Displaying items by tag: s&p

For value investors looking for opportunities, two large-cap stocks stand out this quarter due to their strong economic moats and undervaluation. PayPal (PYPL) is recognized as a leader in the electronic payments space, with a narrow economic moat that should help it remain competitive for years to come. 

Despite recent challenges, including increased competition and the reversal of pandemic-driven growth, PayPal’s focus on top-line growth and product innovation could restore its momentum over time, making its stock price attractive at $104 per share. 

Nike (NKE), the world’s largest athletic brand, also enjoys a wide economic moat but has faced difficulties like soft demand and a leadership change. Despite these setbacks, Nike’s competitive strengths and its new Triple Double strategy could revitalize growth. 

Finsum: Technology is also a place to consider large cap exposure, and the small cap run could mean it’s a great buy for larger cap stocks currently. 

Nvidia's stock surge has had an outsized influence on the S&P 500 this year, accounting for nearly a quarter of the index's 17% gain. The company's 140% rise, driven by strong demand for its AI chips, has been a key market driver, with a single-day 8.2% rally lifting the S&P 500 to its biggest gain in almost two years. 

Investors are concerned that a downturn in Nvidia could drag the broader market down, as the index has struggled to rise on days when the chipmaker's shares decline. 

Nvidia’s dominance in the options market, where it accounts for up to 30% of daily stock options volume, has further amplified its stock movements. Analysts warn that if demand for Nvidia's products weakens, it could trigger a broader market sell-off.

Finsum: Investors need to consider how options plays can lead to better outcomes for their portfolios, and situational plays that compliment their current book.

The domestic broad-market ETF sector is highly competitive, with popular options like Vanguard's and iShares' total market and S&P 500 funds. While these funds offer low costs, blended styles, and broad sector coverage, there are lesser-known alternatives worth considering. 

For broad U.S. market exposure, the Schwab U.S. Broad Market ETF (SCHB) and the SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM) provide similar market coverage at lower costs. For those focused on large-cap exposure, the SPDR Portfolio S&P 500 ETF (SPLG) and BNY Mellon US Large Cap Core Equity ETF (BKLC) offer even lower expense ratios. 

Using these alternatives can enhance tax-loss harvesting strategies while maintaining market exposure. By diversifying beyond the usual Vanguard and iShares funds, investors may find cost savings and strategic benefits.

Finsum: You can still implement thematic investing with these ETFs, so keep this in mind when making decisions. 

Small-cap stocks have recently caught the attention of investors, driven by expectations of upcoming interest rate cuts signaled by Federal Reserve Chair Jerome Powell. Following a significant selloff in early August, there has been renewed interest in small-cap ETFs, like the iShares Russell 2000 ETF, which saw a net inflow of over $688 million last week. 

However, the erratic nature of these investments has some investors weighing the potential for a rebound against the risks associated with this speculative market segment. 

Historically, small-cap stocks have been more sensitive to changes in interest rates and economic conditions, benefiting more directly from lower borrowing costs. The S&P SmallCap 600 Index, for example, has shown gains following initial Fed rate cuts, but with notable downturns in past cycles such as 2007 and 2019. 

Finsum: There is going to be a lot of potential growth for interest rate sensitive small caps as rate hikes ramp up. 

Goldman Sachs projects that the stock market could see a 15% rise by year-end if mega-cap tech stocks continue their strong performance. The bank argues that tech stocks are not currently in a bubble, as investors are focused on companies with profitable growth rather than speculative ones. 

Goldman’s David Kostin notes that while long-term growth expectations for the S&P 500 are slightly above average, they remain well below levels seen during previous market bubbles. Despite concerns about the high concentration in a few tech giants, Goldman believes this is justified given their rapid growth compared to other S&P 500 companies. 

The valuation spread between market-cap-weighted and equal-weighted S&P 500 indexes does not suggest bubble conditions, staying below historical extremes. 

Finsum: We would look into more traditional measures like price to earning ratios if we are concerned about a bubble forming, rather than just long run growth.