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Mega Tech Names Continue To Lead

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In his Daily Market Notes report to investors, Louis Navellier wrote:

Tech Sunshine

Tech names continue to lead despite the very high earnings multiples they’ve already climbed to. With energy prices weak, commodities also weak, and a very inverted yield curve, recession signals remain high despite the strong equity returns in 2023.

Those returns have been driven in a very big way by mega tech gains where the equal-weighted S&P is up 4.2% YTD while the market-weighted S&P is up 14.5%, and the QQQ is up 38.2%.

The enthusiasm for AI continues to the benefit of semiconductors (+45% YTD) and the mega techs who can afford the billions it costs to deploy the very large databases called for.

The sentiment seems to be that even if we do experience a GPD slow down, even if central banks continue to raise rates until they achieve a 2% recurring inflation rate, AI will be rapidly deployed and readily adopted as a competitive edge that cannot be skipped by almost any enterprise.

The sunshine on tech is also reflected in the recovery of crypto, now up 83% YTD despite all the fraud that has come to light by the leading exchanges. In a central bank gathering in Portugal, Jay Powell stated that he doesn’t see reaching the 2% target until 2025, reiterating the higher for longer monetary policy to look forward to.

Don’t Fight The Tape

That investors appear price indifferent to anything AI while traditional businesses are lagging so far behind certainly has the feel of a bubble, but for now it’s hard to fight the tape. Today, the US announced that they may institute export curbs of high-end AI computer chips to China yet semiconductors are nearly flat on the day.

It appears likely that we will not demonstrate any major moves up or down until we get into the 2Q23 earnings season and see what the Fed does in July. 

Coffee Beans: MENA Likes China

Of the nine polled countries in the Middle East and North Africa (MENA) region, China rather than the United States is the favored superpower by the majority. Respondents in many of the polled countries were more concerned by the threat posed by U.S. economic power than that of Chinese economic power. Source: Statista. See the full story here.