Key Concepts
- Basis Points: A unit equal to 1/100 of one percent, used to describe percentage changes in interest rates or yields.
- Intraday Action: Price movements of an asset during regular trading hours.
- Year-to-Date (YTD): The return on an investment from the beginning of the current calendar year to the present date.
- Sentiment Indicators: Metrics used to gauge the overall attitude of investors toward a particular security or market. (e.g., TAN ETF for solar, Biotech, Gambling, Transportation)
- AI Jitters: Market volatility and uncertainty caused by concerns surrounding the rapid development and potential disruption of Artificial Intelligence.
- Capex Intensity: The amount of capital expenditure (CAPEX) a company spends relative to its sales.
- LLM: Large Language Model - a type of AI model.
- Agentic Capabilities: AI systems that can act autonomously to achieve goals.
- Quantum Trading: Utilizing quantum computing principles for advanced trading strategies.
- Parabolic Run: A rapid and unsustainable increase in price.
- Manipulation (in markets): Artificial inflation or deflation of prices through illegal or unethical practices.
Market Overview & Trading Action (February 27, 2024)
The major indices experienced a “photo finish” trading day, with minimal gains. The Dow Jones Industrial Average rose by 32 points (approximately 7 basis points). The Nasdaq Composite increased by 14 basis points, and the S&P 500 finished up 0.1%. The S&P 500 has been close to turning positive for the year for three consecutive days but fell slightly short.
Sector Performance:
- Outperformers: Financials (+1%), Real Estate (+1%), Industrials (record high, +0.5%).
- Underperformers: Consumer Staples (-1.5%), Materials (-1%), Energy (-1%).
Notable Stock Movements:
- Nasdaq 100: Walmart (-3.76%), Apple (+3.17%), Nvidia (+1%), Alphabet, Microsoft, and Tesla each down over 1%.
- Dow Jones Industrial Average: Home Depot (-2%), IBM (-1.5%), United Health (-1%), JP Morgan (+1%), Goldman Sachs (+1%), American Express (+2%).
- Semiconductors: Micron and AMD both down over 2%, SanDisk down over 5%.
Sentiment Indicators: Solar (TAN ETF +3%), Biotech, Gambling, Transportation (rebounded after a previous decline) outperformed. Korean stocks, software, Bitcoin, and small oil underperformed.
Shifting AI Narrative & Investment Strategy (Brian Kershman - GQG Partners)
The conversation surrounding Artificial Intelligence has shifted from rewarding investment in AI regardless of returns to demanding demonstrable results. Initially, investment in AI was rewarded irrespective of outcomes; companies not investing were penalized (e.g., Apple). Now, investors are scrutinizing revenue growth and, increasingly, earnings and free cash flow to justify AI spending.
Key Argument: Investors are becoming more discerning and focusing on profitability and cash flow generation as indicators of sustainable AI investment.
Quote: “Prior to [October/November], it’s basically a situation where the more you invested in AI, the more you’re pursuing some of those returns…the more you got. And conversely, if you weren’t spending enough…it was perceived as falling behind and actually got punished by the market.” – Brian Kershman
Kershman advocates for investing in companies with solid earnings, free cash flow, and lower capital intensity, specifically highlighting Consumer Staples, Energy, and Utilities as potentially undervalued areas. He notes these sectors are less susceptible to AI disruption and offer attractive valuations. He actively screens for these factors, considering earnings growth, dividend yield, and multiple compression risk.
Navigating AI Disruption & Identifying Resilience (Brian Kershman - GQG Partners)
The market is experiencing waves of AI disruption fears moving across different sectors (software, wealth management, trucking). Kershman suggests that elevated valuations provided an excuse for sell-offs when these disruptions occur.
Key Strategy: Focus on companies with real earnings and free cash flow, seeking high single-digit to low double-digit returns without overpaying.
Quote: “What we want to do is try to go back to, okay, where am I getting real solid earnings, real solid free cash flow?” – Brian Kershman
He emphasizes the importance of understanding capital intensity, noting that sectors like telecom now have lower capex intensity compared to hyperscalers.
Precious Metals & Crypto Markets (Ben McMillan - IDX Advisors & Yoni Assia - eToro)
Gold: Ben McMillan believes gold is losing its traditional safe-haven status, exhibiting high correlations with the AI trade. He suggests that investors are using gold as part of the AI trade, leading to increased volatility. He anticipates continued structural tailwinds supporting gold, driven by central bank buying and a move away from the dollar. Poly Market odds predict gold at $4600 by month-end, while Jefferies raised their 2026 forecast to $5000, citing inflation and dollar debasement. The nomination of Jerome Powell was noted as potentially supportive of gold.
Silver: McMillan highlighted potential manipulation in the silver market, particularly in the paper futures market, creating a buying opportunity.
Bitcoin: McMillan acknowledges Bitcoin’s recent 20% decline this year, attributing it partly to capital flowing into precious metals. However, he remains optimistic about Bitcoin’s long-term prospects, anticipating a return to over $100,000 by mid-to-late summer, driven by AI’s increasing role in trading and the efficiency of blockchain technology.
Quote: “Crypto is a cyclical market…times like these are when opportunities arise.” – Ben McMillan
eToro’s Innovations (Yoni Assia): eToro launched 24/7 trading today, initially for gold, expanding to other assets. The company is also introducing an app store allowing 5,000 pro investors to build and publish apps for other users, including quantitative trading strategies and personalized portfolio analysis (e.g., an app that provides investment advice based on the styles of Warren Buffett and Kathy Wood). Assia believes this will give retail investors access to tools comparable to those used by hedge funds and family offices.
Quote: “Every retail investor is going to basically have something you would compare to a hedge fund and a family office in their hands.” – Yoni Assia
Conclusion
The market is navigating a period of shifting sentiment, particularly regarding AI investments. Investors are demanding demonstrable returns and focusing on fundamental metrics like earnings and cash flow. Precious metals, particularly gold, are experiencing increased volatility and a potential shift in their role as a safe haven. Crypto markets remain cyclical, with opportunities arising during downturns. eToro is pioneering new technologies, like 24/7 trading and an app store, to democratize access to sophisticated investment tools and strategies for retail investors. The overall theme is a move towards greater discernment, a focus on profitability, and the increasing influence of AI on financial markets.
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