Up or Down Next? A few sectors might stay strong anyways
April 28, 2024 Update
The NASDAQ had a strong recovery last week (up 4.2%):
In the very short term, the market was oversold and a bounce was a possibility. Now the question is… what’s next?
Here is what I like: The economy keeps improving and the current GDP Nowcast for Q2 sits at almost 4%!
And what I don’t like: inflation is picking up again, slightly, and there are no signs of it moderating any time soon. Oil and some commodities are ticking higher and as a result of all of this, the 10-year treasury yield is up for the 4th week in a row and that does not bode well for growth stocks.
So what? I don’t see the market doing badly if the economy stays strong. Yet, growth stocks may suffer if inflation keeps pointing up. So I would stay open to considering buying cyclical stocks, especially from sectors that are less sensitive to high interest rates.
Last consideration: interest rates are high compared to where they were a few years ago. Yet, real interest rates (nominal - inflation) are not high per se as they sit around 1.6%, a level the overall economy can work with.
SECTORS
The current picture speaks to the environment mentioned above:
In an improving economy, Industrials and Energy are doing well, Technology has its own story attached to the #AI theme. Materials, Consumer Discretionary, and Financials might improve over the next weeks.
INTERNATIONAL
To be noted, it looks like the Chinese stock market is ready to start an uptrend. Have a look at the KWEB 0.00%↑ index (includes many tech-related Chinese companies):
The index popped last week on volume and the MACD turned positive. there are several undervalued companies in the Chinese market right now. Will it be a false signal again?
PORTFOLIOS
10X LARGE CAP MOMENTUM POT
I am adding 30 shares of PDD 0.00%↑ if it touches 130 USD. First stop loss at 113.9.
This is my way of playing the possible Chinese trend.
10X SMALL CAP MOMENTUM POT
I am adding 34 shares of VVX 0.00%↑ if it touches 50.2 USD. First stop at 45.75 USD.
This is a name in the Defense space.
That’s all for the week!
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Important: This is not investment advice. Consult a licensed financial advisor before making any investment decision.