Wrapping Up Q1: Let's Look Forward to the Rest of the Year!
Hello everyone! I hope you all had a wonderful Easter holiday filled with lots of delicious chocolate treats, just like I did. As we step into April and the spring season, I wanted to take a moment to provide a brief overview of the first quarter, focusing on the performance of the S&P 500 indicator and some specific stocks. This update serves as a continuation of the articles I shared back in January, so I encourage you to take a look at that for context.
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Before starting with this analysis, it is important to emphasize that the information provided is not intended as investment advice. The content on this publication and the downloadable resources it offers are not intended to be, and should not be interpreted as, financial advice. I am neither an attorney, accountant, nor a financial advisor, and I do not hold myself out to be one. The information provided on this document is not a substitute for financial advice from a qualified professional who has knowledge of the specifics and nuances of your unique situation.
It is crucial to note that nothing available here should be taken as a suggestion that you shouldn't consult with a financial professional regarding your specific circumstances. Regardless of the information presented, I strongly recommend seeking advice from a qualified professional to address your individual needs and concerns. Your financial well-being is essential, and personalized guidance is key to making informed decisions.
As highlighted in my earlier publication from January, the S&P 500 has exhibited a strong uptrend since the onset of the year, characterized by bullish momentum. The first quarter, in particular, provided an interesting opportunity to gauge whether the index would surpass its previous highs set before the Ukraine invasion, potentially signaling a forthcoming long-term correction. As April unfolds, the S&P 500 has already surpassed its initial target of 5000 points and appears primed for further gains, with projections reaching as high as 6000 points or even soaring to 7500 points. Now, let's swiftly delve into some noteworthy examples of contributors to this remarkable performance.
Kim Khan from Seeking Alpha, presented in march 2024 that the UBS equity team reported that the S&P 500 (SP500) (NYSEARCA:SPY) (IVV) (VOO) yielded a 7.1% year-to-date return, inclusive of dividends, driven primarily by increased multiples and, to a lesser degree, improved fundamentals. Notably, NVDA contributed 25% to this year's returns, while META, MSFT, and AMZN collectively contributed another 28%.
Conversely, AAPL and TSLA detracted 10% from the market's performance. Growth stocks (+9.5%) (IWF) outpaced Value stocks (+3.8%) (IWD) year-to-date, buoyed by superior fundamentals. Additionally, Large-cap stocks outperformed Small-cap stocks (1.5% vs. 7.1%), as multiples remained largely unchanged for Russell 2000 (IWM) constituents this year.
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Following seeking alpha, the Largest S&P 500 contributors year to date are:?
·????? Nvidia (NVDA), price return 59.8%, contribution 1.8%
·????? Meta (META), 38.5, 0.74
·????? Microsoft (MSFT), 10, 0.7
·????? Amazon (AMZN), 16.3, 0.55
·????? Eli Lilly (LLY), 29.3, 0.33
·????? Berkshire Hathaway (BRK.B), 14.8, 0.24
·????? Broadcom (AVGO), 16.5, 0.2
·????? AMD (AMD), 30.6, 0.18
·????? Netflix (NFLX), 23.8, 0.12
·????? Merck (MRK), 16.6, 0.11
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And the largest S&P 500 detractors year to date are:
·????? Apple (AAPL), -6.1, -0.41
·????? Tesla (TSLA), -18.8, -0.32
·????? Boeing (BA), -21.8, -0.08
·????? Intel (INTC), -14.3, -0.07
·????? UnitedHealth Group (UNH), -6.2, -0.07
·????? Adobe. (ADBE), -6.1, -0.04
·????? Humana (HUM) -23.5, -0.03
·????? Pfizer (PFE), -7.7, -0.03
·????? Newmont (NEM), -24.5, -0.03
·????? NextEra Energy (NEE), -9.1, -0.03
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Let’s have a look in some of them!
Nvidia
?"The sky's the limit!" Nvidia has propelled itself to historic heights, surging to levels aligned with Fibonacci sequences. Fueled by the AI revolution, its latest products have garnered applause from both investors and customers alike. However, as with any rapid ascent, the market inevitably needs to pause for breath. Prospective investors eyeing this rocketing company should exercise caution and strive to identify the optimal timing to board, especially if they wish to avoid potential technical corrections along the way.
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META
META's breakthrough, surpassing its prior monthly range peak in January, significantly limited the opportunity for new investors to enter the market at the onset of February. This surge underscored the importance of timing, emphasizing the need for strategic entry points to mitigate the risks associated with potential technical corrections. As the market dynamics continue to evolve, staying attuned to these fluctuations becomes imperative for investors seeking to make informed decisions and capitalize on growth opportunities while minimizing exposure to downside risks.
TESLA
As presented by Lora Kolodny in CNBC , the first quarter proved to be a challenging period for Tesla investors, as the company's shares saw a sharp decline of 29%, representing its worst quarterly performance since 2022. Investor concerns were primarily centered around Tesla's core business performance, particularly as the company prepared to report its first-quarter vehicle production and delivery figures. Despite offering incentives to buyers throughout the quarter, expectations remained subdued.
?Analysts' projections for Tesla's first-quarter deliveries varied widely, ranging from 414,000 to 511,000 units, with some revisions in March suggesting a more pessimistic outlook. Even independent industry researchers anticipate delivery figures falling below the most conservative estimates. Although deliveries serve as the closest approximation of Tesla's sales, precise definitions are lacking in the company's shareholder communications.
?In China, a wave of fully electric vehicles, some priced lower than Tesla's popular models, has intensified competition. BYD dethroned Tesla as the world's leading EV maker in 2023, maintaining pressure in the first quarter with new affordable models like the Qin Plus EV and BYD Seagull. Xiaomi entered the arena with its electric SUV, undercutting Tesla's prices. Despite price cuts by Tesla, sales remained sluggish, leading to production cuts at its Shanghai facility. Analysts foresee a challenging year for Tesla in China, with expectations of modest growth.
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From a technical standpoint, following its significant surge during the COVID period, Tesla is currently undergoing a correction phase. This correction could potentially present new opportunities for investors, possibly around the $100 mark or even lower.
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Amazon
As described by RYAN DEFFENBAUGH in investors.com, Amazon's stock has surged, but its continued success relies on enhancing profitability in online retail and fending off cloud-computing rivals. Despite regulatory scrutiny and heightened competition from companies like Walmart and Target, Amazon maintains its dominance in e-commerce and cloud services through AWS.
Recent expansions into pharmacy services and partnerships with companies like Eli Lilly demonstrate Amazon's commitment to innovation. While analysts project continued earnings growth for 2024, regulatory challenges remain a concern.
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From a technical standpoint, Amazon has demonstrated a robust bullish trend, with a notable entry point observed in October 2023. Analyzing the Ichimoku twist in the monthly timeframe suggests that prices have reached the upper boundary of a range. However, liquidity from the bearish trend remains around $190 USD, indicating the potential for a technical correction and presenting an intriguing opportunity for new entry positions. Investors may consider this scenario for strategic decision-making and capitalizing on potential market movements.
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Apple
According to Investing.com, Apple's stock took a hit in the first quarter due to worries about declining iPhone demand and regulatory pressures. Despite this, analysts at Bernstein suggest investors take a closer look, as the stock's value has dropped significantly below historical averages while its core businessolid.
Apple Inc. (NASDAQ:AAPL) saw an 11% decline in the first quarter, trading well below its typical valuation. Bernstein views this as an opportunity, considering the stock's underperformance and the enduring strength of Apple's fundamental business model. While concerns persist about slowing iPhone sales, especially in China, the upcoming release of the iPhone 16 with AI capabilities could spark a significant upgrade cycle, although past experiences suggest caution.
Despite regulatory challenges, particularly in Europe, Bernstein believes Apple's high-margin services segment remains robust, contributing significantly to its revenue and profits.
From a technical standpoint, while the Ichimoku indicator signals a long-term bullish trend, investors need to exercise caution as there's a possibility of a technical correction. If the bearish scenario materialize, it would be advisable to wait until prices reach the latest support level around $125 before considering re-entry into the market.
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Boeing
In 2024, Boeing's challenges seem to be compounding, with each incident further denting its reputation and market standing. The recent mid-flight plunge of a 787 Dreamliner, causing injuries to passengers, is just the latest blow in a string of setbacks. This incident follows closely on the heels of a previous incident involving a detachment of part of an Alaska Airlines 737 Max during takeoff, sparking concerns about Boeing's manufacturing quality.
The repercussions have been significant, with the temporary grounding of certain 737 Max jets, congressional hearings, production delays, and ongoing federal investigations. Boeing's stock has taken a significant hit, shedding a quarter of its value this year and erasing billions from its market capitalization. Beyond financial losses, Boeing faces legal challenges, potential fines, and reputational damage that could have long-term consequences.
The regulatory spotlight has intensified, with the Federal Aviation Administration (FAA) raising concerns about safety issues on Boeing's 737 Max and 787 Dreamliner models. Additionally, the NTSB's criticism of Boeing's documentation practices underscores broader quality control issues within the company. FAA Administrator Mike Whitaker's comments on the need for improvements in manufacturing processes further highlight the depth of Boeing's challenges.
In response, Boeing has pledged to address these issues with urgency, but the road to recovery remains arduous. Rebuilding trust among airlines, regulators, and passengers will require tangible improvements in safety, quality control, and transparency. As Boeing navigates these turbulent times, restoring confidence in its products and operations will be paramount to its future success.
From a technical perspective, Boeing finds itself in a challenging position. There is a possibility of sustained corrections, with the stock potentially reaching liquidity levels around $30, as indicated by the breaking order block in the quarterly time frame.
In summary, the S&P 500 continues to exhibit strong momentum, largely driven by the AI revolution and the significant influence of tech companies. However, economic pressures persist. Chair Jerome Powell hinted at a potential reduction in the pace of the balance sheet runoff during his post-meeting press conference in March, signaling a prevailing sentiment within the FOMC. Analysts predict that the Fed will announce its intention to initiate this reduction in June. This move aims to address reserve shortages at individual banks before they have broader systemic implications, potentially leading to a gradual reduction in the Fed's balance sheet size. As the saying goes, "Trees do not grow to the sky." Major players like Nvidia or Meta have demonstrated powerful dynamics, prompting investors to await technical corrections before jumping aboard this trend.
Thomas Roure, Experienced Manager dedicated to implementing best practices and competitive strategies for business growth.
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