PLAN WELL, INVEST WELL, LIVE WELL.
HELPING CLIENTS GROW AND PRESERVE THEIR WEALTH.
Q2 2024 – Party like 1999?
Does history actually repeat itself or just go through similar trends over and over again. Right now we seem to be in a party like it’s 1999. Will we see a repeat or will this trend evolve into something different? When it comes to the history of the Nasdaq 100 Index, it is hard to escape the similarities between the bursting of the dot-com bubble in 2000 and the environment we have today. Here’s a chart of Cisco in the dotcom days and Nvidia ripping higher with Artificial Intelligence “AI”. Any similarities? I’m not saying that we’re in a bubble, but AI hype is the only thing driving the markets these days.
There are plenty of critics of this view and I’m more in the glass half-full camp than half-empty, but it is eerily similar to where we were a quarter century ago. If one were to assemble a checklist to determine the possibility that the market is getting overblown, a lot of boxes would be filled in by now. Investor behavior getting irrational? Check. Election year? Check. Sharp runup in the Nasdaq with concentration in just a couple of stocks? Check. Why am I in the glass half full camp? This time there are profits, cash flow and real ongoing demand for the products that are involved in the run up and it’s not being fueled by companies like Pets.com.
What does all of this mean for the 2nd half of the year? The ugly geopolitical developments in Ukraine/Russia and Israel/Gaza will likely contribute to market volatility but are unlikely to derail the global economic recovery. The impact of those events on the markets is often felt primarily through sudden and sizable moves in oil prices, especially when involving the Middle East or a major exporter (Russia). The elections will also cause angst, but initially the outcome won’t affect things as much as the new congress in 2025. Trump may be marginally better for stocks than Biden given corporate tax policies and attitudes toward regulation, but the difference is not substantial since they can only say what they’d like to achieve - congress needs to act to implement the presidential desires. FOMO still rules the market for AI-related stocks. The bottom line is that the fundamental outlook for the economy, earnings, and the Fed's actions will drive markets
Stay invested and don’t forget about the world outside of the US. They don’t have the shiny AI chipmaker like Nvidia driving them, but that’s not to say they don’t have growing profitable enterprises overseas.
I bet you didn’t know that Sweden was the king back in the 80s and 90s!!
Interested in learning more about finance and investing? Here are some newsletters and blogs to get started. I can’t believe it, but Dr. Pepper is now the #2 Soda in the US. Want to work for a Mag 7 Company? Some pay better than others.
Enjoy the summer and please reach out if you need anything,
Nick