Where is the Recession? - Holdun

Holdun Week in Review ending May 26th, 2023


The 5 Things You Need to Know

1. A Mixed Bag:

Debt ceiling uncertainty dominated the first half of the week. However, incredible forward guidance from Nvidia sent the Nasdaq higher to record its 5th consecutive week of outperformance vs. the S&P 500. The NASDAQ jumped 2.5%, the S&P 500 added 0.3%, and the Dow slipped 1.0%. Clearly, A.I. is the stock market’s current antidote of choice.

2. Nvidia to the Rescue:
Nvidia became the de-facto pied piper of the A.I revolution this week. The Chipmaker jumped 24% on Thursday, adding a cool $200 billion to its market cap in the process (the largest single-day addition to any stock in the History of U.S. Equities). To put this into context, Intel, the largest semiconductor company in the U.S. by revenue, is worth just over $100 Billion. Nvidia has now become the sixth largest company in the U.S., with a Market cap of almost $1 Trillion. Despite a 13% decline in earnings over Q1 2023, Nvidia is up over 160% in 2023. That’s what happens when you increase your forward revenue guidance from $7 Billion in Q1 to $11 billion in Q2 as your CEO announces the company is the ‘the beginning of a ten-year cycle’.
3. A Few Big Winners:
America’s Magnificent Seven stocks ($AAPL, $MSFT; $GOOGL; $AMZN, $NVDA, $META, $TSLA) are up 70% YTD (equal-weighted), the other 493 stocks in S&P 500 are up only 0.1%. The narrow breadth of the market is hardly anything new, but as A.I. Mania takes hold, any pending market rotation becomes harder and harder to predict with any certainty.
4. U.S. Debt Ceiling Deal:
House Republicans appear to have reached a deal with the White House, referred to as a “historic reduction in spending”. The TLDR is; Debt ceiling raised by $4 trillion, spending cut by $50 billion and the ceiling pushed out for another two years.
5. What happened to the ‘China Reopening’?:
It appears the much heralded China reopening trade has already lost some steam as a slew of blue-chip firms have pointed to a patchy recovery in the world’s second-largest economy, forcing some executives to warn of slower-than-expected growth. This could have knock-on effects on some of its largest trading partners—bad news for Germany, who already entered into a recession this week.


Apparently, the earnings recession was simply a work of fiction, and now as debt ceiling debates and bank crisis’ subside, market commentators are giving the all clear as labour-boosted nominal GDP and consumer strength dominate the headlines… until such time as higher-for-longer rates and a deteriorating labour market finally take hold that is.
The doomsday economists refer to this stage in the cycle as ‘the calm before the storm’, but the storm has been a long time coming and still no sign of rain just yet.
To learn how we can help you protect your wealth from the volatility ahead, simply reach out to us using the link below.