Latest news with #NicholasColas
Yahoo
4 days ago
- Business
- Yahoo
S&P 500 ETFs Log Best May in 30+ Yrs on AI, Large-Cap Safety
The S&P 500 just posted its strongest May performance in more than three decades, largely driven by a surge in the "Magnificent Seven" tech stocks: Apple AAPL, Alphabet (GOOGL, GOOG), Microsoft MSFT, Amazon AMZN, Meta META, Tesla TSLA, and NVIDIA NVDA (read: 4 ETF Areas Up At Least 25% in May). The SPDR S&P 500 ETF Trust SPY gained 5.2% over the past month (as of Jun 2, 2025) while the Big-Tech heavy Nasdaq-100 ETF Invesco QQQ Trust, Series 1 QQQ advanced 7.7%. While easing trade tensions was the key behind the stock outperformance, Big Tech benefited the most from easing trade tensions. Following the initial tariff-induced downturn, signs of trade de-escalation began to emerge. The United States temporarily reduced tariffs on Chinese goods from 145% to 30%, while China responded by lowering its retaliatory duties on U.S. imports from 125% to 10%. This 90-day reduction period has helped ease investor concerns. Additionally, President Trump postponed a 50% tariff hike on EU goods, delaying implementation from June 1 to July 9. This move accelerated trade negotiations with European partners. The seven mega-cap companies accounted for 62% of the S&P 500's 6.2% gain in May. NVIDIA and Tesla led the charge with monthly gains exceeding 20%. Six out of the seven stocks outperformed the broader index, with Apple being the sole underperformer. Nicholas Colas, co-founder of DataTrek Research, noted that the resurgence of Big Tech is a sign the market has regained its confidence, as quoted on Yahoo Finance. A major reason behind the rally is strong earnings growth from Big Tech. In Q1, the Magnificent Seven posted a combined 27.7% earnings increase year-over-year, compared to 9.4% growth among the other 493 S&P 500 companies, according to FactSet's senior earnings analyst John Butters. Additionally, these companies outpaced analyst expectations, beating estimates by 11.7% on average—well above the 4.6% beat from the rest of the index, as quoted on Yahoo Finance. Overall, total Q1 earnings for the 477 S&P 500 members that have reported results are up +11.4% from the same period last year on +4.4% higher revenues, with 74.2% beating EPS estimates and 62.9% beating revenue estimates, per Earnings Trend issued on May 28, 2025. Citi US equity strategist Drew Pettit highlighted that these earnings surprises explain the group's recent outperformance, as quoted on Yahoo Finance. Over the past month, the Roundhill Magnificent Seven ETF MAGS rose approximately 11%, nearly double the S&P 500's return. After all, it was Big Tech that triggered the latest market downturn earlier this year, so it's not surprising to see these stocks bouncing back the most. Another factor boosting Big Tech is investor preference for large-cap stocks amid rising bond yields. With the 30-year Treasury yield nearing highs not seen since the financial crisis, large-caps have become a safer bet. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Alphabet Inc. (GOOG) : Free Stock Analysis Report Inc. (AMZN) : Free Stock Analysis Report Apple Inc. (AAPL) : Free Stock Analysis Report Microsoft Corporation (MSFT) : Free Stock Analysis Report NVIDIA Corporation (NVDA) : Free Stock Analysis Report Tesla, Inc. (TSLA) : Free Stock Analysis Report Invesco QQQ (QQQ): ETF Research Reports SPDR S&P 500 ETF (SPY): ETF Research Reports Alphabet Inc. (GOOGL) : Free Stock Analysis Report Meta Platforms, Inc. (META) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
CNBC
28-05-2025
- Business
- CNBC
The rest of the world is trouncing the U.S. stock market. Why that could continue
It's been a banner year for international stocks compared to the U.S. The iShares MSCI All Country World Index ex U.S. ETF (ACWX) has rallied more than 14% in 2025, while the S & P 500 is marginally higher year to date. ACWX also hit a closing record high on Tuesday, while the U.S. large-cap benchmark is still 3.8% below its all-time high set in February. This outperformance by the rest of the world is uncommon to say the least. DataTrek Research co-founder Nicholas Colas noted that international stocks are outpacing the S & P 500 by more than three deviations over the past 100 days. That's only the third time that's happened since 2010, he said. These periods have historically been followed by a swift comeback in the S & P 500 relative to the All Country World Index. But Colas thinks this time could be different. ACWX .SPX YTD mountain ACWX vs SPX year to date "We must consider the possibility that there is a regime shift underway in currency and/or equity markets," Colas wrote. "Perhaps capital will keep flowing out of the dollar and U.S. stocks for both diversification and fundamental reasons." The dollar index, which measures the greenback's performance against six leading currencies, has tumbled 8% in 2025. That loss is driven in part by concerns around evolving U.S. trade policies. President Donald Trump in April unveiled a raft of steep tariffs on imported goods. Since then, many of those levies have been temporarily paused or reduced. A lower dollar tends to benefit international markets outside the U.S., making it cheaper for consumers and companies in overseas markets to buy dollar-denominated goods and assets, be they energy or gold or anything else. Stronger oveseas currencies also translate into more dollars when non-U.S. returns are measured here. That tailwind has powered 2025 thus far: iShares MSCI Emerging Markets ETF (EEM): up 10% year to date iShares MSCI Japan ETF (EWJ): up 11.7% in 2025 iShares MSCI China ETF (MCHI): up 15.3% this year "The safest path is to continue to index weight rest of world stocks (roughly a 36% allocation)," Colas added. "While we are still long-term bullish on U.S. equities, investors who benchmark against global equities or those worried about missing out on non-U.S. gains might be well served by owning rest of world stocks for the next few months." Bank of America also pointed out that the technical backdrop for international looks promising. Strategist Paul Ciana noted that ACWX's 50-day moving average is rising and that its 14-week RSI is above 65. "For those reasons, this is a technically constructive picture. Fibonacci measures suggest the breakout can trend higher," he said.
Mint
21-05-2025
- Business
- Mint
The bond market has worries but it isn't freaking out
U.S. government bond investors are nervous—it's easy to see why. The last top-notch rating on Treasuries has been taken away, and worries remain about foreign buyers abandoning the market. Any paper gains from rising bond prices have vanished as yields have risen back to where they were in February. Bond prices have an inverse relationship to bond yields. After years of overspending, fiscal worries are intensifying as a Republican Congress marches toward a new tax bill that could add $3.3 trillion to the deficit over the next decade. That rattles bond investors who doubt the U.S.'s ability to pay its debt back despite its pristine record. Net effect? Yields could rise further as bond prices could decline more. Yet, the mounting anxiety is overshadowing a truth—one that can balance out some of the negative narrative. Treasury yields have largely been locked in a tight range since reciprocal tariffs were reversed, hovering mostly between the 200-day moving-average of 4.23% and 4.5% mark at spread between the two-year and 10-year yields paints a similar picture. The gap, which reflects the additional yield for locking up money for a decade instead of a short term, has been in a range of 0.449 percentage points to 0.584 percentage points at close since April 22. With the gap now near 0.50 percentage points, 'it is difficult to argue that the market is on the precipice of a breakout in either direction," wrote Ian Lyngen, head of rates strategy at BMO Capital Markets. The tight ranges suggest that Wall Street's capacity to absorb drama has been high. The worry about the U.S. Treasury market is valid but any panic may be overblown since yields on the 10-year aren't close to the near 5% level seen in October 2023. The two-year to 10-year spread was wider in April and from 2020 to 2022. The 30-year yield looks more problematic; it closed at 4.967% on Tuesday, and has flirted with the 5% level since mid-May. That 5% level has long been considered an important psychological threshold. Its been the cap for the 30-year for about two decades. But the obsession with the 5% level overlooks an obvious positive: It is an attractive level to buy. Bond yields have risen from 1.4% in 2020. The 30-year can also act as a good hedge against losses in stocks if a recession materializes and bond yields fall, pushing up bond prices. 'While we understand the discomfort around 5 percent 30-year Treasury yields, ultimately the benefits of a visible and relatively attractive long-term risk-free rate of return outweigh the costs," wrote Nicholas Colas, Co-founder of DataTrek Research. 'Capital should always reward investors adequately for the risks they take, even when the security in question is an obligation of the US government." The bond market has some structural problems: Chinese officials in particular have taken a step back as a buyer and more price-sensitive buyers like mutual funds and hedge funds have grown. It's a cause of concern that deserves to be watched, but the market isn't freaking out about it yet. Write to Karishma Vanjani at
Mint
20-05-2025
- Business
- Mint
Forget the US downgrade. Here's what really matters to the market.
Investors reacted Monday morning to the U.S.'s credit rating before stocks rebounded later. A better bet is to focus on what really drives stock returns: corporate earnings. The S&P 500 was down early Monday, as investors reacted to the recent decision by Moody's to strip U.S. sovereign debt of its triple-A credit rating. They may be overreacting, While psychologically jarring, history suggests the move will have little impact on stock returns in the longer term. 'The history of U.S. sovereign debt rating agency downgrades spans +10 years and uniformly shows that these actions do not portend higher rates, recession, or lower stock prices," wrote DataTrek analyst Nicholas Colas in a note Monday. 'Over the last 20 years, 10-year Treasury yields were highest when America was AAA rated by all three agencies," Indeed, Colas noted Standard & Poor's cut its rating on U.S. debt all the way back in 2011, and Fitch did so in 2023. Neither move ultimately scared investors away from Treasury bonds, which remained capital markets ultimate safe haven. Meanwhile the S&P 500 has enjoyed one of its best stretches in recent memory. A better way to gauge where stocks are headed may simply be to focus on corporate profits. There has been cause for worry there too, noted Morgan Stanley analyst Michael J. Wilson in a Monday note, but the picture is improving. One of Wilson's preferred gauges is 'earnings revision breadth," a sentiment measure which compares the number of downward earnings revisions issued by Wall Street stock analysts to upward ones. While the earnings revision breadth measure is still bearish, it's improved dramatically in the past few weeks. Wilson notes that breadth for the S&P 500 is now at -15%, up from a low of -25% in mid-April. If that trend continues, the S&P 500 could approach its mid-February highs. 'The combination of upside momentum in revisions breadth and last week's deal with China has placed the S&P 500 firmly back in our pre-Liberation Day range of 5500-6100," Wilson wrote. 'We think continued upward progress in EPS revisions breadth back toward 0% will be needed to break through 6100 on the upside." The S&P 500 hit its all-time high of 6144 on Feb. 19 Among the sectors that have enjoyed the biggest rebounds are media and entertainment, materials, capital goods and tech hardware. By contrast, laggards with worsening outlooks include consumer durables, autos and consumer services. Citi analysts, for their part, are also bearish on consumer stocks, worrying about recent signs that spending by American consumers is slowing. On Friday, the University of Michigan reported its consumer sentiment index slipped to 50.8, its second-lowest reading in more than 40 years. 'We have been [underweight] consumer discretionary and staples stocks this year as the U.S. consumer has been in the crosshairs of tariff policy risk," analysts wrote Friday. 'A worst-case policy impact has seemingly been alleviated, yet recent signs of consumer slowing are concerning." Citi analysis recommended investors who do want to own consumer stocks pick and choose, with an emphasis on defensive names. To that end, they ran a screen hunting for individual stocks, with low cyclicality, high debt-to-capital ratios and high capital expenditures relative to deprecation. Among the names that came up: Walmart, Dollar Tree, Amazon and Procter & Gamble. Write to Ian Salisbury at
