06.06.2023
Can you afford not to?
The role the "magnificent seven" mega cap tech stocks are playing in 2023's equity market performance is well known. The AI buzz and their safe haven status are the stories typically used to explain price action.
But note the chart below which shows Qi model confidence for the seven blue chip names. Investors need to be aware that there is a strong macro element to these companies right now.
But note the chart below which shows Qi model confidence for the seven blue chip names. Investors need to be aware that there is a strong macro element to these companies right now.
Looking at the chart we can see:
- Nvidia is the only stock that remained in a strong macro regime over the last year. All the others started 2023 with a strong idiosyncratic component.
- There are two who still remain in micro rather than macro regimes. Amazon model confidence stands at 52% but even here that has increased 21% in the last two weeks. Tesla is the laggard - 36% model confidence, up 'just' 16% over the last two weeks.
- Five of these mega cap tech names are back above our 65% threshold for a macro regime - for the first time since Q4'22 macro fundamentals have strong explanatory power.
The good news is macro momentum is still positive. Qi macro-warranted model value continues to trend higher.
The book-ends are Apple where mode value is 'only' up 9.9% over the last month; through to Nvidia where, again over the last month, macro conditions have improved to the tune of 34.9% and Meta, up 32.6%.
The bad news is a fair degree of this good news is in the price. All screen as rich to macro conditions; most modestly so but this time the outliers are Amazon (1.7 std dev or 16.5% rich to model) and Google (+1.8 std dev, +13.5%).
AI will continue to dominate the headlines. Similarly, the success of the Pro Vision product launch is a huge issue for Apple.
Bottom up company fundamentals remain critical. But investors cannot afford to ignore the macro perspective.
Long positions in US mega cap tech stocks means you are running long global economic growth, short rate volatility and have an implicit yield curve steepening bias. Are those risks you're aware of and managing?
The book-ends are Apple where mode value is 'only' up 9.9% over the last month; through to Nvidia where, again over the last month, macro conditions have improved to the tune of 34.9% and Meta, up 32.6%.
The bad news is a fair degree of this good news is in the price. All screen as rich to macro conditions; most modestly so but this time the outliers are Amazon (1.7 std dev or 16.5% rich to model) and Google (+1.8 std dev, +13.5%).
AI will continue to dominate the headlines. Similarly, the success of the Pro Vision product launch is a huge issue for Apple.
Bottom up company fundamentals remain critical. But investors cannot afford to ignore the macro perspective.
Long positions in US mega cap tech stocks means you are running long global economic growth, short rate volatility and have an implicit yield curve steepening bias. Are those risks you're aware of and managing?
