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The AI Enthusiasm Is Losing Some Steam


AI enthusiasm BullFrog AI making AI more accessible Investing In AI Elevators Technology Stock Rally

In his Daily Market Notes report to investors, Louis Navellier wrote:

Market Pause

Stocks trend lower after yesterday’s pullback/partial recovery. Crude oil hits high for the year.

Stocks seem to have finally taken a pause after a blistering first seven months of the year. It’s hard for investors to be too surprised. A 5% – 10% pullback is overdue, which has yet to happen, especially with valuations so relatively high while at the same time the economy digests unprecedented monetary tightening by central banks around the world.

Keeping things in perspective, while the US markets have had a great 2023, several emerging markets have done even better in a general risk-on sentiment of buying the laggards. Mexico’s ETF (EWW) is up 24%,  Ireland (EIRL) is up 27%, and Nigeria (NGE), thanks to crude oil, is up 29%. The best country YTD is Greece (GREK), up 43%, on the heels of a credit rating update on surging tourist activity.

The global rise of markets is particularly impressive considering all the problems China seems to be having in recovering from its delayed rebound from the pandemic, with not only falling imports and exports, but today they reported that consumer prices have fallen in July 0.3% and factory prices fell 0.4%, the first time in 2 years.

Core China CPI came in at +0.8%, the highest since Jan’23, and tourism prices are up 13.1% but consumer sentiment there remains jaded, and the primary offset expected is more government spending. China’s problem is a pointed reminder that while inflation is difficult to rein in, deflation is a much worse circumstance to deal with.

That crude oil prices remain strong is also a bit surprising in the shadow of a weak China, the number one importer.

Another cloud on the horizon is US consumer debt, with household debt hitting a fresh record of over $17 trillion, including a 4% jump in credit card debt in 2Q23, up $45 billion to over $1 trillion for the first time ever for one quarter.

AI Losing Steam

While the earnings season remains largely positive, the AI enthusiasm has lost some steam as the timing of profitable implementation becomes inevitably stretched in reality. Indeed, Robotics and AI names (BOTZ) are down 4.8% in the last month, the QQQ is down 3.1%.

A soft landing remains the consensus, but stocks priced on strong growth rates are vulnerable to growing uncertainties of continued strong consumer spending, as well as high levels of government deficit spending on the back of much higher interest rates. We may have reached the phase where the major indexes will lose momentum as Megatechs lighten up on their very high valuation multiples, which will challenge the chase expected by money on the sidelines, where we saw money market funds inflows rise $21 billion last week.

For now, strength is being seen where cash flows are clearly on the rise, with oil E (XOP) up 15.2% in the last month, oil service (OIH) up 12.3%, and Pharma (PJP) up 8.7%.

Sector bets and individual stock picking look to be taking over from broad index gains as Megatechs cool and investors are becoming more cautious until the picture for 2024 earnings comes more into focus.

Coffee Beans: Level Up

The video game market is projected to generate about $188 billion in 2023, up 2.6 percent from the year prior, with most of it generated in the Asia-Pacific and North American regions. This makes the video game industry the entertainment sector with the highest revenue potential. Source: Statista. See the full story here.


Source valuewalk

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