Looks like a down day in the market. Stocks are down, bonds have fallen, gold has lost its shine but oil is up. A barrel of WTI will cost you $73.30 today.
Assets have fallen because our beloved Fed Chair Jerome Powell said that he was in no hurry to cut interest rates. Powell said, "With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance."
Inflation might be lurking out there behind the eggs, waiting to pounce. Tariffs were also a concern as the market wonders what President Trump is up to next.
On the oil side, production is off in Texas, the OPEC group has managed to cheat less than what is usual for them, and Trump threatened to bring down hell on the Palestinians if they don’t release the hostages. This last bit is said to have pissed off the folks in the Middle East even more than usual and drummed up the noise of war and its possible impact on oil prices.
Steel and aluminum stocks continue to do well due to new 25% tariffs. Here is the company you should buy for that.
Big Star Stocks
As I was poking around looking for something to buy, a task that is getting harder and harder in this overbought market, I looked up the best-performing stocks of the last 52 weeks. Out of the top fifty, fourty of them were down. And they were down big.
OKLO, the nuke stock that Brit recommended you sell a few weeks ago for 95% gains is down below his sell price. Soundhound, the AI solution for drive-through chicken joints, has fallen 7%, and Rigetti, the quantum name, is down 8%. ASTS, the space phone stock I told you about last spring when it was at $8 before it went on an epic run to $39, is down 5% today.
The thing is that all of these big winners over the past year were all story/momentum/growth stocks. Few of them have earnings. Many (like quantum computing and nuke power stocks) are unlikely to have earnings for the next decade, if ever.
There are some like Palantir which do have earnings but trade at a P/E of 600. HIMS is better with a P/E of 101. I get the feeling that a year from now they will be much lower and we will be thinking of them the same way we think of Teledoc or Peleton or the other once high-flying Covid-era stocks.
Mag-7
In an interesting note Cantor Fitzgerald came out today and said the Magnificent Seven group of stocks are “vulnerable,” suggesting that fund flow could shift elsewhere.
Old Fitz wrote: “We think the Mag7 is vulnerable and we could see money move out of the group with some of the funds flows rotating into other parts of tech and other sectors.”
They had five reasons for this vulnerability.
No. 1: Revenue projections for 2025 are dropping for 5 out of the 7 stocks.
No. 2: Revenue growth is on the decline and is expected to continue decreasing in 2025 and 2026.
No. 3: Capital expenditures are rising significantly for 3 of the 7 names, but revenue forecasts are decreasing.
No. 4: Both institutional investors and retail investors have heavily invested in these stocks over the past two years, leading to higher exposure levels.
No. 5: This group has significantly outperformed the equal-weighted S&P 500 over the last two years.
Oh no! If the Mag 7 starts to go down who will take over? What will happen to the heavily weighted S&P 500? How will anyone get rich and retire? Well, I’ll tell you how on Thursday…
All the best,
Christian DeHaemer
Outsider Club
Iran Sanctions:
https://www.outsiderclub.com/new-iran-sanctions-buy-this-stock/
Phone Home:
https://www.outsiderclub.com/finally-a-ufo-etf/
I Want Me Gold:
https://www.outsiderclub.com/gold-hit-an-all-time-high-you-buying/
