Hey there! Armstrong's back from a week in California, and let me tell you, January in Los Angeles beats New York by a mile! If you're cruising down Rodeo Drive, blast out the Decemberists' “Los Angeles, I’m Yours” from your car window. Trust me, it's the perfect vibe. Now, onto the market talk!
Market experts often group the big tech stocks, the so-called Magnificent Seven, as if they're all the same. But that's a mistake. Since the pandemic kicked off, these stocks have seen some wild ups and downs. Just check out this chart:
Amazon's done okay, Nvidia's gone bonkers, and the rest fall somewhere in between. They're all different beasts: Nvidia's all about artificial intelligence, Apple's a top-tier consumer brand, and Amazon's a hybrid of retail and cloud computing.
And when you look at their values and growth rates, it gets even clearer. Some folks say there's a bubble in these stocks, but companies like Meta and Alphabet, which make bank from ads, are priced pretty close to the market average. And their growth prospects? Off the charts!
If we're talking bubbles, maybe Apple or Microsoft have a case to answer. They're pricey, but their growth isn't as stellar. On the flip side, Amazon, Tesla, and Nvidia offer crazy growth with even crazier valuations. Surprisingly, when you crunch the numbers, Nvidia might be the cheapest of the bunch!
So, where's the smart money going: growth or value? Well, Unhedged, in its FT stock picking competition, has put its money on value for 2024. And just for fun, we've doubled down on value with a Mag 7 relative value portfolio. It's a risky move, sure, but if value stocks come back into fashion and AI hype takes a backseat, we might just come out on top.
We're curious: how would you build your own Mag 7 long-short portfolio? Microsoft and Alphabet are reporting earnings today, with Apple, Amazon, and Meta following on Thursday.
Now, onto China. It's a bit of a puzzle for US investors. On one hand, US assets aren't too affected by China's economy. But on the other, a strong Chinese recovery could shake up global markets.
So, how's China's stimulus game going? The government's pulling out all the stops, cutting interest rates and letting property developers borrow to pay off debts. They're even propping up the stock market! But despite these efforts, it feels like China's playing it safe. Unlike past mega-stimulus packages, this round feels more like patchwork.
Why the caution? Well, there are a bunch of factors at play, from local government debt to currency stability. It's a balancing act, and the result is a slow and steady easing of policy.
In short, China's economy might be shifting gears, but it's happening under the radar. Keep an eye on it!