📈 Alpha Portfolio - Guerilla

June 2024

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Welcome Investors!

Here’s your Alpha portfolio update for June 2024:

  • Returns so far this year +6.37%

  • Our leading stock is Silver currently at +27.4% while our position in American Airlines lagged by -19% and is now out of this month’s portfolio.

  • We have 10 new stock positions and 11 stocks sold.

  • Total positions: 20
    See the investment portfolio for the rest of our positions.

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Wall Street is on track to end May's trading month on a strong note. Softer inflation data earlier this month and better-than-expected quarterly earnings reports lifted investor sentiment and helped erase much of April’s ugliness.

Of special note: Nvidia’s quarterly earnings were reported after the close on May 22. Investors had been on pins and needles in the days leading up to the report. Nvidia – the company spearheading the AI boom - has become the 800-pound guerilla of the market.

That’s Your Big Brother

With a $2.8 trillion market valuation (this single stock now has a valuation greater than the GDP of all but the 7 largest countries in the world), the semiconductor giant reported quarterly results and guidance that topped Wall Street's expectations.

As if that wasn’t enough, the company announced a 10-1 stock split and more than doubled its quarterly dividend. "The next industrial revolution has begun," CEO Jensen Huang declared.

"Companies and countries are partnering with Nvidia to shift the trillion-dollar traditional data centres to accelerated computing to produce a new commodity: artificial intelligence."

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[Side point: If you’re in the US market, you’ve likely got exposure to Nvidia – whether you own the individual stock or not. Nvidia has a large weighting in key index ETFs including SPY and QQQ, and is represented in many sector and specialty funds. Among our strategies, QQQ or SPY pops up more months than not in Alpha Portfolio, it has QQQ in the mix each month.]

And Interest Rates?

However, after that sparkling earnings report, stronger US economic data and fresh concerns about a potential consumer spending pullback dampened the interest rate outlook.

Cue up Minneapolis Federal Reserve President Neel Kashkari (a voting member of the FOMC – Federal Open Market Committee), who said he wants to see "many more months" of data pointing to easing inflation before cutting rates. He also said he wouldn't rule out further rate hikes if price pressures tick up again.

There’s your buzzkill.

How is June Shaping Up?

It depends on who you ask. Bank of America wrote last week that there has been a notable rotation into cash among their private clients; biggest inflows into cash since December 2021 and biggest outflows from stocks since December 2023.

In keeping with that sentiment, David Kostin, Chief US Equity Strategist at Goldman Sachs, believes the S&P 500 has tapped its growth potential for the year.

The base case is that the market will trade at around this level of multiple ($5,200) or an even lower multiple, as we come towards the end of the year,”

David Kostin, Chief US Equity Strategist

Then again, a UBS report outlines factors that could drive the S&P 500 up another 200-300 points by year-end. Those factors include continued earnings growth in tech stocks, ongoing investment in AI, and falling interest rates.

Of those, the prospect of falling interest rates may be the most influential. But the first of such cuts probably won't happen before September – if it comes at all in 2024. That leaves investors with uncertainty heading into summer, a time when the stock market tends to disappoint.

Hence the old adage, Sell in May and Go Away.

That’s exactly why we concluded our trading sessions last week with 5.43% profit (in one week) in those five companies we told you we were trading. We’ll resume in October.

Tony Pasquariello, Global Head of Hedge Fund Coverage with Goldman Sachs, is more optimistic. He says succinctly, “The US consumer will defy the bears.”

And Carson Group’s Chief Market Strategist Ryan Detricks believes stocks could have a surprise summer rally. “We had that washout back in April, and we think the upward bias is still alive and well.” He goes on to note that – despite the old adage (above) – June has historically delivered 1.3% on average for the S&P 500.

And For What It’s Worth, we are cautiously optimistic.