Thoughts on short term market direction
-
Hi Mike,
You're correct-short term no one knows. Long term quality businesses do well. The media will publish 100s of articles to click bait investors. It doesn't matter who wins because stock prices are ultimately driven(in the long term) by fundamentals. And whilst 'bets' are always wagered around some material event with the unwinding of that position creating volatility. The beauty with investing is you aren't forced to make a call either way.
The real catalysts for the short term will be big tech earnings which kick off on Tuesday and by Friday we will know AMZN, MSFT, AAPL, META. I don't know what they will report however having followed them all closely I do expect solid results. I don't know how many phones Apple has sold in China but they rarely disappoint. We will have to wait a few additional weeks to hear from Nvidia as their quarter ends 31/10 and they will report approx 3 weeks later on 20 Nov give or take. Their result is not baked in. The guide is $32.5B and if the usual cadence continues we would expect $2B more bringing us to $34.5B. I expect even more. The market is expecting a Q4 guide of +$2B ($36.5B) however we have observed a few things which suggest a better actual Q3and a better Q4 guide. China H20 sales should be very strong. We also know Blackwell shipped in Q3 (early) because MSFT was crowing about being the first to deploy the GB200 servers.
We also believe the market is missing something critical. Hopper sell through has yet to peak, so Q4 will be record Hopper revenue plus material Blackwell revenue. It's a big call but we think the $36.5B expected guide will be closer to $45B with actual being higher again. They may low ball the guide but I'm confident it's $40B+ and every quarter next year will be higher than the last.
There will be plenty to discuss next week!
Regards
Adam
-
Good stuff, thanks Adam (as usual.)
Things seem to have been quite jittery in the last few months; earlier in the year things were going great guns but they've been more unsettled of late. Would it be overly optimistic to expect things to be steadier in their progress once the Trump/Harris show is concluded?
Given your cheery outlook for Nvidia I'm wondering whether to drop Schwab a line to buy another handful of shares. The ones I bought three years or so ago have done very nicely and I wish I'd bought more back then.
-
Odds are DT will win-his policies have historically been pro business
-
Are we due some good news with KLA …seem to be still under the influence of the news that hit them a while back
-
@Adam-Kay Thanks for the detailed reply
Although "odds" are suggesting Trump, I think we will see Harris, perhaps in a landslide
I'm a believer in the 13 Keys fella, Allan Lichtman - in case this makes exIM
- odds can be gamed, actual results less so - although clearly the polls will give the tangerine one the ability to grumble endlessly about how stolen it was 
Clearly we will all know soon enough!
-
Hi,
Not wanting to get into political opinions, my opinion has always been that if one is to dwell on politics then look closer to home. US politics won't change the investing landscape.
In regards Nvidia, I think from my post history you know my thoughts. As we publish most of our holdings, we can't control what anyone does with this information however please bear in mind our approach is based on a portfolio, balancing various holdings and respective weights.
Regards
Adam
-
-
That decisive win has given the markets a nice bump in the right direction. Bravo Adam/Nik/Donald/Whoever else we should thank.
I read somewhere that there is an 'uncertainty index' which dropped sharply when Trump was elected. Given that it's often said on here that markets hate uncertainty then this is presumably a good thing. (And if anyone can suggest some links so I can learn more about this uncertainty index that would be great. My Google-fu is failing as I can find lots of references to market uncertainty indexes but nothing that looks quite like what I am looking for.)
-
Morning O,
No doubt uncertainty drives market prices. But I would ponder, how does one measure it and what uncertainty are you trying to measure, a macro event or if company X will win that contract and earn more money?
Here's one. Most might be certain that PHE +1.8% yesterday was just down to the stock market, generally. It wasn't. FX added 1.1% and 0.7% can be directly linked to specific portfolio changed we implemented in regards the weights.
-
-
The Vix is historical volatility. It doesn't factor in specific stock selection process other than a general view on the market. Yes it's volatile but is irrelevant at the company level and also when you take the investment long term view approach. Im sure traders look at it along with their candles.
-
Well, I couldn’t have been more wrong about the US election, eh
It seems clear that the markets like the result, which renders my thoughts on it pointless
I wonder how well things will continue.
Trump has something of a checkered history on making predictable decisions once in office. The only one I will make is that the increased application of bronzer will continue unabated 🤪Do we think the fact that companies are broadly releasing very positive results bode well for the next 3/6/12 months?
(with the strong caveat that this is ALL banter and not in any way advice!!)
-
Hi Mike,
As previously mentioned, we speculated that there would be a snap reaction to the result either way however cautioned against implementing an investment strategy based around it. It was always going to be a coin flip which largely shifts back to fundamentals and the economy-as you touch on.
Corporate earnings have been largely good. 75% beating expectations. Amazon reported solid results, Msft were very good and Meta results were exceptionally good. The only reason these stocks didn't move even higher on earnings date is due to their increased capital spending on AI capacity. I find this rather odd given Meta is generating very high income from its 'AI insights' models. Secondly, the respective CEOs know what they are doing, have a proven track record of success and have a goal (road map) which requires significant investment now which they anticipate will pay off in spades, in the future. Nadella is an exceptional CEO (as is Zuckerburg)-we are investing in the man perhaps even more than in the company.
I would expect the wider market is now awaiting Nvidia results, Nov 20 before it reasserts the trend.
Regards
Adam
-
So….to resurrect this little thread….
Any thoughts on how the markets will react to the trade tariff wars that are appearing to escalate?Feels like we are entering uncharted territory…I can only see these tariffs causing US consumers to pay more for things….& likely much of the rest of the world too, as Counties inevitably respond with tariff’s of their own. Are we to focus on “Buy British” more? Supply chains are very global these days…
-
Hi Mike, I think you are getting ahead of yourself. Right now Mexico and Canada are impacted. Why? Drugs and people crossing the border plus it's a penalty for all the global firms setting up shop in Mexico. Re Europe, what does Trump want? For them to pay for their share of Nato. What does he want from China? Stop the dumping, behave better. China won't budge imo. Let them duke-it-out.
Right now Foxconn servers will be hit-SMCI will not. Potential winner. TSMC is about to start producing chips in Arizona with more to come-it is usual to get an exemption from tariffs if you agree to move production facilities. He may give TSMC an exemption. I do not see him hurting his real ally's or their most valuable companies. Trump wants more critical tech make in America and he will no doubt achieve it without imposing tariffs.
Like many things, guessing and speculating is to be avoided and there is nothing we can do.
A reminder of what a tariff is. It's a tax on the price paid at import. A GPU which sells for $30k costs about 4K to produce, so worst case it now costs $5k so could sell for $31K or maintain a $30K and impact margins by 3% worst case. To date no taxes have been applied other than Mexico/Canada and given those Foxconn servers could be 100% finished in Mexico, 25% on $3M will make them uneconomic to produce. As I said a big win for US made servers. It is important to understand how products and their components build up 'the cost' of a finished product.
We know ai servers are low margin. Right now anyone buying a Foxconn server(made in Mexico) will pay 25% more! The same server made in America now costs a lot less.
-
A reasoned reply….although it still feels to me like he risks bringing inflation up with a probably spate of “tit for tat” tariff responses (Canada with the first).
He wants to bully nations into doing things, just so he can eventually claim a business victory, as he bases his entire persona on being the master of the deal…
….but mean while, the price of goods (gas, eggs, etc)will only get higher.
Is that good or bad for the markets?!As you say, there is nothing we can do….but we can move our investments about: stock to money markets or bonds, for example. Or indeed the other way, if you feel bullish!
Does the investment committee for IML consider these things, or is no action considered necessary?
