Hey Influence Traders,
Another wild week in the world of finance.
Some markets are up, others are down.
We’ll look at tech/growth, value and crypto.
We lost a legend, if not a quirky one – John McAfee went out like he lived his life … with controversy.
John, who was a tech pioneer with a big personality, died at the age of 75 in a Spanish prison.
The official story is that he took his own life after a Spanish court said he could be extradited to the U.S. to face tax-evasion charges.
McAfee led a colorful life after leaving his namesake company McAfee (Ticker: MCFE) in 1994, traveling the world stirring up controversy, including accusations of drug-dealing, drunken driving, illegally entering Guatemala, polygamy, and running (allegedly) for president.
He died with no less controversy having recently put out a video saying that if it is reported that he took his own life it was a cover story for his murder.
Another conspiracy is just what the world needs.
MCFE remains a powerful force in the individual cyber defense market, being a go to internet defender software for many computers.
Our cyber play was up!
We closed our Global X Cybersecurity ETF (Ticker: BUG) Sep17 28 calls for a 37% gain.
Market Breakdown – Growth vs. Value
A rally by Tesla Inc. (Ticker: TSLA) drove the Nasdaq to a record-high close on Wednesday.
Gains in Nvidia (Ticker: NVDA) and Facebook (Ticker: FB) didn’t hurt either.
TSLA jumped 5.3% on the announcement that it had opened a solar-powered charging station with on-site power storage in Lhasa, the capital of Tibet. That is TSLA’s first charging station facility in China.
It’s a green energy play squared.
On the other side, the S&P 500 dipped, despite news that U.S. factory activity has hit a record.
Yes, activity is up, but manufacturers are still struggling to secure raw materials and qualified workers, which is raising their costs of production beyond what they can raise consumer prices.
Eight of the eleven major S&P sector indexes fell.
As long as rates stay low, growth stocks like TSLA and NVDA should continue to outperform more value oriented, interest-rate sensitive stocks, like banks and materials companies.
What About the Fed?
Markets running hot will put a lot of pressure on the Fed, which continues to send mixed signals.
Fed Chair Jerome Powell reaffirmed that the central bank does not intend to raise interest rates too quickly based only on inflation fears.
But those comments follow the Fed’s announcement, just a week ago, that we could see interest rate hikes sooner than anticipated, likely in 2023.
The Fed hates clarity.
Tech Bubble or Long-Term Play?
Like the Dotcom Bubble, current tech valuations are “speculative.” Unlike the Dotcom Bubble, some of today’s high-growth tech stocks have a business model to be able to grow into those valuations within a few years.
Remember, typically in a late-stage growth rally you will start to see a rotation away from high test growth names into more value-oriented stocks.
However, many of the big tech names offer value at current prices, so the model is being thrown off.
I think the tech rally is going to be with us for a while.
What About Crypto?
The crypto markets are getting their a$$es handed to them at the moment.
I think that we are going to see a period of sustained volatility.
As long as equity markets are on fire crypto is going to stay wonky.
You had a lot of people get in late to the game who now can’t stand the heat because their paper losses are huge.
They are bailing in droves.
Also, professional (and individual) allocators who move between asset classes are running the up-equity market, which means crypto is gonna be down and/or volatile until an equity profit taking pullback begins.
I’m going to keep my eye on the Fed to see when it will finally move to stymie inflation. Until then, enjoy the equity bull run … which Andrew and I are going to trade.
Cutting Through the Noise for You.