Chronicle is your weekly guide to understand the fascinating investment world through insightful, yet easily comprehensible charts. These are your window into the dynamic realm of finance, sparking ideas and conversations that enrich your discussions with colleagues and friends.
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Rotation From Large-Cap to Mid and Small-Cap Growth
Nasdaq will do a rare special rebalance event happening by July 24th. This rebalance aims to maintain index integrity by capping the weight of stocks with individual weights above 4.5% at 40%. Right now, the Magnificent Seven ( AAPL 0.00%↑ , AMZN 0.00%↑ , GOOGL 0.00%↑ , META 0.00%↑ , MSFT 0.00%↑ , NVDA 0.00%↑ , and TSLA 0.00%↑ ) are leading the charge, but will their dominance continue? Or will it trigger the rotation to the laggards: small/mid cap?
Core Inflation Below Fed Fund Rate
Core inflation is a better measure of inflation because it excludes volatile components, such as food and energy. The Fed Fund Rate is a crucial component of monetary policy aimed at managing inflation. Since September 2022, core inflation has been on a downward trend and is currently below the Fed Fund Rate.
US Dollar Fall Below Strong Support
The subdued inflation could solidify the notion that rate hike is ending, as with the strengthening US dollar. However, it would be wise to dismiss any wishful thinking. The US dollar remains the predominant global currency, asserting its prominence in the financial realm.
NVDA is Priced for Perfection
Known as the ultimate beneficiary of GPU chip usage, spanning from gaming, crypto, data centers and deep learning, NVDA 0.00%↑ has impressively doubled its price year-to-date. However, the semiconductor industry is a rapidly evolving landscape. Can NVDA stay ahead of the curve? The market thinks so, expecting 34% and 36% revenue and EPS growth, respectively, per year for the next five years.
Lower Bar for This Earnings Season
The FY2023 earnings have been continuously revised down. The earnings estimate has been revised down by -10.2% compared to a year ago. According to the recent Factset Earnings Insight, consensus expect -7% year-on-year decline for Q2 2023 earnings. Moreover, 60% of S&P 500 companies that announced guidance have issued negative EPS guidance. In this lower-bar environment, those who beat expectation will be highly rewarded, while those who miss will be severely punished.
