The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Nvidia
Futures sagged a little overnight and sank a little further as Europe traded. News wasn’t moving markets and the premarket weakness looked reflexive. The S&P opened down about 10 points and caught a persistent bid around 15 minutes later. The equity market gathered strength and then NVDA turbocharged things by announcing a $100 billion investment in OpenAI, so that they could buy Nvidia chips for a new megaproject. NVDA went vertical and the rest of the market went along for the ride. Yields climbed across the curve a little but had no influence on the mood of equities.
Capital flow was healthy at 114% today. Considering that headlines were banal, it suggests that capital is flowing for structural reasons. Nvidia’s announcement juiced its own stock and catalyzed the broader market higher on an otherwise quiet day. Technicals look overbought in the short term but the bullish trend is just so strong and so obvious, I don’t think short term influences will be as meaningful as usual.
The equity market printed new all-time highs… again… and I don’t see sidelined investors staying on the sidelines for long. They have missed out on too much upside and they will have to capitulate and chase the tape higher. I don’t know how long this breakout will last but the writing is on the wall. We have to climb higher before the tape pulls back. And whatever the pullback, dip-buyers will pounce fast.
As a market, I think we’ve crossed a psychological line. The trend higher has been so consistent and so lucrative and *so long-lived* that it’s going to take a monumental change in the world to derail the train. No small headline, no small data disappointment, no small selloff is going to change the psychological tide.
This is very dangerous in the long term. But in the short and medium term, it is perception creating reality.
Many market pundits have likened the AI-driven gains to the dot-com frenzy of the late nineties. The volatility is nowhere near the same though. The casino-like atmosphere is also missing. However, the supreme confidence that the future must be higher is similar. There is a near-universal agreement that stocks are free money. In the 90s, the free money required enduring big volatility and buying anything internet-linked. Today, free money comes with little volatility and indexing. Outperformance comes from overweighting tech, specifically AI.
This cannot continue indefinitely… but when’s it going to end? Next week? Nah. Next month? Probably not. Sometime next year or even further out? That sounds more reasonable.
We’re only at the beginning of irresponsible valuations and returns. Chances are we have quite a ways to go. It has to become so eye-poppingly absurd that pundits, investors, and naysayers all throw up their hands and just rationalize why the party should continue forever.
See you tomorrow.
-Mike
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