As a young person with a gun once again makes the news headlines again in the USA, I want to draw to your attention away from politics to 2 recent observations that I thought were significant amongst the ever-flowing tide of financial market news that I see every week. Taken together, they may well be flagging a change in equity market leadership, with value investing looking more attractive henceforth.
- The first observation was that in a recent sell off (as perceived) of US markets, in fact only the high growth, AI story driven stocks sold off – the main market was flat. The large market cap weighting of the big tech firms of course significantly influences the indices that include such stocks.
- The second was that what should be very good news for growth stocks: the more and more definite statements that inflation is largely conquered (or let’s be honest, has come down for factors nothing to do with central bank actions) and that as a consequence, the Fed in the US can lower interest rates soon, has had virtually no impact on markets. It is suggested that this news is already in the price, as it were, so the only news on inflation and interest rates that might move markets (down) would the (bad) news that rates reductions are deferred again.
Taken together, those statements hint that the recent strong rally in growth stocks, especially those that can in any way be connected to AI, has run out of steam.
Skimming off profits from the technology sector is something you may well have already been doing. If not, now is the time to seriously think about it, I suggest.
Personally, I am somewhat convinced by the minority of commentators who say that the benefits of AI are more imagined than real, in terms of improved eceonomic performance. We could be seeing another ‘millenium bug’ con trick (an effective one, for sure) from the robber barons of the 21st century.
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