Contents:
Changes to Research
Macro Update & Sector Screen
Pass/Fail Screen for AI Universe
Changes to Research
I’ve decided to start publishing my research on a daily basis. Each day will have a specific focus:
Monday: The Week Ahead - Potential market-moving catalysts (news, earnings, data, etc).
Tuesday: Macro Watch - Macro themes that are driving the market.
Wednesday: Sector Watch - Sector rotation, leadership, and where the next opportunities may emerge.
Thursday: AI Model Update - An update on my AI themed model.
Friday: The 30,000 Foot View - An opinion/observation piece on the themes driving the market/economy.
Each day I will also be including the names within my AI Universe (these are the companies that are involved in the AI theme) that pass or fail my screen. These are not just technology companies, but companies across various sectors that are benefiting from the growth in AI.
Macro Update
Despite weakening market breadth, which I will discuss in a moment, the short, intermediate, and long term trends of the S&P 500 index are all positive:
Current Bull/Bear Trend for the S&P 500 Index
Taking a look at the Relative Rotation Graph (RRG) of the broad indices, we can see a very different picture emerging compared to a few months ago.
After a summer that favored low-beta and value names (and energy due to the Iran conflict), the market is starting to refocus on the large cap, higher-beta areas.
Large cap growth stocks and the tech-heavy QQQ continue to see improving momentum and relative strength vs the S&P 500 index as the market is starting to refocus on the AI trade AND getting ready for the 4th quarter of a midterm election year, which has been very strong in the past.
Average 4th quarter S&P 500 return since 1960
Data source: Optuma
This occurs as investors start to position themselves for the year following a midterm election, which has historically been the strongest of the 4 year election cycle.
Well, what about market breadth?