Highlights
• Nvidia’s beat fuels another surge in the A.I. mania
• What does Warren Buffett sitting on the sidelines say about equity valuations?
• Waller is the latest to preach patience before cutting rates
• The labor market is not as “hot” as people think
While We Were Sleeping
As mentioned, the Nvidia beat would only serve to extend the A.I. mania that has taken hold and that is exactly what happened yesterday. The Dow (+1.2%) and S&P 500 (+2.1%) both jumped to fresh record highs, while the Nasdaq (+3.0%) is within a hair’s breadth. All it took was a guidance beat of a couple of billion dollars to spark a massive surge in global equity prices, even for sectors and companies not involved in the A.I. race.
The downside to this is that the issue of market concentration is getting worse. Indeed, the Magnificent 7 jumped by nearly +5% on the day while the remaining stocks were closer to +1%. Valuations will also remain a concern as the forward P/E ratio pushes 21x (highest since the beginning of 2022) and the equity risk premium is down to a lowly 50 basis points — 2 standard deviations below normal. Lastly, in terms of how crazy things got yesterday, the last time that the Nasdaq 100 made a new all-time high on a 3%+ session was back on… March 22nd, 2000 (tip of the hat to Bespoke). We would also add that, despite the gain in the Nasdaq, breadth actually saw more decliners (1,662 issues) than advancers (1,556). And that the much more cyclically-sensitive small caps could only eke out a +0.8% gain.
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