NOT GOOD ENOUGH!

💡 The Lightbulb
Not Good Enough!

OK, stocks might not actually be down by the time you read this. The S&P is rallying after that GDP data, potentially ending a run of weakness.

Worth remembering that GDP data is backwards looking and often subject to later revisions. Nevertheless, it supports the narrative for now.

Enough strength in the economy to potentially achieve that mythical soft landing.

However, on the individual level, the bar has been set exceptionally high by investors. Loads of stocks beating estimates and then not being rewarded by the market.

Meta was the latest example.

After the whole metaverse debacle, the company was forced to implement widespread cost-cutting and reorganisation.

The share price plunged, falling around 77% from the highs.

Then there was a collective realisation that, actually, this company still makes billions of dollar every month, and the share price recovered most of that lost ground.

Eleven Months Later

The cycle is complete. All the way from “it’s so over” to “we’re so back”:

You’d imagine the share price would react positively to this.

You’d imagine wrong…

Meta fell 4% yesterday pre-earnings, and then fell another 4% after hours.

There was really nothing wrong with the report. It was even Meta’s most profitable quarter in two years ($11.5 billion) underlining the success of Zuck’s “Year of Efficiency”.

Yet the market was in no mood to reward anything, and that’s been a typical pattern of late….

Not good enough

We saw similar last quarter, where stocks generally rallied into the earnings report and then sold off afterwards…

Question: Is this a harbinger of doom, the bears coming out to play - or a decent dip to buy?

⚡ The Spark
Nifty Fifty vs Magnificent 7

While we’re talking stocks, the Market Huddle podcast featured a segment on the Nifty Fifty and the ‘70s crash this weekend.

We’ve written about these guys before…

Here’s the most relevant snippet:

Many of these companies went on to become household names that we still know and love today.

There was nothing wrong with them as businesses.

Multiples: The problem was the share price that investors were prepared to pay.

Now: History doesn’t always repeat, but it often rhymes.

The tech titans seem invulnerable. The Magnificent 7 (Amazon, Apple, Google, Meta, Microsoft, Nvidia and Tesla) aren’t the same as the Nifty Fifty of five decades ago.

Well, a couple of them are…

It doesn’t take a genius to see that some of these megacap stocks are over-valued.

But the longer that interest rates / bond yields stay at current levels or higher, the more those premiums will be questioned…

🧠 The Big Brain
The Why Doesn't Matter

Our brains are explanation seekers. That toddler period of asking why, why, WHY for every single thing that happens never truly leaves us.

We just internalise the process, get better at it, and increasingly figure things out for ourselves as we get older.

With uncertain, risky, and sometimes volatile situations, that toddler part of the brain lights up again, so when markets move, we regress to toddler mode:

WHY did Stock XYZ move?

However…

Yeah, it’s a deep quote. One of our favourites.

Daz (our market veteran) explains:

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