Latest news with #BloombergMagnificent7Index
Business Times
18-05-2025
- Business
- Business Times
Big Tech goes from stock market's safest bet to biggest question
FOR most of the past decade, a handful of high-flying technology companies have pushed the US stock market to record highs and become cornerstones of investment portfolios. But that's collapsed this year. Despite the S&P 500 Index clawing back into the green for 2025 after being whipsawed by President Donald Trump's vacillating trade policies, tech giants like Apple, Alphabet, and Tesla are still down. The Bloomberg Magnificent 7 Index – which includes those companies as well as Meta Platforms, Microsoft and Nvidia – is underperforming the S&P 500, and if that holds through Dec 31, it would make this just the second year in the last 10 where that's happened. It's a far cry from last year, when technology and telecommunications stocks both rose more than 35 per cent to lead the S&P 500's 23 per cent gain. This year, typically lagging groups like industrials, utilities and financials are driving the stock market's rebound. Whether Big Tech can re-establish its historical dominance in 2025 is the existential question facing investors as they start positioning for the back half of the year. 'The market is starting to look back more at individual stocks and companies and financial strength and innovation rather than letting the uncertainty around tariffs and where they may go really dominate the conversation,' said Rick Gardner, chief investment officer at RGA Investments. 'And if you want to start talking about the US economy and you want to start talking about technology, that's a really bright story.' Gardner has been buying Big Tech stocks for his clients over the past month as the market has rebounded but they've languished. He's not alone. Signs are emerging that professional traders are increasingly wading back in after slashing equity positioning amid the economic uncertainty triggered by Trump's global trade war. For example, hedge funds on Tuesday snapped up US equities at the fastest pace since Apr 9, the day the S&P 500 soared 9.5 per cent after Trump announced his tariff reprieve, according to Goldman Sachs' prime brokerage desk. Technology stocks were the biggest beneficiaries of the buying. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Not a good setup The flipside of this optimism is the reality that tech stocks have had a massive run-up over the past few years, and with the economy in flux the risk is these shares could have much more room to fall. Betting on Big Tech a decade ago resulted in a gain of 2,179 per cent, compared with 181 per cent for the S&P 500, excluding dividends. 'I think we're going to stall out here,' Lisa Shalett, Morgan Stanley's chief investment officer, said on Friday (May 16) in an interview. 'It's hard to justify the numbers.' Hedge fund manager Michael Burry, who's famous for his 2008 bet against the housing market that was featured in The Big Short, bought put options, which profit from price declines, on Nvidia in the first quarter, according to the latest 13F regulatory filing by his firm, Scion Asset Management. However, the filing also added a note that the securities 'may serve to hedge long positions which are not eligible to be reported'. That said, the stock market's big 'what if' question is: If those Big Tech laggards start to outperform again, what does that mean for the S&P 500? The Magnificent Seven accounts for about a third of the benchmark's market capitalisation. So if the mega-tech index, which is down 4.2 per cent for the year compared with a 1.3 per cent rise in the S&P 500, reverses course and takes the lead, how much does the S&P rally? 'I think all-time highs are possible,' Gardner said. 'I would hate to be the one betting against our technology industry and innovation right now.' He has a point, since the S&P 500 bottomed on April, tech stocks have led the way higher, with the sector rising 31 per cent compared with a 20 per cent gain for the entire index. Of course, not all Big Tech stocks have been underperformers this year. Meta Platforms is up 9.4 per cent to lead the Magnificent Seven, while Microsoft has gained 7.8 per cent. Both have limited exposure to tariffs and posted better-than-expected earnings results. Nvidia, which reports on May 28, is roughly flat for 2025. Betting on a tech rally comes with its own risks. Trump could resume his hard-line approach to tariffs when his 90-day pause ends in July. And the jury is still out on whether a demand shock from his levies will derail the US economic expansion and cause inflation to flare up again. Economic fears So far businesses have absorbed most of the costs from Trump's tariffs, but Walmart said in its earnings report last week that consumers will start to see higher prices soon as it works through inventory and begins to pass on the expense of newer merchandise. Meanwhile, US consumer sentiment is at the second-lowest level on record and inflation expectations are at multi-decade highs, according to the monthly survey by the University of Michigan. While the factors weighing on big tech laggards vary, the common challenge most of them face is exposure to China, which has been hit with the highest tariffs by the Trump administration. For instance, the majority of Apple's most important device, the iPhone, are still mostly made in China, and the country accounted for 17 per cent of its 2024 revenue, according to data compiled by Bloomberg. The company earlier this month reported a 2 per cent decline in China sales in its fiscal second quarter, short of analyst expectations. Apple has lost more than US$700 billion in market value since closing at a record on Dec 26 and is now worth less than Microsoft and Nvidia. Alphabet, meanwhile, faces mounting concerns about risks to its Google search business from artificial intelligence chatbots like OpenAI's ChatGPT. Searches on Apple's Safari web browser fell for the first time in April, an Apple executive said in court testimony last week. Still, hope for equity investors remains. In many ways the most encouraging sign for the stock market has been the S&P 500's ability to rebound without big tech companies leading, according to George Maris, chief investment officer and global head of equities at Principal Asset Management. 'You don't necessarily need the largest capitalisation securities to do great for a good, constructive market,' he said. 'You probably have a healthier market, a healthier, more fundamentally-oriented market, if you have greater participation across the investment universe.' BLOOMBERG
Yahoo
26-03-2025
- Business
- Yahoo
Amazon Allure Grows With Cheaper Shares Than Apple, Walmart
(Bloomberg) -- Inc. shares are starting to look like a bargain, a word that has rarely been used to describe the stock. They Built a Secret Apartment in a Mall. Now the Mall Is Dying. Why Did the Government Declare War on My Adorable Tiny Truck? Trump Slashed International Aid. Geneva Is Feeling the Impact. How SUVs Are Making Traffic Worse Paris Votes to Make 500 More Streets Car-Free The recent drop in the company's share price — coupled with expectations for durable long-term earnings growth — have brought its valuation to levels rarely seen since the company went public in 1997. This could limit additional downside in the event of further weakness in the broader market. 'You'd be hard pressed to look at Amazon's multiple here and not see it as appealing relative to both tech and retail, and given its multiple secular tailwinds, this looks like an incredible opportunity,' said Clayton Allison, portfolio manager at Prime Capital Financial. While tech valuations have fallen broadly in the recent market selloff, the ratio of Amazon's price to its earnings stands out relative to its history. The stock is trading at around 28 times its estimated future earnings, which is roughly half the 10-year average, and below that of major retail rivals that used to have lower multiples like Walmart Inc. and Costco Wholesale Corp. It also trades at a discount to Apple Inc., which was several times cheaper than Amazon just a few years ago. The valuation has fallen in recent years because Amazon has focused on efficiency and cost cutting, which has lifted its profitability. In the short term, though, the hit has largely been a result of the broader market selloff. Amazon shares are 6.3% lower this year, and are coming off seven straight weekly declines, the longest such streak since May 2022. While Amazon is lagging the Nasdaq 100 Index since the beginning of the year, it has performed modestly better than the Bloomberg Magnificent 7 Index. The stock dipped 0.1% on Wednesday. Wall Street remains almost uniformly positive on the fundamentals of Amazon's e-commerce and cloud-computing business, Amazon Web Services. More than 95% of the analysts tracked by Bloomberg recommend buying the shares. It also trades more than 30% below the average analyst price target. Brian White, an analyst at Monness Crespi Hardt & Co., recently affirmed a buy rating and $265 price target on the stock, writing that Amazon's profitability is below its long-term potential. 'The company's long-term growth path is attractive across the e-commerce segment, AWS, digital media, advertising, Alexa, robotics, AI, and more,' he added. The company recently unveiled an artificial intelligence-powered version of its Alexa voice-activated assistant product, which analysts see as supporting the company's growth. Revenue at Amazon is expected to rise 9.6% this year and hit a 10.4% pace in 2026, driving net earnings from 15% in 2025 to 20% next year. There are, though, near-term clouds for Amazon, as tariffs and broader economic uncertainty weigh on the outlook for both consumer spending and the adoption of AI services. Amazon's most recent results paint a mixed picture for AI. AWS revenue grew 19%, but didn't accelerate as much as anticipated. The company said its cloud business was facing capacity constraints — echoing Microsoft Corp., which is also struggling to meet AI-related demand. Amazon said it would invest about $100 billion this year, mostly on AI-related expenditures like data centers and other infrastructure. Investors have become increasingly focused on when the heavy spending on AI will pay off in a more concrete fashion. This issue, coupled with the broader questions about the economy, could limit the ability of big tech stocks to rebound, even with the more attractive multiples. 'There was over-enthusiasm surrounding big tech earlier this year, and while we are getting to levels where they look attractive again, good fundamentals or multiples don't really matter when there's so much uncertainty,' said Kristian Kerr, head of macro strategy for LPL Financial. 'We need a lot more clarity for a sustainable move higher.' Top Tech News Apple Inc.'s Chief Executive Officer Tim Cook visited China's artificial intelligence hub of Hangzhou, the home of AI sensation DeepSeek which shocked the world with its models built at a fraction of the cost of American rivals. Nintendo Co. shares gained the most in over seven months after Goldman Sachs Group Inc. said it expects the upcoming release of its Switch 2 console to drive active users to new highs. OpenAI is making it easier to edit images in ChatGPT and create visuals for work that include lengthy, legible text, potentially broadening the chatbot's appeal for businesses and everyday users. Alibaba Group Holding Ltd. and BMW AG will team up to produce AI for cars in China, as the tech giant looks to monetize its emerging products and the German automaker seeks to catch up to local brands that are dominating the key market. Vietnam will allow Elon Musk's Starlink to provide satellite internet services in the country for a pilot period of five years, with a maximum of 600,000 subscribers, after the government pushed through regulatory changes. Earnings Due Wednesday Premarket JinkoSolar Postmarket Verint Cheetah Mobile Zepp Health --With assistance from David Watkins. (Updates to market open.) Business Schools Are Back Google Is Searching for an Answer to ChatGPT The Richest Americans Kept the Economy Booming. What Happens When They Stop Spending? A New 'China Shock' Is Destroying Jobs Around the World How TD Became America's Most Convenient Bank for Money Launderers ©2025 Bloomberg L.P. Sign in to access your portfolio
Bloomberg
18-03-2025
- Business
- Bloomberg
Footnote Season: Uncovering Hidden Value in Company Financials
Understanding a company's financial position requires more than just analyzing revenue growth, profitability, and cash flow. While these traditional metrics offer a snapshot, they often overlook critical insights buried in footnotes and disclosures. To gain a true financial perspective, investors must look beyond the income statement and uncover the hidden details that impact real earnings. Join Bloomberg and New Constructs for an exclusive webinar exploring how AI-driven financial analysis enhances accounting transparency to reveal underestimated earnings. Discover how Bloomberg Indices integrates New Constructs' proprietary data to develop systematic strategies that identify companies whose true financial strength is often overlooked—creating a unique opportunity for accounting alpha. CEO of New Constructs David Trainer, CEO of New Constructs, is a Wall Street veteran and corporate finance expert specializing in AI-driven financial analysis. With a career spanning equity research at Credit Suisse First Boston and Epoch Partners (later acquired by Goldman Sachs), he has pioneered AI-powered stock ratings, financial analytics, and valuation models that uncover hidden insights in company filings. His firm's Robo-Analyst technology, validated by research from the Journal of Financial Economics, Ernst & Young, and Harvard Business School, has been proven superior in predicting earnings and stock performance. A former FASB Investors Advisory Committee member and author of Modern Tools for Valuation (Wiley Finance, 2010), Trainer frequently appears in media to share insights on AI, financial markets, and investment strategies. Mike Pruzinsky Senior Global Equity Product Manager Bloomberg Indices Michael Pruzinsky is a senior global equity product manager for Bloomberg Indices. Based in New York, Michael has over 15 years of experience working with the buy-side, and is responsible for overseeing index development, go-to-market, and product strategy. He has created and launched hundreds of indices including the Bloomberg Magnificent 7 Index. Previously, he worked in several client facing roles including Bloomberg's portfolio analytics & risk team that supported the transition from Barclays POINT to Bloomberg PORT. Michael holds a B.A. in Business Economics from Brown University. Steve Hou Index & ESG Research Bloomberg Steve Hou is a researcher on Bloomberg's Index & Portfolio Research team. His research covers systematic equity and multi-asset investment strategies, which he applies in close collaboration with the Multi-Asset Index Product team to produce investable index products. Prior to joining Bloomberg, Steve was a quantitative researcher at AQR Capital Management LLC, where he worked on systematic stock selection and tax efficient investment strategies. Steve graduated with a PhD in Financial Economics from the University of Michigan in 2018. He previously completed graduate and undergraduate studies from ETH Zurich and the University of Virginia.
Yahoo
16-03-2025
- Business
- Yahoo
Hedge funds cut their stakes in all of the Magnificent 7 stocks last quarter — except for one
In the final months of 2024, hedge funds prepared for the dramatic economic and geopolitical changes expected post-election. I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 5 of the easiest ways you can catch up (and fast) Home prices in America could fly through the roof in 2025 — here's the big reason why and how to take full advantage (with as little as $10) Americans with upside-down car loans owe more money than ever before — and drivers can't keep up. Here are 3 ways to cut your monthly costs ASAP That meant reducing their net holdings of all Magnificent 7 stocks except for one, focusing on President Trump's policies, and moving into sectors 'offering opportunities for stock-pickers,' according to a recent report from Goldman Sachs based on data collected from 13-F filings of 695 hedge funds as of Feb. 14, 2025. The Magnificent 7 stocks include Alphabet (GOOG), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA). The term is often used to reference this group of mega-cap technology stocks that supercharged the U.S. stock market's gains in recent years. From March 31, 2020, to December 31, 2024, the Bloomberg Magnificent 7 Index returned 532% vs. 125% for the broad-based Russell 3000 Index. However, as the Goldman Sachs Research team put it recently, they've gone from "Magnificent 7" to "Maleficent 7." So far this year they've plunged more than 13%, while the S&P 500 is down around 4%, as uncertainty surrounding President Trump's policies rattle investors and fears that stocks are overvalued reach a 24-year high. Hedge funds trimmed positions on net in all of them during the last quarter except for Tesla. Tesla was the one stock of the Magnificent 7 that funds added to in Q4 2024, making it onto Goldman Sachs' 'rising stars' list of stocks with the greatest increases in popularity among hedge funds. Investors wanted to be part of its post-election surge as it regained its $1 trillion market capitalization on expectations that it would benefit from Elon Musk's ties to the new administration and deregulation. But Tesla's fortunes have since reversed and, as Musk's focus on the Department of Government Efficiency (DOGE) continues, Tesla's post-election surge has vanished. It's important to note that although hedge funds reduced their stakes in the Magnificent 7 stocks last quarter, all but Tesla still sat atop the Hedge Fund VIP list of the most popular long positions. Read more: An alarming 97% of older Americans are carrying debt into retirement — here's why and 4 simple things you can do if you're stuck in the same situation In Q4 2024, hedge funds increased their exposure to health care and communications services, 'two sectors with high dispersion scores offering opportunities for stock-pickers.' This means there's a wide range of returns for individual stocks, which is an ideal backdrop for stock pickers or investors who target specific companies instead of broad indexes. Health care stocks are currently dominating the ranking of the top 10 best performing S&P 500 stocks so far this year. CVS Health (CVS) has risen nearly 50%. Funds also looked to profit from policy changes resulting from the new administration, increasing their average ownership of stocks expected to benefit from deregulation, stocks exposed to small businesses and those with domestic sales. Capital One Financial (COF), which is awaiting approval for its $35 billion acquisition of Discover, entered the Hedge Fund VIP list of the most popular long positions. They also reduced their holdings of stocks exposed to Chinese supply chains, international sales and tariffs. Funds moved into companies with AI-enabled revenues. These companies, which Goldman refers to as 'Phase 3' companies, are those selling software and IT services that integrate generative AI into their offerings. They tend to trade similarly to 'Phase 1' stocks such as Nvidia, reacting similarly to AI-related news. Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan 'works every single time' to kill debt, get rich in America — and that 'anyone' can do it Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Protect your retirement savings with these 5 essential money moves — most of which you can complete in just minutes This article provides information only and should not be construed as advice. It is provided without warranty of any kind. Sign in to access your portfolio
Yahoo
28-02-2025
- Business
- Yahoo
Big Tech Retreat Presents Stock-Picking Moment, Morgan Stanley's Shalett Says
(Bloomberg) -- The monolithic dominance of Big Tech made life miserable for stock pickers in recent years. With the group reaching a double-digit drop from its peak, opportunities to uncover the next market vanguards have arisen, according to Morgan Stanley's Lisa Shalett. The Trump Administration Takes Aim at Transportation Research Shelters Await Billions in Federal Money for Homelessness Providers NYC's Congestion Pricing Pulls In $48.6 Million in First Month New York's Congestion Pricing Plan Faces Another Legal Showdown NYC to Shut Migrant Center in Former Hotel as Crisis Eases That means scouring balance sheets for companies that have solid earnings and should hold up if the economy slows or tariffs stoke inflation, the wealth management unit's chief investment officer said in an interview. Shalett sees 'money to be made' in owning standouts within financial services, domestic industrials, energy and materials mining companies, as well as consumer services like media and entertainment. She also likes health care, one of last year's worst laggards, pointing to interesting generative AI applications for the sector. 'We have to ask ourselves which companies are going to be able to sustain earnings momentum and which are not,' the CIO said. 'It's a very idiosyncratic market — one where stock picking matters a lot.' Read: Stock Pickers' Light Tech Holdings Are Blessing as Megacaps Fall Part of Shalett's thesis is based on her January pronouncement that the biggest technology companies' command of the stock market would come under the gun this year. That prediction is already starting to play out: less than a month ago, the AI assistant startup out of China, DeepSeek, jumped into the spotlight, casting doubts on US tech and its robust investment into AI technology. She is the latest in a string of Wall Street pros urging investors to be more selective when making decisions, rather than buying broad swaths of the market. Citigroup Inc.'s trading desk recently espoused the strategy while asset manager Janus Henderson launched its first stock-picking ETF earlier this month. Bank of America Corp. strategists led by Savita Subramanian have called the current earnings cycle a 'stock picker's paradise.' Another key bulwark responsible for the market's bull run is also crumbling, Shalett says: namely, a bias at the Federal Reserve toward reducing borrowing costs as inflation stalls. Combine that with the fading dominance of megacap tech and it's time to look for opportunities in other sectors. Already, signs of this shift are evident. The Bloomberg Magnificent 7 Index — a gauge that consists of Apple Inc., Nvidia Corp., Microsoft Corp., Alphabet Inc., Inc., Meta Platforms Inc. and Tesla Inc. — widened its loss from a December high to more than 10% on Tuesday, falling past the threshold that represents a correction. At the same time, last year's underperformers, including consumer staples, health care, real estate and materials, are leading the S&P 500 Index's leaderboard year to date. Only information technology and consumer discretionary sectors, previous winners, were down for the year as of Tuesday. Most of the 2025 advance, according to Shalett, has come from retail investors stepping in to buy the dip because they're accustomed to markets racing higher after any pullback. Indeed, US stock purchases by mom-and-pop investors hit the highest level in two years late last month, according to an analysis by JPMorgan Chase & Co. quantitative and derivatives strategist Emma Wu. 'We're starting to, quote, unquote, 'get real,'' Shalett said. In her view, part of 'getting real' is identifying companies that are generating earnings and signaling continued growth, while steering away from firms heavily exposed to consumer stress or changes around immigration policy. 'This narrative of moving from a monetary policy and thematic market to a fiscal policy and earnings-driven market in our parlance means it's a more normal market.' Of course, finding the next stock winners is extremely difficult, as evidenced by years of underperformance by actively managed funds when compared to the broader market. The next big hurdle for investors will be Nvidia's high-stakes earnings after Wednesday's close, and an update on the Fed's preferred inflation measure: the so-called core personal consumption expenditures price index due Friday. Meanwhile, worries have been compounding around how the new US administration's policies will affect global growth and long-established economic and political alliances, driving investors into international markets. While the the S&P 500 is up less than 2% in 2025, an MSCI Index covering all countries except the US has rallied roughly 7%. European stock markets have soared to record highs. 'We're not yet ready to call the move in Europe anything more than a trade,' Shalett said. 'But geographic diversification is going to be key in these kinds of markets.' Of all the risks that have been building up of late, markets failing to price in geopolitical uncertainty ranks highest for the CIO. Valuations remain expensive versus bonds despite the confrontational stance President Donald Trump and his office have taken against allies and rivals around the world, while wars plague Eastern Europe and the Middle East. 'The political jargon is that we have to make America great again, but from a capital markets perspective, America's been pretty great for the past 15 years,' Shalett said. The issue is that American exceptionalism is premised on old institutional stability, she says, which is now being challenged by White House policies, signaling a potential geographical multi-generational shift. 'That reality is not being priced into the stock market at all,' she said. Trump's SALT Tax Promise Hinges on an Obscure Loophole Warner Bros. Movie Heads Are Burning Cash, and Their Boss Is Losing Patience Walmart Wants to Be Something for Everyone in a Divided America China Learned to Embrace What the US Forgot: The Virtues of Creative Destruction Meet Seven of America's Top Personal Finance Influencers ©2025 Bloomberg L.P.
