Displaying items by tag: tech

Friday, 15 March 2024 04:13

Is the Stock Market Rally Nearing Exhaustion?

2024 has seen the stock market make 17 closing, all-time highs. Despite this strength, many are noting some reasons to be cautious about equities due to some concerning developments under the surface.

 

In essence, the strong performance of the indexes and mega-cap technology stocks is masking hidden weakness. This is reflected in the Dow Jones Transportation Average failing to confirm the new highs of the Dow Jones Industrial Average which is a ‘non-conformation’ according to Dow Theory. Dow Theory warns that a new high by the Industrials but not by transportation stocks is prone to failure. Similarly, riskier parts of the market like high-yield bonds and high-beta stocks are also underperforming Treasuries and low volatility stocks, respectively. 

 

The leader of this bull market has been technology due to excitement around AI and strong earnings growth from leading tech companies. However, there are signs of exhaustion as the relative ratio of the S&P 500 tech sector has failed to confirm the breakout in the S&P 500. According to David Rosenberg, the founder and President of Rosenberg Research, “These were the most important stocks for the market, and no longer look to be in control.” He believes that the longer these measures fail to confirm the new highs in the S&P 500, the larger the risk of a reversal. 


Finsum: 2024 has been a strong year for the stock market with the S&P 500 making new highs. Yet, there are some signs that the rally may be nearing exhaustion. 

 

Category: Eq: Total Market 

Keywords: #S&P 500; #bull market; #tech; #equities; #risk; 

Published in Eq: Total Market
Sunday, 10 December 2023 08:54

Will Direct Indexing Soon be a Household Term?

Thanks mainly to a blend of enhanced technology, lower trading costs, and a growing appetite for personalized investment strategies, direct indexing may become a term as common with investors as mutual funds and ETFs. A recent article in USA Today highlights this trend, and when a broadly read news source such as this writes about a subject, it’s usually a clear sign it has begun to resonate with the masses.

 

So, what is driving this surge in popularity? The answer lies in the convergence of investor preferences and improved platform capabilities. While investors are always keen on the potential for total return, they also seek flexibility, cost efficiency, and favorable tax treatment—benefits that direct indexing is uniquely positioned to provide.

 

Direct indexing allows investors to tailor their holdings to reflect personal values or strategic preferences, such as ESG considerations or specific sector exposures. Moreover, the tax optimization potential of direct indexing allows for more efficient management of capital gains taxes, a feature particularly attractive to savvy investors looking to maximize their after-tax returns.

 

As direct indexing becomes more widely adopted by advisors and platforms, we’ll watch with interest to see if this investment approach moves from the domain of the affluent and the institutional to the everyday investor.


Finsum: Direct indexing's spread to lower account balances could make it as popular a product type as mutual funds and ETFs.

 

Published in Wealth Management
Thursday, 22 September 2022 05:10

ESG Funds Heavily Exposed to Tech Stocks

According to an analysis by ESG specialist Elisabeth Steyn, U.S. equity funds that are classified as ESG, have on average 29% of their holdings in tech stocks. Steyn told Alice Ross of Financial Times that the figure is well above the 23% average for general equity funds. Ross used the iShares ESG Aware MSCI USA ETF as an example. The fund’s top holdings include Apple, Microsoft, Amazon, Tesla, and Alphabet. This may help explain why many ESG funds are seeing heavy losses this year. Ross attributed the reason to two factors. First, ESG funds are exclusionary. Once certain areas of the market are stripped out, tech is typically over -represented. The second reason is that ESG rating agencies can differ greatly on which companies are sustainable. That reason alone can help explain why the SEC is going after ESG labeling. Ross also noted that ESG funds outside the U.S. are not typically overweight in tech stocks.


Finsum:U.SESG funds are heavily overweight in tech stocks due to differing ESG labels and exclusionary factors.

Published in Wealth Management
Monday, 05 September 2022 12:02

Cybersecurity Stocks Beating the Market

As investors grapple with inflation and economic uncertainty, there is one industry that has been outperforming the market, and that’s cybersecurity. While most technology companies have cautioned investors about slower corporate spending, cybersecurity firms are still seeing massive demand. For instance, CrowdStrike and SentinelOne, both recently increased their forecasts for this year. While cybersecurity has always been important, companies are now even more concerned about system vulnerabilities due to an increase in cyber-attacks amidst the war in Ukraine. In addition, the advent of remote and hybrid working arrangements has also increased the demand for cybersecurity solutions. While companies can trim spending on software items such as CRM, cybersecurity is too important to risk. The minute a company lets up, they are at risk of a ransomware attack. This has resulted in the Global X Cybersecurity ETF (BUG) outperforming the NASDAQ this year.


Finsum:While other software companies are seeing slowing demandthe sheer necessity of cybersecurity has resulted incybersecurity ETFs outperforming the NASDAQ this year.

Published in Wealth Management

Analysts at Jefferies are warning investors to avoid small-cap tech stocks due to their high valuations and falling earnings and revenue estimates. In a note, analysts said that their current valuations of 3.4 times sales are not cheap compared to their long-term average of 2.1 times sales. They believe there are “too many nonearners” and then tend to perform poorly when the Fed is hiking interest rates. However, the analysts aren’t telling investors to avoid small-cap stocks altogether, as they like names in the healthcare and consumer-discretionary sectors, which have been outperforming. Analysts stated that valuations in healthcare stocks haven’t jumped as much as their stock performance. Plus, mergers and acquisitions have picked up in the healthcare sector, which the analysts believe could help drive performance. They also believe that discretionary stocks are the cheapest sector in the small-cap range and they tend to outperform when coming out of bear markets.


Finsum:Jeffries analysts are warning investors to steer clear of small-cap tech stocks due to high valuations and falling earnings and revenue estimates. 

Published in Eq: Small Caps
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