A tidal wave of cash is headed for markets post-Nvidia results, this strategist argues.
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With one eye open for Fed minutes and any insights into rate-cut plans, investors may hit the snooze button until Nvidia reports after Wednesday’s close.
The bar has been set high for the heavy hitter which, alongside the S&P 500 SPX and Nasdaq COMP , recorded a fresh record close on Tuesday.
And there’s more where that came from, says our call of the day from Fundstrat’s co-founder and head of research Tom Lee, who sees a wall of pent-up investor cash flooding markets following Nvidia results.
“I think there’s a lot of hesitation out there, but in our view markets are going to rally post Nvidia results, and so I’d recommend being overweight stocks into Nvidia’s reports,” he told clients in an update.
He notes investors have positioned themselves extremely cautiously ahead of the tech behemoth’s results, citing data that shows over the last three weeks, cash balances have been rising for both institutional and retail investors. Cash balances rose $16 billion just in the past week, “a significant amount of added liquidity on the sidelines,” said Lee.
“Anecdotally, in our recent conversations with institutional investors, we get the sense the investors have been cautious ahead of NVDA results, because of the size and importance of the company to the broader technology thesis,” he said.
His post-Nvidia rally prediction is backed by some stats on the typical market reaction to the last eight results. “The average is 20%+ in the last two years, so we think the probabilities favor” a big move post Wednesday’s results, he said.
Nvidia has been consolidating over the last eight weeks — echoing a June to December lull that followed a “pretty explosive move in stocks. If fiscal Q1 is the end of that consolidation, that means Nvidia could have a pretty big move and I think it’s going to pull money off the sidelines. There’s still a lot of cash on the sidelines, and now with Nvidia behind us, I think investors are going to be putting money to work,” he said.
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The strategist said seasonal factors also remain positive for the month. For example, when the first quarter is positive and April is negative for the S&P 500, May is higher 73% of the time, in data stretching back to 1927. And June in those circumstances was positive 100% of the time, with a median gain of nearly 4%, he notes.
A last word of advice from Lee is to stick to what’s working this year. That means AI-related names such as Nvidia, Cadence Design Systems CDNS, 1.47% , Arm Holdings ARM, -0.54% , Global X Artificial Intelligence & Technology ETF AIQ ; in the Ozempic space, Eli Lilly LLY, -0.44% and Novo Nordisk NOVO.B, -1.20% ; plus financials and industrials via Industrial Select Sector SPDR XLI and Financial Select Sector SPDR ETF XLF .
He also likes bitcoin BTCUSD, -0.34% and its proxies — Marathon Digital MARA, 2.08% , PayPal PYPL, -1.92% , Coinbase COIN, -0.07% and MicroStrategy MSTR, -0.21% , alongside small-caps via the iShares Russell 2000 ETF IWM and iShares Core S&P Small-Cap IJR ETFs.
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