Source: Zhitong Finance "Since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%)." With the rebound of the stock market, the old adage "Sell in May and Go Away" seems to have been a bad advice once again. Last month, the S&P 500 index rose 4.8%, the best May performance since 2009. The NASDAQ 100 index rose nearly 6.2%, and the NASDAQ Composite Index rose 6.9%. Goldman Sachs FICC & Equities Trading Division said: "History doesn't really support this saying. Don't sell, leave the market (go on vacation), and enjoy the good times." The rising trend is still to be continued? If history is any guide, it may indicate that the rise of the stock market is not over yet. Looking ahead to the rest of 2024, Scott Rubner, Managing Director of the Goldman Sachs Global Markets Division and tactical expert, pointed out the following historical background for investors. Rubner stated that the S&P 500 index has risen 10.7% year-to-date, and since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%). "Since 1950, the median return of the last 7 months of each year (June 1 to December 31) is 5.4%. In the aforementioned 21 cases, the average performance of the last 7 months increased to 8.1%." Rubner added. Rubner also pointed out that the NASDAQ index has risen for 16 consecutive Julys, with an average return of about 4.64%.
On June 17th, in a live dialogue between Howard Marks, co-founder of Oaktree Capital, a reputed Wall Street investor, and Peng Wensheng, chief economist of China International Capital Corporation, they shared their investment philosophy and market insights. Marks said that the market currently shows a very wild nature dominated by artificial intelligence(AI), which takes the upper hand and consequently deviates from the economic fundamentals. If emotions dominate and positive changes occur in the real world, but they do not meet investors' expectations, then the stock market may even fall. Using AI as an example, if overhyped, with excessive expectations, then failure to meet those expectations may lead to disillusionment and disappointment.$NVIDIA (NVDA.US)$On today's weather is good. On today's weather is good.
Marks said that he does not want anyone here to believe that he thinks artificial intelligence is a bubble. He has seen many bubbles, such as the Beautiful Fifty in the United States, the technology stock bubble in 1999, and the real estate bubble in 2006. These bubbles all share a common feature, which is that they are fleeting phenomena. Bubbles attract excessive attention and expectations for new things, and when those expectations fall short, the bubbles burst. Do not try to predict market ups and downs, but understand the essence of things. After understanding, the ups and downs of the market should be clear. In addition, do not be too clever and keep emotions under control.
Peng Wensheng raised the question, although the Federal Reserve has not yet lowered interest rates, why is the stock market still firm?
Marks pointed out that some stocks are performing very well, supporting the entire stock market and market expectations. The most outstanding performance this year is Nvidia.
At present, artificial intelligence AI is a new field, and the prospects of its chip market seem very bright. This trend supports the stock prices of companies such as Nvidia. Also, compared with other economies, the U.S. economy is stronger and attracts capital inflows.
In addition, as mentioned before, investors have an inherent optimism that can last a long time. If the market can foresee interest rate cuts from the end of 2022 to the second half of 2024, the market may not be so firm. This also reflects the unpredictability of the market.
Investors must accept and realize this. The market is not a sophisticated machine that follows physical laws, and A does not necessarily lead to B, which necessarily leads to C. The subject of the market is human, and the nature of humans is unpredictable.
The current market is showing a very fierce and wild side, which is in the dominant position, causing the market to detach from economic fundamentals.
Peng Wensheng proposed that although people generally have a positive view of artificial intelligence, Nvidia's stock price has soared as a result. However, from a business analysis perspective, there are still many unknowns about how artificial intelligence can be specifically integrated into business and bring profits, and there is a gap between people's perception and reality of artificial intelligence.
Marks said that your point of view is very accurate. Many people think that positive developments in the real world will inevitably lead to a rise in the stock market, but they ignore human nature and psychological factors. If emotions dominate, and positive changes occur in the real world, but these changes do not meet investor expectations, the stock market may even fall.
In the case of artificial intelligence, if there is excessive hype and high expectations for Nvidia, failure to meet expectations may lead to disillusionment and disappointment.
Marks does not want anyone here to believe that he thinks artificial intelligence is a bubble. He has seen many bubbles, such as the Beautiful Fifty in the United States, the technology stock bubble in 1999, and the real estate bubble in 2006.
These bubbles all share a common feature, which is that they are fleeting phenomena. Bubbles attract excessive attention and expectations for new things, and when those expectations fall short, the bubbles burst.
Artificial intelligence is the newest member of a series of new things. We can review the TMT bubble in 1999, the technology stock bubble, the e-commerce bubble, and so on. Indeed, the Internet has changed the world, but this does not mean that the stocks of Internet companies are all good stocks.
Peng Wensheng proposed that China's economy is relatively backward compared to the United States and Europe after the new crown epidemic. The US economy is performing first-class on a global scale, but you also mentioned future risks. If you want to point out the biggest risk, what should you pay attention to?
Marks said that he is not a qualified macroeconomist. Market overheating and recession cause periodic fluctuations. At present, there is no sign of market overheating, and the growth rate of the US capital market seems reasonable.
In the next two to three years, if there is an economic downturn, it is likely to be caused by geopolitical and other external factors rather than internal problems.
Peng Wensheng proposed, do you remember that before the COVID-19 pandemic, people said the US economy was experiencing the longest period of recession in history, the longest period since World War II. The COVID-19 pandemic broke out afterwards, so I want to ask, has the past state before the epidemic returned? The growth is not very high, and inflation is not very strong, but it will not bring about a recession. This theory is reasonable, what do you think?
Max believes that this is the longest decade of recovery and the longest bull market in history, lasting for ten years. The Fed has done a good job in this regard.
In fact, the Fed has indeed learned some lessons from quantitative easing and tightening. They have learned how to use these tools, not just past interest rate regulation, but now also use quantitative methods for regulation. This statement is reasonable and possible.
Peng Wensheng proposed, do you have any valuable advice for investors in the current market?
Max said that the advice is unchanged, don't try to predict market fluctuations, but understand the essence of things. After understanding, market fluctuations should be clear. Don't try to predict the timing of entering and exiting the market because it is very difficult. You must enter in a safe and reasonable manner with reasonable expectations.
In addition, don't be smart. Also, you need to control your emotions.
Don't sell out of panic, and don't go crazy because of temporary excitement. You need to have investment literacy, be steady-handed, control your emotions, and have reasonable long-term expectations. Successful investors need to possess these qualities.
Don't be smart. Also, you need to control your emotions.
Editor/Lambor