Minor corrections in the major markets are mostly of the technical nature and certainly are wrong reasons for smart investors for retreating from mid-term bullish positions in the AI-based techs and other fundamentally strong mega cap equities. The prospect of further slashing U.S. interest rates is too serious an argument to ignore, while the leading role of artificial intelligence in increasing the growing payback of huge businesses is too high. A short-term repositioning in the form of a rather modest rollback of the broad S&P 500 indicator from its historical highs at nearly 6,700, accompanied by just several days of small-size profit-taking on a number of assets like Oracle or Broadcom that had outperformed the market right in September, is precisely what we warned about earlier.
This entire development is therefore not only quite logical, but also fits perfectly into our baseline scenario, which was projected long before last week's meeting of the Federal Reserve. This is our team's very practical conclusion. In purely theoretical discussion, the only wild card that could be obtained in the hand of bearish pessimists about the Wall Street sentiment is the Joker of a potentially impending economic slowdown, and therefore of consumer spending decline on both sides of the pond. This, of course, can be taken into account for a number of vulnerable businesses, since we recall that it was precisely the significant slowdown in the U.S. job numbers that triggered the restart of borrowing costs' reducing by the lagging, as always, central bankers from the Fed. However, that's our part to remember that even during all previous periods of crises, only small and some medium-sized businesses suffered from a decline in consumer spending, while huge businesses were never exposed to such obstacles for too long. Moreover, it was the behemoths of the transnational economy, especially in the IT sector and online sales that emerged as the main winners from all the hardships. That's why this potential Joker, even if it were on the hand, is not able to transform into some kind of Trump Ace to play against giants with trillions of market caps, especially as one of the Trumps (meaning U.S. president Donald Trump, of course) is clearly playing for the bull's optimistic camp as well. He is a master at creating a timely information environment for new market records. However, there are enough arguments like “money goes to money", even without Trump's rhetorical tricks.
In this context, fading of most US-China and US-EU barriers to self-consistent AI demand chains, where NVIDIA invests in OpenAI, OpenAI orders capacity from Oracle, Microsoft or Amazon, and then the latter companies again turns to the same original NVIDIA for chips etc, looks very stable. Thus, even some current technical corrective movements on "bought AI and Fed expectations - sold facts" in such special mega capitalized equities are merely greater dip-buying chances that should not be put off for long. At least, this is an important strategic principle of trading stocks for anyone who wants to have a happy Christmas, taking advantage of the upcoming wave of US indexes' and key global asset's price climbs on the back of the usually very strong third-quarter earnings season, which is about to start in mid-October. Investing in S&P 500 and Nasdaq futures, as well as buying the businesses that corrected most quickly in September like Amazon (-8.3% at the moment from the highest price of $238.85 on September 9 to nearly $218, seems like the simplest idea. The sales season, including Black Friday and Cyber Monday, will speak for itself. E-platforms offering the greatest savings, like Amazon and Walmart online, will benefit when people want to save more money. Given the growing contribution of Amazon Web Services (AWS), its monstrous cloud division, to total profits, we nominate Amazon as our top pick for the next couple of weeks compared to many other mega caps.
