," Cross added.
The release comes as investors widely expect the Fed will cut interest rates for the first time since 2020 when its next policy decision is announced at 2 p.m. ET on Wednesday.
"I don't think this changes really anything," Bank of America Securities senior US economist Stephen Juneau told Yahoo Finance. "It's kind of a non-event."
Read more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards
Markets have been debating how large of a cut the Fed will enact. As signs emerge of slowing in the labor market and as inflation falls toward the Fed's 2% target, markets have shifted to price in a 50 basis point cut from the Fed. The August retail sales data did little to change that thinking.
On Tuesday morning, markets were pricing in a 67% chance that the Fed cuts interest rates by 50 basis points, compared to 33% odds that the Fed opts for a smaller 25 basis point cut, per the CME FedWatch Tool.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
26.
A larger Fed cut wouldn't spark worry — but a smaller one might: Morning Brief
2024-09-17 10:00:02 by Josh Schafer from Yahoo FinanceThis is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:
The chart of the day
What we're watching
What we're reading
Economic data releases and earnings
The debate about just how deep the Federal Reserve will cut interest rates continues to heat up. And in a late-breaking swing, team 50 basis points is leading over team 25.
There's been a prevailing thought over the past month, which we've noted before, that if the central bank does opt for the larger of the two interest rate cut scenarios, it could prompt panic in markets.
It may be a good sentiment to consider, but markets are all about expectations. Panic usually comes when something unexpected happens, and the Fed — even as it keeps a healthy distance from the daily swings of the stock market — is more likely to play within the lines.
"I think the Fed would be reluctant to surprise the market," Deutsche Bank chief US economist Matthew Luzzetti told Yahoo Finance.
As of Monday, that bigger cut would now be anything but unexpected: Markets were pricing in a 61% chance the Fed opts for a 50 basis point interest cut on Wednesday, per the CME FedWatch tool. With odds like that, it's hard to argue that's going to spring outright panic.
From Monday's view, in fact, you can even argue that the Fed would actually be tightening policy by opting for a 25 basis point cut, given how things are priced in.
"Unless something changes, going 25 will tighten financial market conditions, pushing interest rates up," Renaissance Macro's head of economics Neil Dutta wrote in a note to clients on Monday morning. "Monetary policy works through the financial markets. Tighter financial conditions should be avoided when the balance of risks between growth and inflation have shifted as they have now. If the downside risks to employment outweigh the upside risks to inflation, then the Fed should be leaning against tightening financial conditions, all else equal."
EY chief economist Gregory Daco offered a similar opinion on Yahoo Finance's show Catalysts on Monday morning.
"People are saying, well, 25 basis points doesn't really matter," Daco told Yahoo Finance, pointing to the small numeric differences we'd see on the Street with interest rates.
"But," he continued, "the risks are asymmetric. If the Fed does not ease monetary policy by as much as markets are anticipating, then you'll actually see a repricing of rates and you're going to see upward movement in terms of rates."
Movement that damages consumer spending, sentiment, and potentially the economy, per Daco.
In a note to clients on Friday, Goldman Sachs chief US equity strategist David Kostin wrote that his team sees the S&P 500 hitting 6,000 in the next 12 months, with the make-or-break of that target all about whether the Fed's moves can keep the current economic growth story intact.
"While some investors believe the speed of Fed cuts will be the key determinant of equity returns in coming months, the trajectory of growth is ultimately the most important driver for stocks," Kostin wrote.
So if the Fed needs to cut by 50 basis points to make sure its policy isn't so restrictive that it crushes the current market expectations for continued economic growth as the US avoids recession and achieves a soft landing, then so be it. It's already expected at this point, anyway.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
27.
Is the Invesco QQQ ETF a Millionaire Maker?
2024-09-16 22:16:00 by Justin Pope, The Motley Fool from Motley FoolThere's a misconception that investors must make big bets on individual stocks to be successful in the stock market. However, numerous types of investments, including exchange-traded funds (ETFs), can create life-changing investment returns. The big question is: How fast are you trying to get there?
Sure, those who want to become millionaires seemingly overnight will have to take on huge risks that are unlikely to pay off. Trying to get rich fast is almost always a bad strategy.
However, if you have some patience, the Invesco QQQ ETF (NASDAQ: QQQ) could be the best option for generating significant returns without gambling your hard-earned money away.
Here is why this exchange-traded fund is the millionaire maker you've been looking for.
Proven results and how the Invesco QQQ does it
Exchange-traded funds are groups of stocks that trade under one ticker symbol. Often, ETFs follow a market index or investing style. The Invesco QQQ follows the Nasdaq-100, a group of large-cap growth stocks, primarily in the technology sector. Big technology companies have dominated the stock market for over a decade thanks to growth trends such as cloud computing and digital advertising. The best-known market leaders, known as the "Magnificent Seven" stocks, make up over 42% of the Invesco QQQ today. It has produced extraordinary investment returns over the past decade:
With a 700% total return in just one decade, the millionaire-making question is whether this performance will continue. There are reasons to think it can. Today, technology leaders dominate the modern economy. Think powerhouse companies like Amazon, Meta, Apple, Alphabet, Microsoft, Tesla, and Nvidia. They lead enormous and growing end markets, including artificial intelligence (AI), cloud computing, digital advertising, self-driving vehicles, and renewable energy.
The Nasdaq-100 and Invesco QQQ contain dozens of other stocks, but this small handful has become the foundation. Analysts estimate that almost every Magnificent Seven stock will continue growing earnings at a double-digit rate over the long term. These major contributors to the Invesco QQQ could continue lifting the ETF to new heights if that happens.
There is a catch
Risk and reward go hand in hand. While the companies in the Invesco QQQ are primarily large-cap stocks with little bankruptcy risk, high-growth technology stocks are prone to boom-and-bust market cycles that can create huge drawdowns. Just look at how far the Invesco QQQ has occasionally fallen from its highs:
Many investors may struggle to emotionally endure a 30%, 60%, or 75% decline in their investment. That's why portfolio diversification is so important. Sure, the Invesco QQQ is diversified across over 100 stocks, but investors should also consider how much risk and volatility their overall portfolio might have. Despite the Invesco QQQ's long-term investment returns, investing all your money in it wouldn't be wise.
Is the Invesco QQQ a millionaire-maker today?
The big technology companies that comprise over 40% of the Invesco QQQ continue to enjoy multi-decade growth opportunities. The technology cycle can sometimes be volatile, but the long-term direction seems to be up. So yes, Invesco QQQ is a potential millionaire-making investment.
That said, the Magnificent Seven has already enjoyed a remarkable two-year run that raises questions about whether technology stocks are once again in a bubble. Admittedly, nobody knows when the next market crash will happen or how bad it will be, so focus on the long term instead.
Consider a responsible investment strategy that includes portfolio diversity and dollar-cost averaging. Buy slowly and regularly, and add savings if you can. That way, you can enjoy long-term growth while managing your risk and perhaps even have some extra cash handy if a market downturn does occur.
Should you invest $1,000 in Invesco QQQ Trust right now?
Before you buy stock in Invesco QQQ Trust, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Invesco QQQ Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $729,857!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 16, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Is the Invesco QQQ ETF a Millionaire Maker? was originally published by The Motley Fool
28.
Billionaires Are Selling Nvidia Stock and Buying This Supercharged AI Index Fund Instead
2024-09-16 08:44:00 by Trevor Jennewine, The Motley Fool from Motley Fool
Nvidia has been a spectacular investment in recent years. The stock has skyrocketed more than 700% since January 2023 amid excitement surrounding artificial intelligence (AI). But excitement is a double-edged sword. Numerous companies are now designing custom AI chips, and some investors are concerned Nvidia will lose market share.
The following hedge fund billionaires have navigated the situation by selling shares of Nvidia in the second quarter, and redeploying capital into the Invesco QQQ Trust (NASDAQ: QQQ), a growth-focused index fund that tracks the Nasdaq-100 index.
- Cliff Asness at AQR Capital sold 1.3 million shares of Nvidia, shrinking his stake by 8%. He also bought 9,254 shares of the Invesco QQQ Trust, increasing his position 332%.
- Steven Cohen at Point72 Asset Management sold 409,042 shares of Nvidia, reducing his stake by 16%. He also bought 1,500 shares of the Invesco QQQ Trust, increasing his position 150%.
- Israel Englander at Millennium Management sold 676,242 shares of Nvidia, reducing his stake 5%. He also bought 81,616 shares of the Invesco QQQ Trust, increasing his position by 557%.
- Ken Griffin at Citadel Advisors sold 9.2 million shares of Nvidia, slashing his stake 79%. He also purchased 2.8 million shares of the Invesco QQQ Trust, increasing his position by 585%.
- David Shaw at D.E. Shaw sold 12.1 million shares of Nvidia, cutting his stake 52%. He also started a small position in the Invesco QQQ Trust.
Importantly, these trades do not signal a complete lack of confidence in Nvidia. Not only do all five fund managers still have positions in the chipmaker, but also Nvidia is the third largest position in the Invesco QQQ Trust.
Having said that, their decision to buy the index fund is sensible because it diversifies their portfolios across more technology stocks likely to benefit from the AI boom. Here's what investors should know about the Invesco QQQ Trust.
The Invesco QQQ Trust provides heavy exposure to technology stocks
The Invesco QQQ Trust measures the performance of the Nasdaq-100, an index that tracks the 100 largest non-financial companies on the Nasdaq Stock Exchange. The index fund is heavily weighted toward the information technology sector. The 10 largest holdings are listed by weight:
- Apple: 8.9%
- Microsoft: 8.3%
- Nvidia: 7.7%
- Broadcom: 5.1%
- Amazon: 5.1%
- Meta Platforms: 4.8%
- Alphabet: 4.6%
- Tesla: 2.9%
- Costco Wholesale: 2.7%
- Netflix: 2%
Many investors see Nvidia as a paragon of artificial intelligence (AI) stocks because the company dominates the market for data center graphics processing units (GPUs), chips that are the gold standard in speeding up complex workloads such as training machine learning models. But several other companies in that list are well positioned to monetize AI.
For instance, Microsoft, Amazon, and Alphabet have the three largest public clouds in the world. That means they should be major beneficiaries as businesses invest in the cloud infrastructure and platform services required to train AI models and develop AI applications.
Similarly, Broadcom helps customers like Alphabet and Meta Platforms design custom AI chips, and it recently won a major deal with OpenAI. That bodes well for the company because Morgan Stanley analysts expect the custom AI chip market to grow more quickly than the GPU market through the end of the decade.
Finally, Tesla is dedicated to developing full self-driving (FSD) software, and the company plans to monetize its FSD platform through subscription sales and robotaxi services.
The Invesco QQQ Trust produced supercharged returns over the past 20 years
The Invesco QQQ Trust has been an excellent long-term investment. The index fund returned 1,490% over the past 20 years, compounding at 14.8% annually. By comparison, the S&P 500 (SNPINDEX: ^GSPC) returned 641% during the same period, compounding at 10.5% annually.
The downside of the Invesco QQQ Trust is volatility. The fund is highly concentrated in technology stocks, such that weakness in that market sector can cause it to nosedive. The Invesco QQQ Trust has a 10-year beta of 1.12, meaning it moved 1.12 percentage points for every 1-percentage-point movement in the S&P 500.
Volatility cuts both ways. On one hand, the Invesco QQQ Trust more than doubled the return of the S&P 500 during the past two decades. On the other hand, the Invesco QQQ Trust declined much more sharply than the S&P 500 during the most recent bear market. Specifically, the index fund suffered a maximum drawdown of 35%, while the S&P 500 never fell more than 24%.
The last item of note is the expense ratio. The Invesco QQQ Trust has an expense ratio of 0.2%, meaning investors will pay $2 per year on every $1,000 invested in the index fund. That's below the industry average of 0.36%, according to Morningstar.
Here is the bottom line: The Invesco QQQ Trust is a growth-focused index fund that tracks several companies well positioned to benefit from the artificial intelligence boom, including Nvidia. The index fund's concentration in technology stocks makes it volatile, but that volatility has been an asset over the past two decades, given its outperformance compared to the S&P 500.
I think the Invesco QQQ Trust will continue to outperform over the next decade as the AI boom unfolds. Patient investors comfortable with risk and volatility should consider buying a small position today. And shareholders should lean into market weakness by adding to their position during significant pullbacks.
Should you invest $1,000 in Invesco QQQ Trust right now?
Before you buy stock in Invesco QQQ Trust, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Invesco QQQ Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $729,857!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 9, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Trevor Jennewine has positions in Amazon, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Costco Wholesale, Meta Platforms, Microsoft, Netflix, Nvidia, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Billionaires Are Selling Nvidia Stock and Buying This Supercharged AI Index Fund Instead was originally published by The Motley Fool
29.
SPY, QQQ: Track Top ETFs, Trends With Markets Monitor
2024-09-13 21:30:00 by Kent Thune from etf.com
Many investors and advisors know that ETFs are not only a low-cost, effective means of capturing the performance of almost any segment of the market, they are also powerful tools for monitoring market trends. This dual purpose of ETFs is where etf.com’s Markets Monitor comes in as a powerful tool.
Learn more about how ETFs can be used to monitor market trends and how the Markets Monitor tool efficiently fills this need for investors and advisors.
How Can Investors Use ETFs to Monitor Market Trends?
Investors can use exchange-traded funds as a tool to monitor stock market trends in several ways, including sector rotation trends, market index tracking, style investing, international markets and technical analysis.
Here are a few common ways investors use ETFs to monitor market trends:
- Sector rotation: ETFs offer exposure to various sectors, such as technology, healthcare or energy. By monitoring the performance of sector-specific ETFs, investors can gauge the relative strength or weakness of different sectors within the stock market. If a particular sector ETF consistently outperforms others, it may indicate a trend of market leadership, providing insight into the overall market sentiment.
- Market index tracking: ETFs often track specific market indexes, such as the S&P 500, Dow Jones Industrial Average or Nasdaq Composite. By monitoring the performance of these ETFs, investors can get a sense of the overall market trend. If the ETFs that track these indexes are consistently rising, it generally suggests a bullish market sentiment, while declines may indicate a bearish sentiment.
- Style investing: ETFs can also be categorized based on investment styles, such as growth or value, or by factors, such as momentum or volatility. Investors can monitor the performance of growth-oriented ETFs relative to value-oriented ETFs to gain insights into prevailing market sentiments. During periods of economic expansion, growth stocks tend to outperform, while value stocks may do better during economic contractions.
- International markets: ETFs can provide exposure to global markets and specific countries or regions. By tracking international ETFs, investors can monitor the performance of global markets and identify trends or divergences between different regions. This can be particularly useful for assessing the impact of global events or geopolitical factors on the stock market.
- Technical analysis: ETF charts can be analyzed using technical indicators and chart patterns to identify trends, support/resistance levels and potential turning points. Technical analysis techniques, such as moving averages, trend lines or relative strength analysis, can be applied to ETFs to gain insights into the broader market trend.
SPY, QQQ: Tracking Market Trends With ETFs
Markets Monitor provides investors and financial advisors a broad view of performance trends through the lens of major market ETFs. Users of etf.com’s Markets Monitor can see a summary of performance of these ETFs, or they may drill down to specific areas of the market, including equities, sectors, factors, global markets, fixed income, commodities and market movers.
Within each of these tool options, investors and advisors can handpick among preselected ETFs that represent major market indexes.
For example, if a user wanted to see performance trends for the S&P 500, the Nasdaq-100, REITs, crude oil and China stocks in one consolidated view, they could select those options in the tool and see trends on those market segments, as represented by the SPDR S&P 500 ETF Trust (SPY), the Invesco QQQ Trust (QQQ), the Vanguard Real Estate ETF (VNQ), the United States Oil Fund LP (USO) and the SPDR S&P China ETF (GXC), respectively.
How to Use etf.com’s Markets Monitor
Here’s a breakdown on how to use the various elements in etf.com’s Markets Monitor:
- Markets summary: This is the starting point for the Markets Monitor, with a range of ETFs covering diverse areas of the market, including U.S. stocks, international stocks, fixed income and commodities.
- Equities drilldown: Users can drill down to equity markets by plotting performance of U.S.-issued ETF tickers that are modeled on key global equity exchanges in the Americas, Europe, Mid-East/Africa & Asia-Pacific.
- Sectors drilldown: This part of the tool enables users to plot performance of U.S.-issued ETF tickers that are modeled on 11 S&P 500 sectors and 19 industries.
- Factors drilldown: Users are enabled to plot performance of U.S.-issued factor ETFs, which include factors such as momentum, high dividend yield and volatility.
- Global markets drilldown: As the name suggests, users can easily single out performance trends on U.S.-issued ETF tickers that are modeled on the broad equity universes of major countries in the Americas, Europe, Mid-East/Africa & Asia-Pacific.
- Fixed income drilldown: This lists U.S.-issued ETF tickers that are modeled after the major classes of fixed income securities including U.S. Treasury, U.S. government agencies, U.S. corporate credit and international credit.
- Commodities drilldown: Users can plot performance of U.S.-issued ETF tickers that are modeled after the major classes of commodities including energy, metals and agriculture.
- Market movers: This page provides users with insight into what segments of the overall financial markets have moved the most on the current day, using the lens of representative ETFs.
Bottom Line on etf.com's Markets Monitor Tool
The Markets Monitor tool at etf.com is a quick and efficient means of following major market trends through the lens of ETFs that track the major market indexes. It's important to note that while ETFs can provide valuable information about market trends, the Markets Monitor tool does not replace the broader investment decision process, which typically includes further research and analysis.
30.
What a bigger-than-expected Fed rate cut would mean for the stock market
2024-09-12 15:30:46 by Josh Schafer from Yahoo FinanceHotter-than-expected readings on consumer prices — and on some wholesale prices — this week led markets to price in a higher likelihood that the Federal Reserve will opt for a smaller, more conservative interest rate cut at its September meeting.
But a confluence of events later in the week once again revived bets of a larger, 0.50% rate cut next week.
A bigger reduction could send stocks reeling, experts have warned.
Friday saw a rise in expectations for a jumbo rate cut by policymakers, per the CME FedWatch Tool, after reports by the Financial Times and The Wall Street Journal that policymakers were struggling to come to a decision. Investors now place a roughly 45% probability on a 50 basis point cut at the Fed's meeting next week, compared with 15% at one point on Thursday.
Some strategists have said that a 25 basis point cut would be a more welcome sign from the Federal Reserve.
Yardeni Research chief markets strategist Eric Wallerstein reasoned the Fed likely wouldn't cut by more than 25 basis points "absent recessionary conditions or a financial crisis emerging."
Read more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards
"For everyone who's asking for a 50 basis point cut, I think they should really reconsider the amount of volatility that would cause in short-term funding markets," Wallerstein told Yahoo Finance. "It's just not something the Fed wants to risk."
To Wallerstein's point, while the most recent jobs report showed continued signs of slowing in the labor market, economists largely reasoned it didn't reveal the substantial cooling that many believed would be needed to prompt a deeper cut from the Fed. The risk is that significant deterioration in the job market indicates a recession.
Meanwhile, Wednesday's Consumer Price Index (CPI) report showed that on a "core" basis, which strips out the more volatile costs of food and gas, prices in August climbed 0.3% over the prior month, above Wall Street's expectations for a 0.2% increase.
"The unwelcome news on inflation will distract slightly from the Fed's renewed focus on the labor market and makes it more likely that officials stick with a more measured approach to easing, beginning with a 25 [basis point] cut next week," Oxford Economics deputy chief US economist Michael Pearce wrote in a note to clients on Wednesday.
Some on Wall Street have also pointed out that a 50 basis point interest rate cut could create a more ominous sign about the health of the US economy than the central bank would like to portray.
"A 50 basis point cut would reek of panic, and it's almost like we're totally behind the curve at this point," Jennifer Lee, BMO Capital Markets senior economist, told Yahoo Finance.
DataTrek co-founder Nicholas Colas analyzed each Federal Reserve rate-cutting cycle since 1990. Among the five cutting cycles over that time period, both times the Fed began its cycle with a 50 basis point cut (in 2001 and 2007), a recession soon followed.
"While the data here is sparse, there is something to be said for associating an initial cut of 25 basis points with a midcycle policy correction and 50 basis points as signaling the Fed is too far behind the curve to avoid a recession," Colas wrote in a note to clients on Wednesday morning. "Chair Powell and the rest of the FOMC certainly know this history. Their first cut will almost certainly be 25 basis points."
As of Wednesday morning, markets are expecting 100 basis points of cuts from the Federal Reserve this year. More clues on the Fed's thinking will come on Sept. 18 when the Federal Reserve releases its Summary of Economic Projections, including its "dot plot," which maps out policymakers' expectations for where interest rates could be headed in the future.
Wallerstein reasoned that if the total amount of Fed cuts this year falls short of the market's expectations, that isn't necessarily a bad thing for stocks.
"If those rate cuts get priced out because growth is stronger than expected and GDP comes in strong for the third quarter and the labor market indicators aren't too bad, and we keep seeing consumer spending [increasing], then stocks will have more room to run as earnings continue to grow," Wallerstein said.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
31.
Wall Street is cutting Q3 earnings estimates — why that's 'not a cause for worry'
2024-09-10 15:48:38 by Josh Schafer from Yahoo FinanceThe fundamental story for stocks is holding steady more than halfway through the third quarter.
Analysts slashed their earnings expectations for the current quarter by 2.8% during July and August, per FactSet senior earnings analyst John Butters. But that's not as bad as it may seem.
As Butters pointed out in a note on Friday afternoon, analysts typically cut their earnings estimates as the quarter goes on. The current level isn't out of the ordinary. Analysts have slashed expectations by 3% on average for the past 20 years.
DataTrek co-founder Nicholas Colas wrote in a note to clients on Tuesday morning that these revisions are "not a cause for worry and could be a positive catalyst as we get into Q3 financial reporting season."
Colas noted that last quarter, earnings weren't revised down by as much as they usually are and therefore set a more challenging bar for companies to beat. As a result, companies beat earnings expectations by a lower amount than both the five- and 10-year averages during the second quarter.
The high bar carried over to stock reactions, where even companies that beat Wall Street's estimates saw a more muted reaction than normal.
This was capped off by Nvidia's (NVDA) earnings report on Aug. 28. The AI juggernaut posted earnings and revenue growth of more than 100%, both topping Wall Street's estimates, but the stock faltered the next day as the market read-through appeared to be that good wasn't good enough for investors.
Colas noted that the cutting of earnings estimates in the current quarter creates a lower bar for companies to surpass and sets the stage for a fourth quarter rally in stocks.
After earnings grew 11.3% year over year in the second quarter, they are expected to increase 4.9% year over year in the third quarter, which will kick off in earnest with big banks on Oct. 11. Citi US equity strategist Scott Chronert told Yahoo Finance the setup for the current quarter and beyond is one of "earnings resilience."
While the growth expected in the current quarter isn't considered stellar, Chronert noted that for the first time in six quarters, earnings from the 493 stocks in the S&P 500 not including the Magnificent 7 are growing. This, Chronert argues, supports the broadening out in the market rally over the past two months as stocks outside tech have led the charge.
Additionally, consensus currently expects double-digit earnings growth compared to the year prior throughout 2025.
"The setup should still be for an improving dynamic going into 2025," Chronert said.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
32.
Lazard Taps State Street Veteran to Lead ETF Push
2024-09-09 19:41:52 by DJ Shaw from etf.com
Lazard Asset Management has appointed Robert Forsyth as its global head of ETFs, bolstering the firm's efforts to expand its presence in the rapidly growing active ETF space.
According to a press release from New York-based Lazard, Forsyth will join the firm as managing director and be responsible for growing Lazard’s active ETF business.
“Building and expanding an active ETF platform is a key next step in our plans and Rob will play an important role in accelerating our ambitions,” Evan Russo, Lazard Asset Management CEO, stated in the release.
The move comes as the ETF market is shifting toward actively managed products.
Despite active ETFs accounting for less than a tenth of total ETF assets under management in the U.S., they make up nearly half of all ETF offerings, according to data compiled by Bloomberg. This year has seen actively managed ETFs capture about one-third of the total inflows into U.S.-listed ETFs, indicating growing investor interest in this category.
Forsyth, who will be based in New York and report to Head of North American Distribution Jennifer Ryan, brings over two decades of experience in exchange-traded products to his new role, the release said. He most recently served as global head of ETF strategy at State Street Global Advisors, where he held various leadership positions in product, investment, and sales strategy for its $1 trillion ETF business.
Lazard's Entry Into ETF Market
Forsyth’s appointment follows Lazard’s recent entry into the ETF market. In June, the firm introduced its first ETF product, the Lazard Global Listed Infrastructure Active ETF (GIFL), for Australian investors. The company plans to build on this debut, along with a new sub-advised ETF mandate in the U.S.
As of July 31, Lazard’s asset management business managed approximately $246 billion in client assets, according to the firm.
“The Lazard brand, the quality of its investment products, and the firm’s global reach will help bring sophisticated investment products to a larger number of clients through exchange traded products," Forsyth said.
33.
2 ETFs That Are Screaming Buys in September After the Nvidia-Led Technology Stock Sell-Off
2024-09-09 11:45:00 by Geoffrey Seiler, The Motley Fool from Motley FoolTechnology stocks have recently come under pressure following a strong start to the year, hurt by the pullback in shares of Nvidia. The chip giant has helped lead the market charge higher in the past few years, as its chips have become the backbone of the artificial intelligence (AI) infrastructure buildout.
With investors now taking some profits in both Nvidia and the tech sector as a whole, this is a great time to buy some tech-heavy exchange-traded funds (ETFs). Let's look at two great options.
Invesco QQQ ETF
The first great ETF option to consider is the Invesco QQQ ETF (NASDAQ: QQQ). The ETF looks to mimic the performance of the tech-heavy Nasdaq-100 index, which comprises the 100 largest stocks that trade on the Nasdaq Stock Exchange.
About half of the ETF's portfolio is made up of stocks from the Information Technology sector, with another 15% from the related Communication Services sector. Its top information technology holdings include Apple at 9.2% of its portfolio, Microsoft at 8.2%, Nvidia at 7.2%, and Broadcom at 4.9%, as of Sept. 3.
On the Communication Services side, Alphabet represents 4.9% of its holdings, followed by Meta Platforms at 4.8%. Amazon, meanwhile, is classified as a Consumer Discretionary stock, as is Tesla. They account for 4.9% and 2.7% of the ETF's holdings, respectively.
As you can see, investors are getting a lot of exposure to the top tech companies in the world through the Invesco QQQ ETF. These are also the companies best positioned to continue to benefit from AI.
Given the important ways these technology leaders have helped shape the world we live in, it is perhaps no surprise that the ETF has been a huge winner over the years. Over the past decade, the ETF has generated a 418% return as of the end of August, while over the past five years, it has garnered a nearly 163% return.
With the ETF off its earlier highs, now is a great time to add it to your portfolio.
Vanguard Information Technology ETF
Another great technology-focused ETF to buy right now is the Vanguard Information Technology ETF (NYSEMKT: VGT). This ETF tracks the performance of the MSCI U.S. Investable Market Information Technology 25/50 index.
Similar to the QQQ ETF, the Vanguard Information Technology Index has been a strong performer over the years. In fact, it's been an even better performer over both the past five and 10 years. The ETF has a cumulative return of nearly 181% in the past five years and over a 532% return the last 10 years as of the end of August.
The ETF consists of only tech stocks and is very heavily weighted toward its top three holdings. Apple is its largest holding, representing 17.2% of its portfolio, followed by Microsoft at 15.8% and Nvidia at 14.1%. There is then a big drop, with Broadcom in its fourth-largest position at 4.8%.
Combined, its top four holdings make up half its portfolio. As such, how those stocks perform will have a large influence on the ETF's performance as well.
Given the heavy concentration in its top holdings, the Vanguard Information Technology ETF is a more aggressive investment. However, its top holdings are the largest tech companies in the world. They got to the size they are for a reason, and that is their operational and stock performances.
Just like the S&P 500 index and the Nasdaq-100, the MSCI index that the Information Technology ETF is based on is a market-cap-weighted index, so these stocks have earned their index weightings through their performances.
So, for investors who want to bet even more heavily on the largest technology companies in the world, this is a great time to buy the Vanguard Information Technology ETF. It is well off its high of $609.15 that it hit on July 15, which means investors can scoop up this strong-performing ETF at about 10% below where it was trading less than two months ago.
Should you invest $1,000 in Invesco QQQ Trust right now?
Before you buy stock in Invesco QQQ Trust, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Invesco QQQ Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $630,099!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 3, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
2 ETFs That Are Screaming Buys in September After the Nvidia-Led Technology Stock Sell-Off was originally published by The Motley Fool
34.
Inflation back in focus, Apple's iPhone event: What to know this week
2024-09-08 11:31:36 by Josh Schafer from Yahoo FinanceThe S&P 500 just suffered its worst week since the 2023 regional banking scare as a mixed August jobs report failed to reinvigorate investor appetite.
In the holiday-shortened trading week, the S&P 500 (^GSPC) slid more than 4% while the Nasdaq Composite (^IXIC) tumbled nearly 6%. The Dow Jones Industrial Average (^DJI) dropped almost 3%. The first week of September also marked the worst weekly return for the Nasdaq 100 since 2022, led by a more than 12% decline in Nvidia stock (NVDA).
A fresh reading on inflation will headline the week ahead as investors continue to look for clues on how deeply the Federal Reserve will cut interest rates at its September meeting. Additionally, the first reading of consumer sentiment for September is slated for release on Friday.
In corporate news, Apple's annual iPhone event kicks off the week on Monday. Earnings results from Oracle (ORCL), Adobe (ADBE), and Kroger (KR) will lead an otherwise quiet week in scheduled company announcements.
'No clear winner' from the jobs report
The August jobs report showed the US economy added 142,000 nonfarm payroll jobs and the unemployment rate fell to 4.2% from 4.3% in July. Revisions to the June and July labor reports showed the US economy added 86,000 fewer jobs than initially reported in those months.
Capital Economics deputy chief North America economist Stephen Brown wrote in a note to clients Friday that given the report wasn't overly strong or exceedingly weak, it "did not signal a clear winner" in the debate over whether the Federal Reserve should cut interest rates by 25 or 50 basis points at its September meeting.
Speeches from Federal Reserve governor Christopher Waller and New York Fed president John Williams appeared to tilt the markets in favor of a 25 basis point cut.
As of Friday afternoon, markets were pricing in a 25% chance the Fed opts for a 50 basis point cut in September, down from a 40% chance seen the day prior, per the CME Fed Watch tool.
The Goldman Sachs economics team led by Jan Hatzius reasoned Friday's Fed speak was consistent with Goldman's forecast for a 25 basis point cut in September but indicates "that the Fed leadership is open to 50bp cuts at subsequent meetings if the labor market continues to deteriorate."
Price check
While signs of slowing in the labor market have been top of mind for market participants over the past few weeks, inflation remains a key piece of when and how aggressively the Fed will cut rates. Wednesday will bring the final inflation reading before the Fed's next policy decision on Sep. 18 with the release of the August Consumer Price Index (CPI).
Wall Street expects an annual gain of 2.6% for headline CPI, which includes the price of food and energy, down from the 2.9% seen in July. Prices are set to rise 0.2% on a month-over-month basis, in line with their monthly increase from July.
On a "core" basis, which strips out the volatile food and energy prices, inflation is expected to have risen 3.2% year over year, unchanged from the prior month. Monthly core price increases are expected to clock in at 0.2%, also unchanged from the prior month.
"Another benign CPI report could give enough FOMC members further 'confidence' that inflation is moving back to 2% on a sustainable basis for them to back a 50 bps rate cut," Wells Fargo's economics team led by Jay Bryson wrote in a note to clients on Friday. "If, on the other hand, the inflation data are hotter than expected, then the consensus likely will coalesce around a 25 bps reduction on Sept. 18."
iPhone intro
The top company release of the week will come on Monday when Apple (AAPL) will host its annual iPhone event. The event is expected to provide more details on Apple's Apple Intelligence AI platform.
Yahoo Finance's Dan Howley has the full preview.
'Uninspiring' earnings expectations
Analysts slashed their earnings expectations for the current quarter by 2.8% during July and August, per FactSet senior earnings analyst John Butters. As Butters pointed out in a note on Friday afternoon, analysts typically cut their earnings estimates as the quarter goes on. The current level isn't out of the ordinary, though. Analysts have slashed expectations by 3% on average for the past 20 years.
But still, it marks a shift in market sentiment compared to last quarter when analysts actually raised their estimates through the first two months of the quarter.
"Outside of the Magnificent 7, estimate revisions for 2024 and 2025 [earnings per share] have been uninspiring, but at least stable," Citi US equity strategist Scott Chronert wrote in a note to clients on Friday.
While not an alarming trend to macro strategists like Chronert just yet, the slight hit to what's otherwise been a solid fundamental case for stocks over the next year will be one to watch ahead of third quarter earnings season.
Weekly calendar
Monday
Economic data: New York Fed one-year inflation expectations, August (2.97% previously); Wholesale inventories, July final (0.3% expected, 0.3% previously)
Earnings: Oracle (ORCL), Rubrik (RBRK)
Tuesday
Economic data: NFIB Small Business Optimism, August (93.7 expected, 93.7 previously)
Earnings: Academy Sports and Outdoors (ASO), Dave & Buster's (PLAY), GameStop (GME), Petco (WOOF)
Wednesday
Economic data: Consumer Price Index, month-over-month, August (+0.2% expected, +0.2% previously); Core CPI, month-over-month, August (+0.2% expected, +0.2% previously); CPI, year-over-year, August (+2.6% expected, +2.9% previously); Core CPI, year-over-year, August (+3.2% expected, +3.2% previously); Real average hourly earnings, year-over-year, August (+0.7% previously)
Earnings: Manchester United (MANU), Vera Bradley (VRA)
Thursday
Economic data: Initial jobless claims, week ending Sept. 7 (230,000 expected, 233,00 previously); Producer Price Index, month-over-month, August (+0.2% expected, +0.1% previously); PPI, year-over-year, August (+0.2% expected, 0% previously)
Earnings: Adobe (ADBE), Big Lots (BIG), Kroger (KR), RH (RH)
Friday
Economic data: Import price index, month-over-month, August (-0.3% expected, +0.1% previously); University of Michigan consumer sentiment, September preliminary (68.0 expected, 67.9 prior)
Earnings: No notable earnings.
35.
August jobs report: Unemployment rate falls to 4.2%, labor market adds 142,000 jobs
2024-09-06 13:50:16 by Josh Schafer from Yahoo FinanceThe US economy added fewer jobs than expected in August while the unemployment rate ticked lower.
Data from the Bureau of Labor Statistics released Friday showed the labor market added 142,000 nonfarm payroll jobs in August, fewer additions than the 165,000 expected by economists.
Meanwhile, the unemployment rate fell to 4.2% from 4.3% in July. August job additions came in higher than the revised 89,000 added in July. Overall, revisions to the June and July labor reports showed the US economy added 86,000 fewer jobs than initially reported in those months.
Wage growth, an important measure for gauging inflation pressures, rose to 3.8% year over year, up from a 3.6% annual gain in July. On a monthly basis, wages increased 0.4%, higher than the 0.2% seen the month prior.
Capital Economics chief North America economist Paul Ashworth wrote in a note to clients that the August jobs report is "still consistent with an economy experiencing a soft landing rather than plummeting into recession."
Friday's report comes amid an ongoing debate over how severely the Fed should cut interest rates at its meeting later this month. During a late August speech, Federal Reserve Chair Jerome Powell said the cooling in the labor market has been "unmistakeable" and added that the central bank does not "seek or welcome further cooling in labor market conditions."
Data released earlier this week indicated further signs of slowing in the job market. ADP's National Employment Report for August showed private payrolls in the US added 99,000 jobs during the month, well below economists' estimates for 145,000 and fewer than the 122,000 jobs added in July. The August data marked the fifth straight month payroll additions had slowed from the month prior. Meanwhile, data out Wednesday showed July ended with the lowest amount of job openings in the US labor market since January 2021.
Still, some economists argue that signs of strength within Friday's jobs report are enough to prompt the Fed to cut interest rates by 25 basis points at its upcoming September meeting rather than making a larger 50 basis point cut.
Read more: Fed predictions for 2024: What experts say about the possibility of a rate cut
“The overall solid gain in August payrolls, the retreat in the unemployment rate, and pop in average hourly earnings are not likely enough for Fed officials to start the rate cutting cycle with 50bps reduction on September 18,” Nationwide chief economist Kathy Bostjancic wrote in a note to clients on Friday.
But Bostjancic added that the downward revisions to payroll additions in prior months, as well as current job gains coming from a narrow group of sectors, "underscore that the labor market is losing steam rather quickly." This, Bostjancic argues, could open the door for the Fed to cut rates by 50 basis points at one of its meetings this year.
The market agrees, with traders pricing in more than 100 basis points of cuts from the Fed this year, per Bloomberg data. As of Friday morning, markets were pricing in a 45% chance the Fed cuts rates by 50 basis points by the end of its September meeting, up from a 30% chance seen a week prior per the CME FedWatch Tool.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
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36.
History Says This 1 Monster ETF Will Beat the S&P 500 Between Now and 2030
2024-09-06 12:10:00 by Neil Patel, The Motley Fool from Motley Fool
Undoubtedly, the S&P 500 is the top index that investors look at to assess how the stock market is performing. It provides a pretty accurate view, given it's a benchmark of 500 large and profitable companies.
In the past decade, the S&P 500 has generated a total return of 235%, which turned a $10,000 investment into $33,500 today. That's an impressive gain.
However, I believe there's one monster exchange-traded fund (ETF) that will beat the S&P 500 between now and 2030. Here's the investment vehicle you don't want to miss.
Concentrated in specific sectors
The S&P 500 has 11 different sectors, so investors naturally gain broad exposure to all parts of the economy. However, some sectors have performed better, such as information technology.
This sector is featured prominently in the Invesco QQQ Trust (NASDAQ: QQQ), making up 51% of its holdings. The QQQ is a fund that tracks the performance of the 100 largest non-financial companies that trade on the Nasdaq stock exchange, providing more niche exposure to certain pockets of the market.
Over the last 10 years, the QQQ has produced a fantastic total return of 412%, which would have more than quintupled your starting capital. However, past performance is never a guarantee of future returns. In my opinion, this ETF is poised to continue outperforming the S&P 500 over the next six or so years.
The QQQ is heavily focused on some of the most innovative and disruptive businesses on the planet. And generally, these are the types of companies that can help drive strong portfolio gains.
Ahead of the curve
The ETF's top holdings are names that you're likely familiar with. The "Magnificent Seven" are featured prominently. Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta Platforms, and Tesla combined represent 42% of the portfolio's assets. The performance of these stocks has a big influence on the QQQ's trajectory.
In recent years, that's been a major benefit. These businesses gain from very broad secular trends that are shifting the economic landscape. Areas like cloud computing, digital advertising, digital payments, streaming entertainment, and electric vehicles have helped lift the QQQ higher.
We also can't forget about artificial intelligence (AI), the revolutionary technology that everyone can't seem to get enough of. Owning the QQQ means that investors don't have to try and pick single stocks that will be winners of the AI boom. The ETF provides broad exposure to basically capture the entire trend.
Is now a good time to invest?
As of this writing, the QQQ trades 6% off its peak level from July of this year. The current dip seems like the perfect opportunity to put some money to work. Of course, that's after you've set up an emergency fund and have eliminated all high-interest debt.
Another smart strategy is to dollar-cost average. Instead of trying to accurately predict when the market will bottom out, investors can simply add savings to the QQQ on a regular basis, say every month or quarter. This eliminates market timing and helps encourage continuous investment.
By owning the QQQ, investors have a legitimate shot at beating the S&P 500 between now and 2030, and maybe beyond that. Moreover, because the expense ratio of 0.2% is compelling, more of the returns generated are actually yours at the end of the day.
This winning combination of high return potential, low costs, and a passive strategy is hard to beat. That makes buying the QQQ an easy decision.
Should you invest $1,000 in Invesco QQQ Trust right now?
Before you buy stock in Invesco QQQ Trust, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Invesco QQQ Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
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Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 3, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Nasdaq and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
History Says This 1 Monster ETF Will Beat the S&P 500 Between Now and 2030 was originally published by The Motley Fool
37.
Tradr Debuts Leveraged ETFs for Longer-Term Investors
2024-09-04 12:00:00 by Jeff Benjamin from etf.com
For the first time since leveraged ETFs were introduced in 2006, investors and financial advisors can justify holding the aggressive strategies for more than one day at a time.
This week the Tradr ETF brand of AXS Investments rolled out eight leveraged ETFs that reset monthly and weekly as opposed to the traditional daily reset strategies that can trip up longer-term investors.
Whether the longer reset periods gain appeal among active traders and investors who are already holding the daily-reset ETFs longer than designers expected remains uncertain.
“We’re targeting active traders and fiduciaries who are not allowed to use daily ETFs because of the daily reset,” said Matt Markiewicz, head of product and capital markets at Tradr ETFs in New York.
Math Adds Up for Longer-Reset Leveraged ETFs
In addition to potentially capturing a slice of the financial advisor market that might be able to check the suitability box, Markiewicz said the longer reset periods will benefit investors who tend to hold the daily-reset strategies a week or longer.
The math adds up in favor of longer-reset ETFs for investors intent on sitting in the short-term strategies. But possibly the biggest advantage about resetting the leverage on a weekly and monthly basis, as opposed to daily, is that investors will be able to compare and contrast their leveraged exposure in these slightly nuanced strategies.
Will Longer-Term Leveraged ETFs Catch On?
“This takes the pressure off having to worry about getting out quickly,” said Eric Balchunas, senior ETF analyst at Bloomberg Intelligence.
“The one worry I have is whether it will increase the amount of rank speculation among retail investors, but I’m not here to judge,” he added.
The Tradr suite includes: the Tradr 2X Long SPY Weekly (SPYB), the Tradr 2X Long SPY Monthly (SPYM), the Tradr 2X Long Triple Q Weekly (QQQW), the Tradr 2X Long Triple Q Monthly (MQQQ), the Tradr 2X Long SOXX Weekly (SOXW) and the Tradr 2X Long SOXX Monthly (SOXM).
There are also single stock versions. The Tradr 1.75X Long NVDA Weekly (NVDW) and the Tradr 1.5X TSLA Weekly (TSLW).
“The smart thing is, they’re picking really popular ETFs to leverage,” Balchunas said. “This is the eye of the hurricane when it comes to volume, and that gives Tradr a fighting chance of success.”
One of the issues the longer resets aim to solve is the tracking error that can develop when daily-reset ETFs are held for longer time periods.
For example, the ProShares Ultra S&P 500 ETF (SSO), which offers two times daily exposure to the S&P, is up 30.5% this year, which compares to a 17.1% gain for the S&P.
Doubling the index performance adds up to 34%, exposing 400 basis points worth of tracking error.
Markiewicz says that tracking errors will still occur with the weekly and monthly reset products, but it won’t be as extreme, and the tracking should be very close if the ETFs are held for the specific weekly or monthly periods.
38.
What investors are getting wrong about the VIX right now
2024-09-04 10:00:43 by Jared Blikre from Yahoo FinanceListen and subscribe to Stocks in Translation on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
Thursday marks the one-month anniversary of the Aug. 5 "yen shock" — a mini-market panic that quickly spread throughout global markets after beginning in Japan the Monday following the July jobs report.
The Nikkei stock index (^N225) hemorrhaged 12% that Monday — its biggest one-day drop since 1987 — while the S&P 500 (^GSPC) plummeted 3%. The VIX Volatility Index (^VIX) spiked to 65, the third-highest level on record.
But almost as soon as the selling was over that morning, the eye-popping recovery began, which could be why there's not even a compelling agreed-upon name for the event. By midday in the US on that fateful Monday, the VIX had already fallen to 30 — its biggest intraday crash on record.
By mid-August, US stocks had already erased the losses. But this roller-coaster ride of volatility highlights some critical misconceptions about the VIX. And historical price action surrounding August shocks suggests that stocks are not in the clear just yet.
The VIX has long been dubbed the “fear gauge” by financial media (including by yours truly), but this moniker oversimplifies its function. As Steve Sosnick, chief strategist at Interactive Brokers, explained on a recent episode of Stocks in Translation, “[The] VIX is not a fear gauge. It plays one on TV.”
The VIX measures the market's expectation of S&P 500 volatility over the next 30 days as calculated from options on the benchmark. It doesn’t account for actual fear but rather reflects the market's best estimate of future volatility, which often coincides with market fear or panic.
According to Sosnick, “VIX is the best proxy for the demand for [institutional] hedging protection because it is really the simplest way to do a short, quick hedge on a portfolio.”
Institutional and retail investors alike can tap deep and liquid markets for VIX futures and ETFs — along with options on those instruments. (But the VIX itself is an index and does not actually trade, much like the S&P 500.)
Investors might assume that a low VIX means markets are stable and not in need of hedging. But a low VIX is an affordable VIX. "Buy protection when you can, not when you must," goes the Wall Street adage. Thinking back to the Monday market meltdown with hindsight, the right play was to sell the VIX by midday — by either shorting or covering prior long bets.
The BofA data analytics team has a historical warning for investors who have already moved past last month's shock.
"August fragility leads fall volatility (and it's not priced in)," the team wrote in a note to investors.
The team also noted that from a historical perspective, the VIX tends to rise from August through October, which can be bearish for stocks.
The chart above tracks the average VIX level across the calendar year, using data from 1990 to 2023. The small peak around the beginning of August already perfectly captured the Aug. 5 spike that rattled investors. And right now is when volatility tends to pick up and trend higher into November.
The bank reminds investors that in prior years, markets didn't immediately recover from August market shocks. In August 2007, there were pre-global financial crisis tremors. Then S&P downgraded US debt in August 2011, and China surprised the world in 2015 by devaluing its currency, the yuan.
In each of these years, more downside for stocks followed.
In the current situation, however, the bank sees an opportunity: "In our view, the record VIX retracement offers the opportunity to add equity hedges at similar levels as before the early-August shock, and ahead of crucial upcoming catalysts."
On Yahoo Finance's podcast Stocks in Translation, Yahoo Finance editor Jared Blikre cuts through the market mayhem, noisy numbers, and hyperbole to bring you essential conversations and insights from across the investing landscape, providing you with the critical context needed to make the right decisions for your portfolio. Find more episodes on our video hub or watch on your preferred streaming service.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
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39.
Crucial jobs report kicks off a new month: What to know this week
2024-09-02 10:45:02 by Josh Schafer from Yahoo FinanceAfter a whipsaw month of market action, the S&P 500 (^GSPC) logged its fourth-straight winning month to end August.
For the month, the S&P 500 added nearly 2.3% while the Dow Jones Industrial Average (^DJI) added almost 1.8% and sits at all-time high. Meanwhile, the Nasdaq Composite (^IXIC) added more than 0.6%.
US markets were closed for Labor Day on Monday, and now attention turns to incoming labor market data set for release throughout the week.
The August jobs report, due out on Friday, will headline economic releases in the week ahead as investors look to see whether the signs of slowing in the July jobs report were overstated or an early warning of a broader slowdown.
Updates on job openings and private wage growth are also on the schedule, as well as activity checks from the services and manufacturing sectors.
In corporate news, quarterly reports from Broadcom (AVGO) and Dick's Sporting Goods (DKS) headline a quiet week for earnings releases.
A closer look at labor
In July, the US economy added 114,000 jobs, well below estimates, while the unemployment rate hit 4.3%, its highest level in nearly three years. The report stoked recession fears as concerns about a weakening labor market grew.
But in the weeks that followed, additional data suggested the US economy remained rather resilient. Unemployment claims, a weekly indicator economists use to track the labor market in between employment reports, have reversed from their upward trend seen in July.
And many economists believe this points to weather-related causes impacting the July jobs report to overstate weakness in the labor market.
Morgan Stanley economist Sam Coffin argued in a note to clients last week that a large reason why unemployment hit 4.3% in July was an unusually large increase in temporary layoffs. As the immediate shock to the Texas labor market from Hurricane Beryl subsides, Coffin doesn't see a repeat.
Coffin and the Morgan Stanley economics team forecast that unemployment will fall to 4.2% while the US economy added 185,000 jobs last month.
"We expect the reacceleration in payrolls to leave the Fed cutting 25bps in September," Coffin wrote.
Consensus expectations among economists surveyed by Bloomberg project the US economy added 163,000 jobs in August while the unemployment rate ticked down to 4.2%. This would mark the first decrease in the unemployment rate since March.
The Fed has 'leeway'
On Friday, the latest reading of the Fed's preferred inflation gauge showed price increases continuing their downward trend toward the Fed's 2% target.
This, economists argue, puts further pressure on next Friday's labor report when deciphering whether or not the Fed will cut interest rates by 25 or 50 basis points at its September meeting.
"A Fed rate cut in September is assured after Chair Powell’s Jackson Hole speech," Nationwide senior economist Ben Ayers wrote in a note to clients on Friday. "But the further cooling of inflation could give the Fed leeway to be more aggressive with rate declines at coming meetings, especially if the labor market shows a steep deterioration."
Ayers added, "We still project more cautious [25 basis point] cuts at the remaining three FOMC [meetings] of 2024, but the door is open for larger decreases if economic conditions weaken more than expected."
As of early Tuesday, markets were pricing in a 31% chance the Fed opts for a 50 basis point rate cut instead of 25 basis points at its September meeting, per the CME FedWatch Tool.
Still, traders have priced a full percentage point of interest rate cuts from the Fed this year. With only three meetings left this year, that means markets expect a larger cut from the Fed at one of its remaining meetings.
Not so Magnificent
Nvidia (NVDA) reported earnings last week that once again topped estimates. But the stock lagged the following day as investors focused on how Nvidia's pace of surprises, and overall growth, have slowed over the last year.
Notably, the stock's 6% drop didn't spark a broad sell-off in tech or the market as a whole.
Instead, it served as the latest sign that, after two years of the Magnificent Seven tech stocks leading the market higher, other areas of the market are now outperforming the market's tech leaders.
In a research note on Friday, Bank of America's head of US equity strategy & quant strategy, Savita Subramanian, highlighted that since a promising inflation reading on July 11, more than 70% of stocks have outperformed the S&P 500.
The equal-weighted S&P 500, which isn't as influenced by moves in larger stocks given every member of the index holds the same sway, has outperformed the cap-weighted index.
From July 11 to Aug. 29, the Magnificent Seven — Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TSLA), and Nvidia — fell a cumulative 10.2%. Meanwhile, the other 493 stocks in the S&P 500 gained 4.1%.
As Charles Schwab senior investment strategist Kevin Gordon pointed out, this has resulted in the Magnificent Seven having its two worst months compared to the S&P 500 since December 2022.
Weekly Calendar
Monday
Markets closed for the Labor Day holiday.
Tuesday
Economic data: S&P Global US manufacturing, August final (48.1 expected, 48 previously); Construction spending month-over-month, July (0.1% expected, -0.3% prior); ISM Manufacturing, August (47.5 expected, 46.8 previously)
Earnings: Gitlab (GTLB), Zscaler (ZS)
Wednesday
Economic data: Job openings, July (8.1 million expected, 8.18 million previously); Factory orders, July (+4.6% expected, -3.3% previously); Durable goods orders, July final (9.9% previously) MBA Mortgage Applications, week ended Aug. 30 (+0.5% previously); Fed Beige Book release
Earnings: C3.ai (AI), Casey's (CASY), ChargePoint (CHPT), Dick's Sporting Goods (DKS), Dollar Tree (DLTR), Hewlett Packard Enterprise (HPE), Hormel Foods (HRL)
Thursday
Economic data: ADP private payrolls, August (+145,000 expected, +122,000 previously); Nonfarm productivity, second quarter-final (2.4% expected, 2.3% previously); Initial jobless claims, Aug. 31 (231,000 previously); S&P global US Services PMI, August final (55.2 previously), S&P Global US composite PMI, August final (54.1 previously); ISM services index, August (50.9 expected, 51.4 previously); Challenger jobs cuts, year-over-year, August (+9.2% previously)
Earnings: Broadcom (AVGO), DocuSign (DOCU), Nio (NIO)
Friday
Economic calendar: Nonfarm payrolls, August (+163,000 expected, +114,000 previously); Unemployment rate, August (4.2% expected, 4.3% previously); Average hourly earnings, month-over-month, August (+0.3% expected, +0.2% previously); Average hourly earnings, year-over-year, August (+3.7% expected, +3.6% previously); Average weekly hours worked, August (34.3 expected, 34.2 previously); Labor force participation rate, August (62.7% expected, 62.7% previously)
Earnings: Big Lots (BIG)
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
40.
Why investors turn to ETFs during times of market stress
2024-08-31 19:04:47 by Jared Blikre from Yahoo FinanceMarket volatility often prompts investors to kick the tires on their portfolio, which for US investors has often meant turning to exchange traded funds, or ETFs, to refresh positions or act on new ideas.
Since the pandemic, the ETF market has roughly doubled in size — as of the end of the first quarter, (ETFs) represented $7.1 trillion, or 13% of the US stock market and 2.8% of the US bond market, up from $3.5 trillion in 2019, according to BlackRock.
Todd Sohn, ETF strategist at Strategas Asset Management, recently stopped by Yahoo Finance's Stocks in Translation podcast and highlighted some of the pros and cons of ETFs for investors.
A key advantage for ETFs is cost — the fees charged to investors have plummeted amid the race to zero commissions among the big brokers.
"You can buy an S&P 500 fund for 2 or 3 basis points. That's nothing," said Sohn.
To simply buy one share of each component of the S&P 500 would cost about $105,000. To replicate the entire index according to each stock's weight would cost a minimum of $15,500,000, according to Yahoo Finance calculations, which doesn't include brokerage commissions. In contrast, an annual fee of 3 basis points — or 0.03% — on an ETF means an investor would pay 30 cents for every $1,000 invested.
ETFs also tap a wide range of markets and strategies, which is essential for diversification.
Sohn highlighted that ETFs give investors "access to virtually any market around the globe."
In addition to geographic and asset class diversification, ETFs have evolved to mimic certain hedge fund strategies. So-called smart beta ETFs, for instance, use predetermined rules for selecting investments in a fund.
Sohn also highlighted transparency as a key benefit, as ETFs report holdings on a daily basis.
"I can look at the holdings every day. I know what ingredients are in my investment," said Sohn.
ETFs are similar to mutual funds, but a key distinction is intraday liquidity. ETFs can be traded throughout the day, while mutual funds can only be bought and sold on the close.
"I can trade them throughout the day if I wanted to," said Sohn. "Or if I'm a large investor, I can move large amounts of money to these funds."
Many ETFs also offer significant tax advantages, which Sohn described as their "secret sauce."
And during times of market stress and volatility, ETFs can act as "shock absorbers." If an investor is concerned about a stock's decline, Sohn explained, "they can buy an ETF of its peers to diversify and mitigate risk."
"ETFs have great value in volatile environments. They're not exacerbating any sort of market structures. They're helping smooth things out," said Sohn.
On Yahoo Finance's podcast Stocks in Translation, Yahoo Finance editor Jared Blikre cuts through the market mayhem, noisy numbers, and hyperbole to bring you essential conversations and insights from across the investing landscape, providing you with the critical context needed to make the right decisions for your portfolio. Find more episodes on our video hub. Watch on your preferred streaming service, or listen and subscribe on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
41.
Invesco QQQ Trust vs. Fidelity Nasdaq Composite Index ETF: Which Is the Best Nasdaq ETF For You?
2024-08-30 12:21:00 by Matt Frankel, The Motley Fool from Motley FoolThe Nasdaq has been the biggest driver of stock market returns for over a decade. The tech-heavy Nasdaq Composite index has produced annualized returns of more than 16% over the past 10 years, significantly outpacing the benchmark S&P 500.
There are two main indices that track the performance of the Nasdaq: the Nasdaq 100 and the Nasdaq Composite. And two great index funds that you can use to invest in these are the Invesco QQQ ETF (NASDAQ: QQQ) and the Fidelity Nasdaq Composite Index ETF (NASDAQ: ONEQ), respectively.
To be sure, there are some big similarities between the two. But there are a few key differences to keep in mind before deciding which is the best Nasdaq ETF for you.
Key differences between the two indices
As mentioned, the Invesco QQQ ETF tracks the Nasdaq 100 index, which as the name implies, consists of 100 Nasdaq-listed stocks. Specifically, the Nasdaq 100 is composed of the 100 largest non-financial companies that are listed on the Nasdaq, so stocks such as banks are specifically excluded.
On the other hand, the Nasdaq Composite is a broad-based index that is designed to be a representative of the Nasdaq index as a whole. Not only are there more than 1,000 stocks in the Nasdaq Composite index, but it doesn't exclude any specific sector.
Both are weighted indices, meaning that larger components make up a greater proportion of the fund's assets. And as you might expect, there's a lot of overlap among the funds' top holdings. In fact, the top 10 holdings on the most recent fund literature are identical.
Similar expenses and performance
Before choosing any ETF, it's important to take a look at its expense ratio, which is an expression of the fund's investment fees as a percentage of its assets. Note that this isn't a fee that you have to actually pay. It will simply be reflected in the fund's performance over time.
The Invesco QQQ ETF has a 0.20% expense ratio, which means that for every $1,000 in fund assets, $2 will go toward investment fees and expenses annually. The Fidelity ETF has a slightly higher 0.21% expense ratio, but this isn't much of a difference at all. These are both low-cost ways to gain Nasdaq exposure.
Performance has been similar over the years, with a slight edge to the Invesco QQQ ETF over the longer periods. This certainly makes sense – after all, the biggest driver of stock market returns has been the big tech companies, and the Nasdaq 100 only focuses on large stocks. Here's an overview of the performance of both funds over various periods, compared with the total return of the S&P 500 index.
| Time Period |
Invesco QQQ ETF |
Fidelity Nasdaq Composite ETF |
S&P 500 Total Return |
|---|---|---|---|
| 1 year |
31.4% |
31.7% |
29.3% |
| 5 years |
166% |
137% |
111% |
| 10 years |
418% |
340% |
237% |
| 15 years |
1,240% |
916% |
627% |
Data source: yCharts. Returns through 8/27/2024.
During periods where large-cap tech stocks produce the best returns, I'd expect the Invesco QQQ to have a slight advantage on performance. But over all of these periods, it's important to note that both funds handily outperformed the S&P 500.
Which is best for you?
To be perfectly clear, I don't think investors will go wrong with either of these index funds as a long-term hold. And as we've seen, these are very similar ways to invest. I tend to gravitate toward the Fidelity ETF for the exposure to smaller Nasdaq stocks as well as the mega caps, but there's a solid argument to be made in favor of either.
Should you invest $1,000 in Invesco QQQ Trust right now?
Before you buy stock in Invesco QQQ Trust, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Invesco QQQ Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $769,685!*
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Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Invesco QQQ Trust vs. Fidelity Nasdaq Composite Index ETF: Which Is the Best Nasdaq ETF For You? was originally published by The Motley Fool
42.
Why gold is outperforming nearly everything so far this year
2024-08-28 10:00:22 by Jared Blikre from Yahoo FinanceListen and subscribe to Stocks in Translation on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
Gold futures (GC=F) have been surfing record highs, with Monday's prices hitting $2,555.2 per ounce, sending the value of a 400 troy ounce gold bar to $1,022,080.
The yellow metal has forged meteoric gains this year, emerging as the world's second-best-performing asset next to crypto. Its 23% year-to-date gain edges out the megacap-loaded Nasdaq Composite (^IXIC) — itself up a healthy 18%. (A proxy for the crypto market writ large, the Bitwise 10 Crypto Index Fund (BITW), is up 47% this year.)
According to BofA Global Research, gold funds just absorbed the largest inflows in four weeks, attracting $1.1 billion. Yet, the broader trend has actually seen $2.5 billion in outflows year to date, suggesting that underlying strength is coming from outside traditional fund flows.
Central banks — especially those of developing countries — have been buying the barbarous relic at a record clip. According to the World Gold Council, central banks have purchased 290 tonnes in the first quarter alone, beating out the prior Q1 record from 2023 and setting CBs on a path to record gold purchases in 2024 that are estimated to easily eclipse 1,000 tonnes.
"Not only is the long-standing trend in central bank gold buying firmly intact, it also continues to be dominated by banks from emerging markets," wrote the Gold Council.
In that regard, Turkey tops the buy list this year with 30 tonnes purchased in the first quarter — lifting its gold reserves to 570 tonnes. China bought 27 tonnes in Q1, making it the 17th consecutive quarter of purchases and also bringing its holdings to 2,262 tonnes. Other notable purchasers include India, Kazakhstan, the Czech Republic, Oman, and Singapore.
The central bank buying spree has solidified gold's status as a reserve asset. According to BofA, gold has now surpassed the euro to become the world's largest reserve asset second only to the US dollar, representing 16% of the reserve pool.
The precious metal’s performance can be attributed to its unique position as a real asset with one of the lowest correlations to stocks across asset classes, making it a safe haven from market swings and inflation.
According to Tom Bruni, head of market research at StockTwits, in a recent episode of Stocks in Translation, "We're seeing gold being used as an uncertainty hedge."
Bruni also emphasized gold's appeal to traders due to its price action. "With gold breaking out above its 2011 highs, it's drawing significant attention from trend followers and technical analysts alike."
Investors looking for deep, liquid gold markets have a robust choice of futures markets, ETFs, and gold miner stocks and ETFs, which tend to be even more volatile than the underlying metal.
"The volatility in gold prices has made it a prime trading vehicle, whether through gold ETFs or mining stocks," said Bruni.
BofA separately highlighted how this latest gold rally isn't like the other advances this century, offering a tantalizing glimpse of future bullish potential.
The bank noted this is the third major gold advance in two decades, yet "households have missed this rally." The first two rallies — from 2004 to 2011, and from 2015 to 2020 — attracted big fund flows into gold ETFs. But over the last year, gold bullion and gold miner ETFs have shed $6.4 billion in assets, according to Bloomberg data and Yahoo Finance calculations.
But if last week's large gold inflows were to gain momentum, that trend could signal a perfect storm of retail, institutional, and central bank gold buying is brewing. Why?
Bruni said it best: “Gold is kind of one of these things that operates on vibes."
On Yahoo Finance's podcast Stocks in Translation, Yahoo Finance editor Jared Blikre cuts through the market mayhem, noisy numbers, and hyperbole to bring you essential conversations and insights from across the investing landscape, providing you with the critical context needed to make the right decisions for your portfolio. Find more episodes on our video hub or watch on your preferred streaming service.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
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43.
Nvidia’s Earnings: Biggest News of the Week for ETFs
2024-08-26 12:00:00 by Sumit Roy from etf.com
The most highly anticipated event of the week in financial markets is, without a doubt, the release of Nvidia’s earnings report after the bell on Wednesday, Aug. 28.
The AI powerhouse is expected to announce another blowout quarter thanks to insatiable demand for the company’s AI chips.
But expectations are sky high, which means that Nvidia has a high bar to climb in order to satisfy demanding investors, who have pushed the company’s stock up by almost 160% this year.
Nvidia Earnings: What to Watch
The most important number to watch is Nvidia’s revenue for Q2—as well as its forward guidance.
Three months ago, Nvidia forecast revenues of $28 billion for the second quarter. But the company has beaten its guidance by $2 billion or more in each of the past four quarters—something that many investors expect to happen again.
That means that anything less than $30 billion of revenue for Q2 could be seen as a disappointment by investors. While anything higher than that could satisfy the bulls.
In addition to the Q2 numbers, investors will look to see where Nvidia sets its guidance for Q3, as well as commentary on the ramp up in production of the company’s next generation Blackwell chips.
Earlier this month, media reports suggested that Blackwell chips could be delayed by up to three months. Investors will be keen to hear whether those reports were accurate and if so, what it means for Nvidia’s growth in 2025.
Nvidia Stock's Impact on ETFs
Movements in Nvidia’s stock price could have a significant impact on all sorts of exchange-traded funds this week. The stock has a nearly 7% weighting in the SPDR S&P 500 ETF Trust (SPY), which puts it neck-and-neck with Apple and Microsoft as the biggest holding of the world’s largest ETF.
It also has an 8% weighting in the Invesco QQQ Trust (QQQ), equal to Microsoft, and just behind Apple’s 9% weighting.
Semiconductor ETFs, like the iShares Semiconductor ETF (SOXX) and the VanEck Semiconductor ETF (SMH) also have large allocations to the stock: 9% and 22%, respectively.
44.
Nvidia earnings highlight a busy end of August: What to know this week
2024-08-25 14:43:05 by Josh Schafer from Yahoo FinanceFederal Reserve Chair Jerome Powell told investors on Friday the "time has come for policy to adjust."
In response, stocks finished the week near record highs. The S&P 500 (^GSPC), the Nasdaq Composite (^IXIC), and the Dow Jones Industrial Average (^DJI) all rose more than 1% on the week. The S&P 500 is now within 1% of a record closing high.
But the market's rebound from August lows will be put to the test with a highly anticipated earnings release from AI leader Nvidia (NVDA) after the bell on Wednesday.
Earnings from Salesforce (CRM), Best Buy (BBY), Dell (DELL), and Lululemon (LULU) will also be in focus, while a key reading of the Fed's preferred inflation gauge will highlight the economic calendar.
A done deal
On Friday, Powell made clear to investors that interest rate cuts are coming in September.
But he did not explicitly signal how aggressively the central bank will slash rates as it gets this easing cycle underway.
Powell noted the timing and pace of cuts will "depend on incoming data," and markets quickly moved to fully price in four rate cuts of 0.25% by the end of 2024 on Friday morning after the Fed chair said the central bank has "ample room" to maneuver as policy enters its next phase.
Read more: Fed predictions for 2024: What experts say about the possibility of a rate cut
With only three Fed meetings left in 2024, the looming question remains when the Fed would cut rates by 0.50% in a single meeting to reach current forecasts.
"We continue to think that if instead the August [jobs] report is weaker than we expect, then a 50bp cut would be likely [on Sept. 18]," Goldman Sachs' economics team led by Jan Hatzius wrote in a note to clients.
As of early Monday morning, markets were pricing in a 36.5% chance the Fed cuts by 50 basis points by the end of its September meeting, up from a roughly 24% chance seen a week before, per the CME's FedWatch Tool.
Capital Economics' deputy chief markets economist Jonas Goltermann argued the Fed cutting deeper than 0.25% because of weakness in the labor market may not be a welcome sign for investors.
"Investors may reasonably worry that if the FOMC feels the need to front-load policy easing ... it may be because the economy is slowing by more than the still very rosy outlook discounted in equity and credit markets implies," Goltermann wrote in a note to clients on Friday.
"As such, it may well be that a 25bp cut in September is in fact the preferable outcome for equity markets."
While Powell spent a large part of his Friday speech emphasizing the downside risks to the labor market, the Fed will still have its eyes on an important inflation update on Friday.
Economists expect annual "core" PCE — which excludes the volatile categories of food and energy — to have clocked in at 2.7% in July, up from the 2.6% seen in June. Over the prior month, economists project "core" PCE rose 0.2%, in line with the month-over-month increase seen in June.
Powell said on Friday his confidence has "grown that inflation is on a sustainable path back to 2%."
All eyes on Nvidia
With nearly all members of the S&P 500 done reporting earnings, one massive report has been looming: Nvidia.
As has been the case since the chip giant supercharged an AI-driven stock market rally with its earnings report back in May 2023, expectations for Jensen Huang's company are sky-high.
Wall Street expects Nvidia grew earnings by roughly 109% year over year, with revenue also jumping 99% compared to the same quarter a year ago. Updates on any potential delays for Nvidia's new Blackwell chip will be in particular focus.
The stock enters the print up roughly 160% year to date.
"We believe modest expectations for Blackwell shipments in FQ3 have been backfilled with higher Hopper bookings," KeyBanc analyst John Vinh wrote in a recent note."We expect NVDA to report beat/raise results, in which upside will be driven by strong demand for Hopper GPUs."
Vinh, who has a $180 price target on Nvidia, told Yahoo Finance on Thursday that the stock still looks attractive even after a recent 30% rally.
"Being one of the best-positioned semiconductor companies, obviously levered to one of the strongest product cycles in AI right now, we think it's still attractively valued at these levels," Vinh said.
Charles Schwab Asset Management CEO and chief investment officer Omar Aguilar said the release will be "very anticipated" for the broader market too.
"What I think is going to be expected by the market is to hear what is the outlook for AI and what is the demand for chips going forward as people continue to spend money in AI technologies," Aguilar told Yahoo Finance on Friday.
Tech volatility could be 'behind us'
Whipsaw movements in Nvidia and the other "Magnificent Seven" tech stocks have been a feature of the market's recent drawdown and subsequent bounce back.
Goldman Sachs equity strategist Ben Snider told Yahoo Finance this week that the back-and-forth action could be primed to settle down.
"I think most of the short-term volatility in [the Magnificent Seven] stocks is behind us," Snider said.
The rally in this group — which consists of Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), and Tesla (TSLA), along with Nvidia — between Aug. 5 and Aug. 19 added more than $1.4 trillion to their collective market cap.
"The trajectory of sales and earnings growth has been resilient, more resilient than a lot of investors feared coming into the second quarter," Snider added. "Valuations are by no means low compared to history, but they're lower than they were several weeks ago, and we won't get another earnings report for a few months now."
For the first time since the start of 2022, hedge funds trimmed exposure to many Magnificent Seven tech stocks to end the second quarter, according to Snider's recent analysis of securities filings for the end of the second quarter. Amazon and Apple were exceptions.
Snider said this move "speaks to the anxiety we were hearing from investors heading into the second quarter earnings season."
He added that investors felt the stocks had benefited from the excitement around AI but also expressed "some concern that that AI investment boom was coming to an end."
"In my conversations with investors, including hedge fund clients, there was very clearly excitement at the opportunity to buy some stocks that they already liked at lower valuations given the sell-off," Snider said.
Now, after the snapback in tech stocks, investors aren't as convicted as they were when buying the dip in early August. "I would call sentiment [around megacap tech] cautiously optimistic," Snider said.
Nothing like price to change an investor's feelings.
Weekly Calendar
Monday
Economic data: Durable goods orders, July preliminary (+4.2% expected, -6.7% previously); Dallas Fed manufacturing activity, August (-16 expected, -17.5 previously)
Earnings: Trip.com (TCOM)
Tuesday
Economic data: Conference Board Consumer Confidence, August (100.1 expected, 100.3 previously); S&P CoreLogic Case-Shiller, 20-City Composite home price index, month-over-month, June (+0.3% expected, +0.34% previously); S&P CoreLogic Case-Shiller 20-City Composite home price index, year-over-year, June (+6.81% previously); Richmond Fed manufacturing index, August (-17 previously)
Earnings: Bank of Montreal (BMO), Box (BOX), Nordstrom (JWN)
Wednesday
Economic data: MBA Mortgage Applications, week ending Aug. 23 (-10.1% prior)
Earnings: Nvidia (NVDA), Abercrombie & Fitch (ANF), Affirm (AFRM), Bath & Body Works (BBWI), CrowdStrike (CRWD), Chewy (CHWY), Foot Locker (FL), Five Below (FIVE), HP (HPQ), Kohl's (KSS), Okta (OKTA), RBC (RBC), Salesforce (CRM), The J.M. Smucker Company (SJM)
Thursday
Economic data: Initial jobless claims, week ended Aug. 24 (235,000 expected, 232,000 previously); Personal income, month-over-month, January (+0.5% expected, +0.3% previously); Second quarter GDP, second estimate (+2.8% expected, +2.8% prior); Wholesale inventories, month-over-month, July preliminary (+0.2% prior); Pending home sales, month-over-month, July (+0.4% expected, +4.8% prior)
Earnings: American Eagle Outfitters (AEO), Best Buy (BBY), Birkenstock (BIRK), Burlington Stores (BURL), Campbell's (CPB), Dell (DELL), Dollar General (DG), Gap (GAP), Lululemon (LULU), Marvell Technology (MRVL), MongoDB (MDB), Ulta Beauty (ULTA)
Friday
Economic news: Personal spending, month-over-month, July (+0.5% expected, +0.3% previously); PCE inflation, month-over-month, July (+0.2% expected, +0.1% previously); PCE inflation, year-over-year, July (+2.6% expected, +2.5% previously); "Core" PCE, month-over-month, July (+0.2% expected, +0.2% previously); "Core" PCE, year-over-year, July (+2.7% expected; +2.6% previously); MNI Chicago PMI, August (44.5 expected, 45.3 prior); University of Mich. consumer sentiment, August final (67.9 expected, 67.8 prior)
Earnings: No notable earnings.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
45.
3 ETFs for Growth Investors to Buy and Hold for Decades
2024-08-25 08:57:00 by David Jagielski, The Motley Fool from Motley Fool
Do you want exposure to some of the best growth stocks in the world? You don't have to go out hunting for them using various stock screeners to find the most promising opportunities in the markets. Exchange-traded funds (ETFs) can help you with that.
ETFs are often associated with being safe options for risk-averse investors who don't know much about stocks or aren't good at picking stocks. But they can also help target specific growth opportunities. Whether you want broad exposure to growth stocks or focus on a specific sector of the market, they can help simplify your overall investing strategy.
Three ETFs that can be suitable options for growth investors are the Invesco QQQ Trust (NASDAQ: QQQ), iShares Biotechnology ETF (NASDAQ: IBB), and iShares Russell 1000 Growth ETF (NYSEMKT: IWF). Here's what makes these stocks potentially great investments to add to your portfolio right now and hold on to for the long haul.
Invesco QQQ Trust
The Invesco QQQ Trust is the one ETF I would have no trouble recommending to any long-term investor. Since it focuses on the top non-financial stocks on the Nasdaq exchange, it can give you some exposure to fantastic stocks all in just one investment. And given that it focuses on just 100 holdings, you're getting the best of the best with the fund, including big tech stocks such as Apple and Nvidia.
In the past five years, the Invesco fund has generated total returns (including dividends) of more than 160%, which is far higher than the S&P 500's returns of 108% over the same time frame.
The one downside of the fund is that it is tech heavy; more than 50% of its holdings are tech stocks. That means there can and will be volatility depending on how tech stocks are doing.
This is why the ETF is ideal for long-term investors who aren't planning to pull their money out of the stock market within the next few years. As long as you have at least five-plus investing years to go, this can be a no-brainer to put into your portfolio.
iShares Biotechnology ETF
For investors who have a bit more risk tolerance and want to go outside of tech for potentially big gains, the iShares Biotechnology ETF can be an attractive option. As the name suggests, this is a fund focused on top biotech stocks.
Biotech can give you exposure to some of the leading growth stocks in healthcare, including Regeneron Pharmaceuticals and Amgen, which are two of the top holdings within the fund.
And with more than 200 stocks in the ETF, you're also getting some broad diversification and exposure to smaller players in the industry. The bulk of the fund is made up of biotechs (81% of holdings), but another 16% comes from stocks involved with life-sciences tools and services.
The ETF has underperformed the markets in the past five years as its total returns are around just 40%. But with a lot of growth opportunities within the healthcare industry, the fund has the potential to outperform the market in the long run.
iShares Russell 1000 Growth ETF
For the investor who wants broad access to many growing businesses, the iShares Russell 1000 Growth ETF could be the most attractive option listed here. Its focus on large and mid-cap stocks means there could be more potential upside here since the fund specializes in U.S. companies that are likely to grow faster than the market.
There are around 400 holdings in the ETF, making it the largest fund on this list. Like the Invesco QQQ, it includes big names such as Apple, Nvidia, and other tech leaders. But investors will also gain access to smaller growth stocks as well, including Booking Holdings and Arista Networks. Their positions will be much smaller, but the fund gives investors a more diverse way to tap into promising growth stocks.
Over the past five years, the ETF has been a market-beating investment, generating total returns of around 140%.
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3 ETFs for Growth Investors to Buy and Hold for Decades was originally published by The Motley Fool
46.
Investors price in 4 rate cuts from Fed after Powell signals 'ample room' to move
2024-08-23 20:06:21 by Josh Schafer from Yahoo FinanceInvestors solidified bets on how deeply the Federal Reserve will cut interest rates this year after Fed Chair Jerome Powell said Friday the "time has come for policy to adjust."
Powell noted the timing and pace of cuts will "depend on incoming data," but markets quickly moved to fully price in four rate cuts of 0.25% by the end of 2024 on Friday after the Fed chair said the central bank has "ample room" to maneuver as policy enters its next phase.
"The current level of our policy rate gives us ample room to respond to any risks we may face, including the risk of unwelcome further weakening in labor market conditions," Powell said.
Stocks rallied following Powell's speech, with the S&P 500 (^GSPC) rising 1more than % and the tech-heavy Nasdaq Composite (^IXIC) nearly 1.5%. The Dow Jones Industrial Average (^DJI) rose about 1.1%, or more than 450 points, and the interest rate-sensitive Russell 2000 (^RUT) small-cap index soared, rising roughly 3%.
Renaissance Macro head of Economics Neil Dutta highlighted in a note to clients that Powell didn't use the word "gradual" when referring to rate cuts like some other Fed officials had in recent days.
This, Dutta argued, suggests "Powell is not removing the optionality of doing large moves as policy adjusts."
Markets appear to agree.
Though with only three Fed meetings left in 2024, the looming question remains when the Fed would cut rates by 0.50% in a single meeting to reach the current investor expectation of four interest rate cuts this year.
Bets that a larger move will come in September moved up marginally on Friday morning. Markets are pricing in a 36.5% chance the Fed cuts by 50 basis points by the end of its September meeting, up from a 24% chance seen the day prior, per the CME's FedWatch Tool.
Economists have argued further weakness in the labor market would be the likely prompt for a larger cut in September. The July jobs report showed the second-weakest monthly job additions since 2020 and the highest unemployment rate, 4.3%, in nearly three years.
Powell addressed these developments on Friday, noting the cooling seen in the labor market is "unmistakeable" and that the downside risks to the central bank's mandate for full employment have risen.
"It seems unlikely that the labor market will be a source of elevated inflationary pressures anytime soon," Powell said. "We do not seek or welcome further cooling in labor market conditions."
Capital Economics' deputy chief North America economist Stephen Brown wrote in a note to clients that a weak August jobs report, set for release on Sept. 6, would be a likely catalyst for the Fed to cut by more than 25 basis points at its next meeting.
"Fed Chair Jerome Powell’s dovish tone at Jackson Hole [on Friday] and pledge to do 'everything we can to support a strong labour market' implies that a 50 bp cut could be on the table at the September meeting, although such a move might require a further rise in the unemployment rate in the August Employment Report, which we judge to be unlikely," Brown wrote.
Oxford Economics chief US economist Ryan Sweet agreed.
"The August employment report will determine whether the Fed cuts by 25 [basis points] or 50 [basis points] in September," Sweet wrote.
The Fed's next policy decision will be announced on Sept. 18.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
47.
Powell Rate Comments Push ETFs Toward Records
2024-08-23 18:41:30 by Sumit Roy from etf.com
Stock and bond ETFs surged after Fed Chair Jerome Powell confirmed that the U.S. central bank was ready to cut interest rates in his widely anticipated speech in Jackson Hole, Wyoming.
“The time has come for policy to adjust,” Powell said at the Economic Symposium hosted by the Federal Reserve Bank of Kansas City. He said he was increasingly confident that inflation “is on a sustainable path back to 2%.”
The SPDR S&P 500 ETF Trust (SPY) was up by around 0.5% ahead of the speech, but extended its gains to as much as 1.2% after Powell’s comments came out.
The Invesco QQQ Trust (QQQ) went from a gain of 0.8% to as much as 1.6%.
Meanwhile, the yield on the benchmark 10-year Treasury bond dropped from around 3.85% to less than 3.79%, while the yield on the 30-year fell from 4.12% to 4.08%.
The highly-popular iShares 20+ Year Treasury Bond ETF (TLT) jumped as much as 0.9% midday Friday (bond prices move inversely to interest rates).
Interest Rate Comments in Powell Speech
In his speech, Powell assured listeners that rate cuts were coming without signaling anything about how large they might be.
“The direction of travel is clear,” he said, while “the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks.”
Investors remain split on whether the Fed will slash rates by 25 basis points or 50 basis points at its September 18 meeting, with fed funds futures currently putting a 68% probability on the former and a 32% probability on the latter.
Like Powell said, incoming data—and particularly, August’s labor market data which comes out on September 6—will play a role in determining the how much the Fed cuts rate by.
Still, even though he didn’t provide any clarity on September’s rate cut, there was a lot for investors to take comfort from in Powell’s speech.
The Fed Chair noted that the slowdown in the jobs market was “unmistakable” and that he and his colleagues did not “seek or welcome further cooling in labor market conditions.”
The comments could help assuage some of the worries that the Fed was behind the curve or that it wasn’t paying enough attention to the slowing of nonfarm payrolls growth and the uptick in the unemployment rate.
At today’s highs, SPY was trading a mere 0.3% below its record closing high from July, nearing erasing all of the losses from the aggressive sell-off of a few weeks ago.
48.
Labor market weakness shows signs of 'leveling off,' keeps Fed on track to cut rates in September
2024-08-22 14:26:39 by Josh Schafer from Yahoo FinanceInitial filings for unemployment benefits were roughly flat last week, reflecting a labor market that is cooling but not rapidly deteriorating as the employment outlook remains in focus ahead of Federal Reserve Chair Jerome Powell's Friday speech in Jackson Hole, Wyo.
New data from the Department of Labor released Thursday showed 232,000 initial jobless claims filed in the week ending Aug. 17, up from 228,000 the week prior and in line with economists' expectations.
Continuing jobless claims rose again to 1.86 million, the highest level since November 2021.
"Claims appear to be leveling off on a trend basis," Oxford Economics senior economist Nancy Vanden Houten wrote in a note to clients on Thursday. "There is nothing in the claims data to change our view that, while the labor market is softening, it isn't weak enough to warrant anything more than a 25bps rate cut at the Fed's September meeting."
Oliver Allen, senior economist at Pantheon Macroeconomics, added in a client note on Thursday: "Underlying claims have plateaued, and will probably slip back in the near term."
With recent data showing inflation falling, economists have argued the labor market will be "where the action is going to be" as investors search for clues about how much the Federal Reserve will slash interest rates this fall.
Read more: How does the labor market affect inflation?
Fresh minutes from the Federal Reserve's July meeting released on Wednesday noted that Fed officials believe "upside risks to the inflation outlook were seen as having diminished, while downside risks to employment were seen as having increased."
This commentary from the meeting came before several data points over the past few weeks that have shown a cooling in the labor market. Just days after the Fed's most recent meeting, the July jobs report showed the second-weakest monthly job additions since 2020 and the highest unemployment rate, 4.3%, in nearly three years.
On Wednesday, an annual benchmark revision from the BLS showed the US economy employed 818,000 fewer people than originally reported as of March 2024, revealing the labor market may have slowed earlier and by a greater magnitude than initially thought.
Deutsche Bank senior US economist Brett Ryan said the revisions data is in line with the recent increases in the unemployment rate.
"[The revisions data] solidifies the case for starting cuts in September," Ryan said. "It doesn't necessarily advance the case for aggressive cuts off the bat, which the market has been ... looking to get signals for."
That signal could come from Powell on Friday when he delivers his annual speech at the Jackson Hole Symposium. But Ryan reasons the case for a 50 basis point interest rate cut is more likely to be settled when the August jobs report is released on Sept. 6.
"The committee wants to be very much data dependent and doesn't feel that it wants to outline a preset course here," Ryan argued. "So there isn't much he could say."
As of Thursday afternoon, markets were fully pricing in an interest rate cut from the Fed by the end of September, with a roughly 25% chance the Fed cuts interest rates by 50 basis points, per the CME FedWatch Tool.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
49.
Morgan Stanley to Close 6 Remaining ETFs on FundLogic Platform
2024-08-22 12:00:00 by Lauren Gibbons from etf.com
Morgan Stanley is to close its remaining six smart beta exchange-traded funds available on its FundLogic platform.
The group said assets had fallen below a specific threshold of $50 million across its six remaining ETFs, which will stop trading on Sept. 17.
Morgan Stanley declined to comment on the closures.
Morgan Stanley ETFs Closing
- MS SciBeta HFE US Equity 6F EW UCITS ETF (USHF)
- MS SciBeta HFI US Equity 6F EW (USD) UCITS ETF (USUF)
- MS SciBeta HFE EM Equity 6F EW UCITS ETF (EMHF)
- MS SciBeta HFE Europe Equity 6F EW UCITS ETF (EHEF)
- MS SciBeta HFE Japan Equity 6F EW UCITS ETF (JHEF)
- MS SciBeta HFE Pacific ex-Jap Equity 6F EW UCITS ETF (PHEF)
The ETFs have total expense ratios (TERs) of 0.30%, with total assets of the individual funds sitting between $1 million and less than $3 million.
The ETFs look to capture six factors, value, size, low volatility, high momentum, low investment and high profitability.
It highlights how smart beta ETFs have fallen out of popularity, with the asset class suffering outflows of $1.7 billion (1.5 billion euros) in the first quarter of 2024.
Last year, Northern Trust Asset Management closed four of its five factor ETFs, before Waystone ETFs agreed to take over its Irish platform and its one remaining ETF in June.
The group entered the U.S. ETF market last year and now looks to be focusing its ETF efforts solely on the market.
The multi-factor range lost 91.7% of its assets in 2023 after amassing $334 million (300million euros) in its first five years. USHF held $224 million in assets under management on the closure of MS Scientific Beta US Equity Factors UCITS ETF (USEF) in October 2022.
Morgan Stanley shut USEF in 2022 with less than $1 million AUM, and previously closed the MS Scientific Beta Global Equity Factors UCITS ETF (GEF) which delisted in Aug. 2021.
50.
Meme stocks are surging again, which may be good news for the risk rally: Morning Brief
2024-08-21 10:53:33 by Jared Blikre from Yahoo FinanceThis is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:
The chart of the day
What we're watching
What we're reading
Economic data releases and earnings
Stocks have come roaring back since stumbling early in August.
In the two weeks following the lows on Aug. 5, the S&P 500 added $3.7 trillion in market capitalization with the "Magnificent Seven" stocks accounting for $1.6 trillion of that.
While Nvidia (NVDA) and the artificial intelligence trade are leading the rebound, the risk rally has broad participation — even from oft-forgotten corners of the market like meme stocks.
In May, we outlined Yahoo Finance's proprietary meme stock five-day volatility trigger. The list of stocks includes meme stalwarts GameStop (GME) and AMC Entertainment (AMC), along with Carvana (CVNA), Beyond Meat (BYND), Kodak (KODK), Palantir (PLTR), and Coinbase (COIN).
Any up or down moves among members of this group greater than three standard deviations, measured over the trailing quarter, are recorded and aggregated. When there are at least three triggers within a rolling five-day window, a signal is generated.
Since the Aug. 5 low, Carvana, Palantir, Beyond Meat, and Coinbase each registered volatility triggers — with the composite signal peaking at 7 on Aug. 9.
(The all-time signal peak — going back to December 2020 — was 14, recorded on Jan. 28, 2021, during the original GameStop frenzy.)
As outlined in May, meme stocks were once a reliable contrary signal during the 2022 bear market. Investors chased each fledgling rally by bidding up laggards — right before the general market rolled over.
But that hasn't been the case for most of this bull market, as signals have been distributed throughout the price rallies. And recent signals were generated closer to the beginning of the surge.
In fact, the recent price action in the meme stocks that produced volatility triggers seems to be explained more by idiosyncratic factors and general market volatility than by any latent memeishness.
Palantir, for instance, delivered an upbeat earnings forecast on Aug. 5, which turned a 14% loss on the open that day when the yen was blowing up into a 2.6% loss by the close.
Coinbase's returns have recently waxed and waned with the fortunes of crypto and bitcoin. And Carvana reported earnings on July 31, leading to a sizable bounce on Aug. 1 — right before the general market turmoil.
The exception might be Beyond Meat, which jumped 40% on Aug. 9 for no discernible reason.
Suggesting the pure meme trade — those unexplained surges that defy any fundamental or rational justification — is still in play for the modern trader.
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