Tag: Factiva Filters

Why investors should be wary of New Year ‘head fakes’ for this hot asset class

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The first trading day of the New Year looks set to challenge the Santa Rally theory, with Dow futures down over 200 points as bond yields surge. An Apple downgrade may not have helped investor confidence.

This week will bring the minutes of the Federal Reserve’s last meeting and important December jobs data.

“Data that comes in too hot will kill the idea of rate cuts starting as soon as March, and data that comes in too cold will kill the idea of a soft landing. It means Goldilocks must return from her Christmas trip to Aruba and appear this week,” says Michael Kramer, founder of Mott Capital Management.

Read: A stock investor’s guide to the first trading days of 2024

Onto our call of the day from MacroTourist blogger Kevin Muir, who sees a rally in small-cap stocks as one big theme for the coming year, though investors should beware of getting in too soon.

In a post, Muir draws on a 2021 observation from Raoul Paul, co-founder and CEO of Real Vision financial media platform, who posted on Twitter now X, at the time about the perils of piling into “head fakes” or new ideas in January.

Paul noted how hedge funds and asset managers start the new year with a clean investment slate, but then two weeks later start moving into so-called consensus Wall Street year-ahead trades. And once the rest of the investment world gets in, the trend reverses or corrects, and those managers get back to flat or have to start over.

Muir says given the Fed’s pivot away from monetary tightening at the end of 2023, small-caps will end up as stock leaders this year. A bull on that asset class, he flagged his readers to buy in early November and December.

After a tough year, the Russell 2000
RUT
rallied late in 2023 as it became clearer that Fed interest rate increases, particularly hard on smaller companies, were drawing to a close.

As per this Russell 2000 chart, Muir says he did get the timing right on that bullish call:

However, Muir says he’s concerned that the rally was mainly from “hedge fund covering,” and not a solid signal that the bear market for those stocks has ended.

One reason, he notes was that the stocks blasting higher at the end of 2023 were the most heavily shorted — he offers the Goldman Sach’s most-shorted index chart here:

MacroTourist

The chart is evidence of how hedge funds that got caught out when the Fed surprisingly guided toward interest rate cuts at the December meeting. Within a few hours of the Fed announcement, the Most-Short index had rallied 15%. But along with that, the ARKK Innovation ETF
ARKK
also shot higher, a red flag for Muir.

That short index is tightly correlated to ARKK and the Russell 2000 small-cap index, he said.

So says it’s possible the small-cap push was “just a hedge fund short-covering rally that will sag back down now that the buying has flamed out.” And based on Raoul Paul’s theory, it makes sense that hedge funds and other investors may be piling into the asset class.

Muir says he stands by his view that small-caps are cheap and deserving of gains. “However, if this small-cap rally is for real, then it can’t be led by crap. We can’t have the GS Rolling Most-Short leading the charge. We need quality small-cap stocks to rally,” he said.

So the correlation between broader small-cap indexes and the most-shorted index (also tightly correlated with ARKK) will have to break down.

“As a proxy for this index, and a hedge against my small-cap long position, I am shorting ARKK. So far, the short covering drove all these smaller capitalized stocks higher, but my bet is that an actual small-cap bull market will see much better differentiation, and that new small-cap leadership will emerge (and it won’t be ARKK),” he says.

The markets

U.S. stock index futures
ES00,
-0.67%

YM00,
-0.26%

NQ00,
-1.19%
are falling sharply as Treasury yields
BX:TMUBMUSD10Y

BX:TMUBMUSD02Y
climb. Gold
GC00,
+0.32%
is up, and oil
CL.1,
+0.14%
is up 2% after Iran sent warships to the Red Sea after the U.S. Navy sank some Houthi militia-backed boats. The Hang Seng
HK:HSI
fell 1.5% after weak China factory activity.

Key asset performance

 Last

 5d

 1m

 YTD

 1y
S&P 500

 4,769.83

 0.32%

 3.81%

 24.23%

 24.23%
Nasdaq Composite

 15,011.35

 0.12%

 4.94%

 43.42%

 43.42%
10 year Treasury

 3.933

 3.28

 -24.22

 5.23

 18.77
Gold

 2,082.50

 0.87%

 1.67%

 0.52%

 13.79%
Oil

 72.78

 -0.97%

 -0.70%

 2.03%

 -9.60%
Data: MarketWatch. Treasury yields change expressed in basis points.

The buzz

U.S. nonfarm payroll data for December is due Friday, with the Institute for Supply Management’s manufacturing report and minutes of the Dec. 12-13 Fed meeting both on Wednesday. Construction spending is due at 10 a.m. on Tuesday.

Read: Health of U.S. labor market looms large on markets’ radar this coming week

Apple
AAPL,
-2.97%
is down 2% in premarket after Barclays’ analysts cut the iPhone maker to underweight from equal weight, on signs of weak iPhone 15 and other hardware sales.

Voyager Therapeutics stock
VYGR,
+29.74%
is up 32% after the biotech announced a licensing deal with Novartis unit Novartis Pharma
NOVN,
+0.99%.

Joyy
YY,
-14.65%
is off 11% after Baidu
BIDU,
-3.40%
cancelled a $3.6 billion offer for the Singapore-based live-streaming platform.

Bitcoin
BTCUSD,
+4.23%
is at $45,447, a high not seen since April 2022, on ETF approval hopes.

Tesla
TSLA,
-0.55%
said it delivered 484,507 EVs in the fourth quarter, producing 494,989. Deliveries grew 83% to 1.81 million for 2023 as a whole. Tesla shares are slipping. Meanwhile, China’s BYD
002594,
-2.73%
sold 3.02 million electric vehicles in 2023, eclipsing Tesla a second-straight year.

Japan’s western coast was hit by several heavy earthquakes on New Year’s Day, leaving at least 30 people dead and more quakes could come. A collision between a Japan coast guard plane and a Japan Airlines flight that caught fire on the runway on Tuesday resulted in the deaths of five people.

Best of the web

This year, resolve to pack a ‘go bag’ to be ready for the next disaster: Here’s what to put in it

Why Suze Orman never goes out to dinner

Topless massages, cage fights and private flights: CEO mishaps of 2023

The chart

More on small-cap caution from Chris Kimble at See It Market. He points out that investors may be getting greedy as some big resistance levels approach for the Russell 2000:


See It Market

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

Ticker

 Security name
TSLA,
-0.55% 		Tesla
MARA,
+7.47% 		Marathon Digital Holdings
NIO,
-5.79% 		Nio
NVDA,
-3.27% 		Nvidia
GME,
-1.14% 		GameStop
AAPL,
-2.97% 		Apple
AMC,
 		AMC Entertainment
COIN,
-2.62% 		Coinbase GLobal
MULN,
-4.69% 		Mullen Automotive
RIOT,
+5.69% 		Riot Platforms

Random reads

New Year’s Eve in a Japanese cat bar.

Woman sues Hershey for $5 million over a faceless Reeses pumpkin.

Viral Burger King worker buys first home after crowdsourcing.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

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These ETF strategies won big in 2023. How one analyst sees them doing next year.

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Hello! This is MarketWatch reporter Isabel Wang bringing you this week’s ETF Wrap. In this week’s edition, we look at ETF strategies that have exploded in popularity in 2023, and whether they will continue to gain momentum in the year ahead.

Please send tips or feedback to [email protected] or to [email protected]. You can also follow me on X at @Isabelxwang and find Christine at @CIdzelis.

Sign up here for our weekly ETF Wrap.

U.S. exchange-traded funds have had a strong 2023, attracting around $580 billion in net inflows with assets climbing to a record $8.1 trillion as of December 27, according to FactSet data.

ETFs tracking the large-cap benchmark S&P 500 index
SPX,
which has risen 24.6% this year, have seen the strongest net inflows in 2023 among the nearly 700 funds MarketWatch tracks, according to FactSet data.

The SPDR S&P 500 ETF Trust
SPY,
the world’s largest and oldest ETF with $493 billion assets under management, has recorded the largest net inflows of over $47 billion this year to date, followed by the Vanguard S&P 500 ETF’s
VOO
$41 billion and the iShares Core S&P 500 ETF’s
IVV
$36 billion over the same period, according to FactSet data. 

In terms of year-to-date performance, technology-related stock funds have shown a remarkable turnaround in 2023 after facing a tumultuous bear market the year before. Some of the ETFs tracking the tech-heavy Nasdaq 100 index
NDX
as well as semiconductor stocks are on pace to finish 2023 with gains of more than 50%, thanks to the rise of the “Magnificent Seven” stocks.

The Fidelity Blue-Chip Growth ETF
FBCG
has jumped 58.7% in 2023 to become the best-performing U.S. fund, excluding ETNs and leveraged products, according to FactSet data. The WisdomTree U.S. Quality Growth Fund
QGRW
is up 56.2% this year, while the Invesco QQQ Trust Series I
QQQ
has risen 55.6% in 2023. Gains in all of these funds were fueled by a massive rally in mega-cap technology stocks such as Apple Inc.
AAPL,
+0.22%
and Nvidia Corp.
NVDA,
+0.21%,
which have surged 49% and 239% this year, respectively, according to FactSet data. 

Will these ETF strategies continue to thrive in 2024? Will others emerge to deliver greater returns next year? Here’s how one CFRA ETF analyst sees things shaping up in the new year. 

Tech-driven growth ETFs will continue to stand out in 2024

The recent strong performance of technology and growth-driven ETFs is likely to continue in 2024, although with higher volatility, according to Aniket Ullal, senior vice president and head of ETF data and analytics at CFRA. 

The table below summarizes the best performing ETF sub-categories in 2023, excluding leveraged and inverse ETFs. The best ETF sectors have featured tech- and growth-related themes like fintech, cryptocurrency, semiconductors, software and the metaverse. “These themes are very likely to continue to have a strong year in 2024,” said Ullal.

SOURCE: CFRA ETF DATABASE, DATA AS OF DECEMBER 18, 2023

One concern for investors is whether ETFs linked to technology sectors can continue to appreciate in 2024. But CFRA’s analysts think that some of the largest tech firms have strong balance sheets and cash flows, so they should be “safe havens” with “a growth tilt” next year.

“Despite the AI-driven recent run-up, the tech sector is still growing into its multiple, and ETFs like the Technology Select Sector SPDR Fund
XLK
do not yet have frothy multiples,” Ullal said in a Friday client note. 

See: ‘Magnificent Seven’ up for another bull run? What to expect from technology stocks in 2024.

Meanwhile, the massive amounts of cash parked at U.S. money-market funds could also keep the bull-market rally chugging along next year.

As of December 20, there was still $5.9 trillion sitting in U.S. money-market funds, according to data compiled by the Investment Company Institute. But given the stock-market rally in 2023 and the “likely pivot” to interest-rate cuts next year by the Federal Reserve, Ullal and his team see investors moving money out of cash-like instruments and migrating back to 60/40 portfolios by increasing their equity exposure next year, he wrote. 

Continued growth in options-based ETFs

ETFs using options-based strategies, such as covered-call ETFs or defined-outcome ETFs, have exploded in popularity in 2023. They have “long-term staying power” in sustaining investor interest in the year ahead, said Ullal. 

Specifically, the largest U.S. covered-call ETF, the $31 billion JPMorgan Equity Premium Income ETF
JEPI,
has seen $13 billion in net inflows so far this year and is among the top-five funds attracting the most capital in 2023, according to FactSet data.

A covered-call ETF, or an option-income ETF, is a fund that uses an options strategy called covered-call writing to generate income through collecting premiums. In a covered-call trade, investors sell a call option on an asset they hold, which gives the buyer of the option the right, not the obligation, to purchase the asset from them at a specified “strike” price on or before a certain date.

When the price of the asset goes down and doesn’t reach the “strike” price before the expiration date, the call option will expire as buyers walk away, but investors could still keep the premium as their payout.

That’s why the covered-call strategy usually performs well in a sideways or choppy market environment, because investors will be compensated for giving up the upside in stocks with a higher options premium. 

More on covered-call ETF: This type of ETF is designed to hedge against volatility and help investors navigate a stormy stock market

Ullal attributed the growing popularity of options-based ETFs to the success of JEPI as well as ETF firms relentlessly expanding their covered-call and buffer-ETF suites in 2023, even though these strategies tend to underperform in a rapidly rising stock market. 

“The flows are probably moderate [in 2024] relative to what we’ve seen so far, but I don’t think the flows will be negative or this category will go away,” Ullal said in a follow-up interview with MarketWatch on Thursday. “What’s happening is there are investors who are willing to trade off or sacrifice some [stock] performance for income or downside protection.” 

With that backdrop, Ullal sees options-based ETF strategies continuing to grow in 2024, though they will be put to the test if the current bull-market trend continues. 

Also see: An ETF that can’t go down? This new ‘buffer’ fund is designed to provide 100% protection against stock-market losses

Emerging-markets ETFs without China-related drag

ETF investors may want to “unbundle” their emerging-market exposure by reconsidering China-related assets in their ETF portfolios, according to Ullal.

Having a high exposure to China in emerging-market holdings was challenging for ETF investors in 2023, as China significantly underperformed other emerging markets this year due to a slower-than-anticipated post-Covid economic recovery, weakness in the country’s property sector and geopolitical tensions with the U.S., Ullal said.

China exposure in two of the most popular emerging-market ETFs, the Vanguard FTSE Emerging Markets ETF
VWO
and the iShares Core MSCI Emerging Markets ETF
IEMG,
stands at 31% and 24.4%, respectively, according to FactSet data. In turn, VWO has risen 8.3% this year, while IEMG has climbed 10.7% in 2023.

Meanwhile, the SPDR S&P China ETF
GXC
has slumped 12.8% year to date, per FactSet data. But the iShares MSCI Emerging Markets ex China ETF
EMXC,
which has no China exposure, has advanced 18.9% over the same period.

One option for investors would be to calibrate their exposure by combining emerging-market ex-China ETFs like EMXC with China-focused ETFs, Ullal said.

Alternatively, investors could construct the EM sleeve of their portfolios with country-specific ETFs, or use active ETFs like the KraneShares Dynamic Emerging Markets Strategy ETF
KEM,
as that fund’s China exposure is dynamically adjusted based on fundamental, valuation, and technical signals, he added.

Rising demand and competition in active bond ETF category 

The U.S. fixed-income ETF sector is dominated by funds passively tracking Treasury bonds like the 10-year Treasury note
BX:TMUBMUSD10Y,
which has seen declining yields lately as discussions around the Fed’s interest-rate path, and a possible pivot to rate cuts, continue to take center stage heading into 2024.

But MarketWatch reported last week that demand for active bond ETFs has picked up, with Vanguard launching two new active bond funds earlier this month. The desire for active bond ETFs among the firm’s clients has grown significantly over the past two years, John Croke, Vanguard’s head of active fixed-income product management, told MarketWatch.

Meanwhile, the firms that dominate the indexed and active bond ETF categories are different, Ullal noted. In the indexed bond ETF category, Vanguard competes with traditional rivals BlackRock and State Street, while in the active bond ETF category where it is now expanding its footprint, Vanguard is competing with managers like JPMorgan, First Trust and PIMCO. 

“This competition will put pressure on the incumbent players, but will be good for investors, and will be an important trend to watch in the next year,” said Ullal.

As usual, here’s your look at the top- and bottom-performing ETFs over the past week through Wednesday, according to FactSet data.

The good…

Top Performers

 %Performance
AdvisorShares Pure U.S. Cannabis ETF
MSOS 		12.7
Amplify Transformational Data Sharing ETF
BLOK 		10.5
SPDR S&P Biotech ETF
XBI 		9.9
ARK Genomic Revolution ETF
ARKG 		8.3
ARK Innovation ETF
ARKK 		6.4
Source: FactSet data through Wednesday, Dec 27. Start date Dec 21. Excludes ETNs and leveraged products. Includes NYSE-, Nasdaq- and Cboe-traded ETFs of $500 million or greater.

…and the bad

Bottom Performers

 %Performance
iMGP DBi Managed Futures Strategy ETF
DBMF 		-2.9
Vanguard Total International Bond ETF
BNDX 		-2.2
iShares 20+ Year Treasury Bond BuyWrite Strategy ETF
TLTW 		-2.1
VanEck BDC Income ETF
BIZD 		-1.2
Vanguard Short-Term Inflation-Protected Securities ETF
VTIP 		-1.2
Source: FactSet data

New ETFs

  • TCW Group filed to convert its TCW Artificial Intelligence Equity Fund TGFTX into the TCW Artificial Intelligence ETF, and is seeking to convert its TCW New America Premier Equities Fund TGUSX into the TCW Compounders ETF, according to the fund’s prospectus filed with the Securities and Exchange Commission on Tuesday.

Weekly ETF Reads



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The Magnificent 7 dominated 2023. Will the rest of the stock market soar in 2024?

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2023 will go down in history for the start of a new bull market, albeit a strange one.

Despite some year-end catch-up by the rest of the S&P 500 index, megacap technology stocks, characterized by the so-called Magnificent Seven, have dominated gains for the large-cap benchmark
SPX,
which is up 23.8% for the year through Friday’s close.

That’s the result of “extreme speculation,” according to Richard Bernstein, CEO and chief investment officer of eponymously named Richard Bernstein Advisors. And it sets the stage for investors to take advantage of “once-in-a-generation” investment opportunities, he argued, in a phone interview with MarketWatch.

MarketWatch’s Philip van Doorn last week noted that, weighting the Magnificent Seven — Apple Inc.
AAPL,
-0.55%
 , Microsoft Corp.
MSFT,
+0.28%,
 Amazon.com Inc.
AMZN,
-0.27%,
 Nvidia Corp.
NVDA,
-0.33%,
 Alphabet Inc.
GOOG,
+0.65%

GOOGL,
+0.76%,
 Tesla Inc.
TSLA,
-0.77%,
 and Meta Platforms Inc. 
META,
-0.20%
— by their market capitalizations at the end of last year, the group had contributed 58% of this year’s roughly 26% total return for the S&P 500, and that’s down from a breathtaking 67% at the end of November.

The chart below shows that the percentage of stocks in the S&P 500 that have outperformed the index in the year to date remains well below the median of 49% stretching back to 1990:


Richard Bernstein Advisors

Meanwhile, the tech-heavy Nasdaq Composite
COMP
has soared more than 40% this year, while the more cyclically weighted Dow Jones Industrial Average
DJIA,
which hit a string of records this month, is up 12.8%.

The narrowness of the rally gave some technical analysts pause over the course of the year. They warned that that it was uncharacteristic of early bull markets, which typically see broader leadership amid growing confidence in the economic outlook.

Bernstein, previously chief investment strategist at Merrill Lynch, sees parallels with the late-1990s tech bubble, which holds lessons for investors now.

The market performance indicates investors have convinced themselves there are only “seven growth stories,” he said. It’s the sort of myopia that’s characteristic of bubbles.

The consequences can be dire. In the 1990s, investors focused on the economy-changing potential of the Internet. And while those technological advances were indeed economy-changing, an investor who bought the tech-heavy Nasdaq at the peak of the bubble had to wait 14 years to get back to break-even, Bernstein noted.

Today, investors are focused on the economy-changing potential of artificial intelligence, while looking past other important developments, including reshoring of supply chains.

“I don’t think anyone is arguing AI won’t be an economy-changing technology,” he said, “ the question is, what’s the investing opportunity.”

For his part, Bernstein argues that small-cap stocks; cyclicals, or equities more sensitive to the economic cycle; industrials; and non-U.S. stocks are all among assets poised to play catch-up.

“I don’t think one has to be overly sexy on this one…it may not make a huge difference as to how you decide to execute and invest” in those areas, he said. “There’s a bazillion different ways to play this.”

Those areas are showing signs of life in December. The Russell 2000
RUT,
the small-cap benchmark, has surged more than 12% in December versus a 4.1% advance for the S&P 500. The Russell still lags behind by a wide margin year to date, up 15.5%, or more than 8 percentage points behind the S&P 500.

Meanwhile, an equal-weighted version of the S&P 500
XX:SP500EW,
which incorporates the performance of each member stock equally instead of granting a heavier weight to more valuable companies, has also played catchup, rising 6.2% in December. It’s now up 11% in 2023, still lagging behind the cap-weighted S&P 500 by more than 8 percentage points.

Bernstein sees early signs of broadening out, but expects it to be an “iterative process.” What investors should be aiming for, he said, is “maximum diversification,” in direct contrast to 2023’s historically narrow market, which reflects investors rejecting the benefits of diversification and taking more concentrated positions in fewer stocks.

To be sure, while the Magnificent Seven-dominated stock-market rally has attracted plenty of attention, it doesn’t mean those individual stocks have been the sole winners in 2023.

“I will say, ‘magnificent’ is in the eye of the beholder,” said Kevin Gordon, senior investment strategist at Charles Schwab, in a phone interview.

The seven stocks that account for such a large share of the S&P 500’s gains do so mostly due to their extremely “mega” market caps rather than outsize price gains. And that’s just, by definition, how market-cap-weighted indexes work, analysts note.

That doesn’t mean the megacap stocks are necessarily the best performers over 2023. While Nvidia, up 243%, and Meta, up 194%, top the list of year-to-date price gainers in the S&P 500, Apple Inc.
AAPL,
-0.55%
is only the 59th best performing stock, with a 49% gain. Combine that with a $3 trillion market cap, however, and Apple proves one of the biggest movers of the overall index.

What was bizarre about the 2023 rally wasn’t so much the megacap tech performance, Gordon said, but the fact that the rest of the market languished to such a degree until recently.

Clarity around the economic outlook and interest rates help clear the way for the rest of the market to play catch-up, he said. Fears of a hard economic landing have faded, while the Federal Reserve has signaled its likely finished raising rates and is on track to deliver rate cuts in 2024.

For stock pickers that didn’t latch on to the few winners, 2023 was brutal. Passive investors who just bought S&P 500-tracking ETFs should feel good.

So why not just chase the index? Bernstein argues that could spell trouble if the megacap names are due to falter. That could make for a mirror image of this year where gains for a wider array of individual stocks is offset by sluggish megacap performance.

Gordon, however, played down the prospect of “binary outcomes” in which investors sell megacaps and buy the rest of the market.

If troubled segments of the economy, such as the housing sector, recover in 2024, investors “could definitely see a scenario where the rest of the market catches up but it doesn’t have to be at the expense of highfliers,” he said.

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Nvidia and AI changed landscape of the chip industry, as rivals play catch-up

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This year’s artificial-intelligence boom turned the landscape of the semiconductor industry on its head, elevating Nvidia Corp. as the new king of U.S. chip companies — and putting more pressure on the newly crowned company for the year ahead.

Intel Corp.
INTC,
+2.12%,
which had long been the No. 1 chip maker in the U.S., first lost its global crown as biggest chip manufacturer to TSMC
2330,

several years ago. Now, Wall Street analysts estimate that Nvidia’s
NVDA,
-0.94%
annual revenue for its current calendar year will outpace Intel’s for the first time, making it No. 1 in the U.S. Intel is projected to see 2023 revenue of $53.9 billion, while Nvidia’s projected revenue for calendar 2023 is $56.2 billion, according to FactSet.

Even more spectacular are the projections for Nvidia’s calendar 2024: Analysts forecast revenue of $89.2 billion, a surge of 59% from 2023, and about three times higher than 2022. In contrast, Intel’s 2024 revenue is forecast to grow 13.3% to $61.1 billion. (Nvidia’s fiscal year ends at the end of January. FactSet’s data includes pro-forma estimates for calendar years.)

“It has coalesced into primarily an Nvidia-controlled market,” said Karl Freund, principal analyst at Cambrian AI Research. “Because Nvidia is capturing market share that didn’t even exist two years ago, before ChatGPT and large language models….They doubled their share of the data-center market. In 40 years, I have never seen such a dynamic in the marketplace.”

Nvidia has become the king of a sector that is adjacent to the core-processor arena dominated by Intel. Nvidia’s graphics chips, used to accelerate AI applications, reignited the data-center market with a new dynamic for Wall Street to watch.

Intel has long dominated the overall server market with its Xeon central processor unit (CPU) family, which are the heart of computer servers, just as CPUs are also the brain chips of personal computers. Five years ago, Advanced Micro Devices Inc.
AMD,
+0.90%,
Intel’s rival in PC chips, re-entered the lucrative server market after a multi-year absence, and AMD has since carved out a 23% share of the server market, according to Mercury Research, though Intel still dominates with a 76.7% share.

Graphics chips in the data center

Nowadays, however, the data-center story is all about graphics processing units (GPUs), and Nvidia’s have become favored for AI applications. GPU sales are growing at a far faster pace than the core server CPU chips.

Also read: Nvidia’s stock dubbed top pick for 2024 after monster 2023, ‘no need to overthink this.’

Nvidia was basically the entire data-center market in the third quarter, selling about $11.1 billion in chips, accompanying cards and other related hardware, according to Mercury Research, which has tracked the GPU market since 2019. The company had a stunning 99.7% share of GPU systems in the data center, excluding any devices for networking, according to Dean McCarron, Mercury’s president. The remaining 0.3% was split between Intel and AMD.

Put another way: “It’s Nvidia and everyone else,” said Stacy Rasgon, a Bernstein Research analyst.

Intel is fighting back now, seeking to reinvigorate growth in data centers and PCs, which have both been in decline after a huge boom in spending on information technology and PCs during the pandemic. This month, Intel unveiled new families of chips for both servers and PCs, designed to accelerate AI locally on the devices themselves, which could also take some of the AI compute load out of the data center.

“We are driving it into every aspect of the applications, but also every device, in the data center, the cloud, the edge of the PC as well,” Intel CEO Pat Gelsinger said at the company’s New York event earlier this month.

While AI and high-performance chips are coming together to create the next generation of computing, Gelsinger said it’s also important to consider the power consumption of these technologies. “When we think about this, we also have to do it in a sustainable way. Are we going to dedicate a third, a half of all the Earth’s energy to these computing technologies? No, they must be sustainable.”

Meanwhile, AMD is directly going after both the hot GPU market and the PC market. It, too, had a big product launch this month, unveiling a new family of GPUs that were well-received on Wall Street, along with new processors for the data center and PCs. It forecast it will sell at least $2 billion in AI GPUs in their first year on the market, in a big challenge to Nvidia.

Also see: AMD’s new products represent first real threat to Nvidia’s AI dominance.

That forecast “is fine for AMD,” according to Rasgon, but it would amount to “a rounding error for Nvidia.”

“If Nvidia does $50 billion, it will be disappointing,” he added.

But AMD CEO Lisa Su might have taken a conservative approach with her forecast for the new MI300X chip family, according to Daniel Newman, principal analyst and founding partner at Futurum Research.

“That is probably a fraction of what she has seen out there,” he said. “She is starting to see a robust market for GPUs that are not Nvidia…We need competition, we need supply.” He noted that it is early days and the window is still open for new developments in building AI ecosystems.

Cambrian’s Freund noted that it took AMD about four to five years to gain 20% of the data-center CPU market, making Nvidia’s stunning growth in GPUs for the data center even more remarkable.

“AI, and in particularly data-center GPU-based AI, has resulted in the largest and most rapid changes in the history of the GPU market,” said McCarron of Mercury, in an email. “[AI] is clearly impacting conventional server CPUs as well, though the long-term impacts on CPUs still remain to be seen, given how new the recent increase in AI activity is.”

The ARMs race

Another development that will further shape the computing hardware landscape is the rise of a competitive architecture to x86, known as reduced instruction set computing (RISC). In the past, RISC has mostly made inroads in the computing landscape in mobile phones, tablets and embedded systems dedicated to a single task, through the chip designs of ARM Holdings Plc
ARM,
+0.81%
and Qualcomm Inc.
QCOM,
+1.12%.

Nvidia tried to buy ARM for $40 billion last year, but the deal did not win regulatory approval. Instead, ARM went public earlier this year, and it has been promoting its architecture as a low-power-consuming option for AI applications. Nvidia has worked for years with ARM. Its ARM-based CPU called Grace, which is paired with its Hopper GPU in the “Grace-Hopper” AI accelerator, is used in high-performance servers and supercomputers. But these chips are still often paired with x86 CPUs from Intel or AMD in systems, noted Kevin Krewell, an analyst at Tirias Research.

“The ARM architecture has power-efficiency advantages over x86 due to a more modern instruction set, simpler CPU core designs and less legacy overhead,” Krewell said in an email. “The x86 processors can close the gap between ARM in power and core counts. That said, there’s no limit to running applications on the ARM architecture other than x86 legacy software.”

Until recently, ARM RISC-based systems have only had a fractional share of the server market. But now an open-source version of RISC, albeit about 10 years old, called RISC-V, is capturing the attention of both big internet and social-media companies, as well as startups. Power consumption has become a major issue in data centers, and AI accelerators use incredible amounts of energy, so companies are looking for alternatives to save on power usage.

Estimates for ARM’s share of the data center vary slightly, ranging from about 8%, according to Mercury Research, to about 10% according to IDC. ARM’s growing presence “is not necessarily trivial anymore,” Rasgon said.

“ARM CPUs are gaining share rapidly, but most of these are in-house CPUs (e.g. Amazon’s Graviton) rather than products sold on the open market,” McCarron said. Amazon’s
AMZN,
-0.18%
 Graviton processor family, first offered in 2018, is optimized to run cloud workloads at Amazon’s Web Services business. Alphabet Inc.
GOOG,
+0.66%

GOOGL,
+0.63%
also is developing its own custom ARM-based CPUs, codenamed Maple and Cypress, for use in its Google Cloud business according to a report earlier this year by the Information.

“Google has an ARM CPU, Microsoft has an ARM CPU, everyone has an ARM CPU,” said Freund. “In three years, I think everyone will also have a RISC-V CPU….It it is much more flexible than an ARM.”

In addition, some AI chip and system startups are designing around RISC-V, such as Tenstorrent Inc., a startup co-founded by well-regarded chip designer Jim Keller, who has also worked at AMD, Apple Inc.
AAPL,
+0.54%,
Tesla Inc.
TSLA,
+2.04%
and Intel.

See: These chip startups hope to challenge Nvidia but it will take some time.

Opportunity for the AI PC

Like Intel, Qualcomm has also launched an entire product line around the personal computer, a brand-new endeavor for the company best known for its mobile processors. It cited the opportunity and need to bring AI processing to local devices, or the so-called edge.

In October, it said it is entering the PC business, dominated by Intel’s x86 architecture, with its own version of the ARM architecture called Snapdragon X Elite platform. It has designed its new processors specifically for the PC market, where it said its lower power consumption and far faster processing are going to be a huge hit with business users and consumers, especially those doing AI applications.

“We have had a legacy of coming in from a point where power is super important,” said Kedar Kondap, Qualcomm’s senior vice president and general manager of compute and gaming, in a recent interview. “We feel like we can leverage that legacy and bring it into PCs. PCs haven’t seen innovation for a while.”

Software could be an issue, but Qualcomm has also partnered with Microsoft for emulation software, and it trotted out many PC vendors, with plans for its PCs to be ready to tackle computing and AI challenges in the second half of 2024.

“When you run stuff on a device, it is secure, faster, cheaper, because every search today is faster. Where the future of AI is headed, it will be on the device,” Kondap said. Indeed, at its chip launch earlier in this month, Intel quoted Boston Consulting Group, which forecast that by 2028, AI-capable PCs will comprise 80% of the PC market..

All these different changes in products will bring new challenges to leaders like Nvidia and Intel in their respective arenas. Investors are also slightly nervous about Nvidia’s ability to keep up its current growth pace, but last quarter Nvidia talked about new and expanding markets, including countries and governments with complex regulatory requirements.

“It’s a fun market,” Freund said.

And investors should be prepared for more technology shifts in the year ahead, with more competition and new entrants poised to take some share — even if it starts out small — away from the leaders.

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#Nvidia #changed #landscape #chip #industry #rivals #play #catchup

Silver’s window of opportunity is closing, with prices poised for an ‘explosive move’ in 2024

Post By Stock , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Silver prices could be headed for an “explosive” rise in 2024 if global supplies continue to fall short of demand, and the Federal Reserve makes good on its plans to pivot to interest rate cuts in the coming months, according to metal-markets analysts.

While silver this year has underperformed gold, which saw prices touch record highs this year, the opportunity to snap up silver at bargain prices may be brief.

“The window for buying silver in the low- to mid-$20s is ending,” said Peter Spina, president of silver news and information provider SilverSeek.com.

It is likely that silver prices next year will be pushing up toward the major $30-an-ounce technical resistance, he told MarketWatch, adding that he “fully” believes that the price barrier will fall. 

On Thursday, the most-active March contract for silver futures
SIH24,
-0.95%

SI00,
-0.95%
settled at $24.39 an ounce on Comex, with prices up 6.4% for the session to erase what had been a loss for the year. It traded 1.4% higher year to date, according to Dow Jones Market Data.

Gold futures
GCG24,
-0.43%

GC00,
-0.43%,
on the other hand, settled at $2.044.90 Thursday, up 2.4% for the session, up 12% for the year so far, and trading close to its record finish of $2,089.70 from Dec. 1.

Silver’s underperformance

Generally, silver moves with gold much more than with other commodities such as copper or oil, and silver’s moves tend to be bigger than gold’s as a percentage, said Keith Weiner, chief executive officer of Monetary Metals.

That’s what happened with silver’s recent move lower, he said. Silver, on Wednesday, tallied an eighth consecutive session loss, marking the longest streak of losses in just over a year and a half.

Both gold and silver had experienced similar trends in terms of “lack of investment demand” due to rising interest rates, said Chris Mancini, research analyst at Gabelli Funds. This has primarily manifested in outflows from both gold- and silver-backed exchange-traded funds, he said.

The iShares Silver Trust
SLV,
which holds 441.47 million ounces of silver, has seen a year-to-date net asset value return of negative 0.3% as of Thursday.

Gold, however, has benefited from a surge in demand this year from central banks, which are buying gold to “diversify out of the U.S. dollar,” said Mancini.

Read: Global central-bank gold purchases reach a record high for the first 9 months of the year

Also see: Gold just hit a record high. Is it too late for investors to add it to portfolios?

Solid economic performance this year around the world, and specifically in the U.S., led to higher short-term rates from the Fed and other central banks, and the “subsequent decline in investor demand for gold and silver,” Mancini said.

Global physical investment demand for silver is forecast at 263 million ounces this year, down 21% from 333 million ounces in 2022, the Silver Institute reported in mid-November, citing data from Metals Focus.

Change of course

Silver prices rallied by late Wednesday afternoon, after the Federal Reserve penciled in three interest-rate cuts in 2024, instead of the two that were projected in September. 

That marked quite a change, as prices for silver had been trading lower for the year before that rally.

Prospects for an end to the Fed’s rate-hiking cycle weakened the U.S. dollar and Treasury yields, providing support for dollar-denominated gold prices — and silver along with them.

Read: Gold futures leap closer to record highs in one fell swoop

The Fed decision “put a reversal on industrial demand fears,” so the temporary pressure brought on by those fears has been removed, said Spina.

Fed Chairman Jerome Powell on Wednesday had said officials from the central bank were starting to discuss when to cut interest rates.

New York Federal Reserve President John Williams appeared to walk back on those comments, telling CNBC Friday that Fed officials weren’t really talking about cutting rates right now.

At some point, the Fed is going to have to reverse course on interest rates, said Monetary Metals’ Weiner.

“When they do, it will be a catalyst for higher gold and silver prices, “perhaps much higher,” he said. “We are in a secular bull market now — this is not the bear market of 2012-2018.”

Bullish fundamentals

Global supply of silver, meanwhile, is expected to fall short of demand this year, for a third year in a row.

The “fundamentals for the silver market are extremely bullish,” Spina said, particularly with a structural deficit continuing for silver.

The report from the Silver Institute showed that global industrial demand for silver is expected to grow by 8% to a record 632 million ounces this year, buoyed by investment in photovoltaics — used in solar technology — power grid and 5G networks, growth in consumer electronics, and rising vehicle output.

The report showed 2023 global silver supply estimated at about 1 billion ounces, while total demand is seen at a larger 1.143 billion ounces. Metals Focus said it believes the deficit will “persist in the silver market for the foreseeable future.”

“The only last big driver missing for silver prices to explode is investor interest,” said Spina.

Keep in mind that silver is a “precious green metal,” he said. It benefits from strong growth in mandated green energy demand, which will continue to “push industrial demand to fresh records.”

Meanwhile, silver inventory stocks are being “drained,” as a structural deficit for physical silver competes for remaining inventories, said Spina.

““If the gold price is moving to record price highs in the coming weeks, silver is in the perfect set-up to test $30, with a likely breakout to $50…coming in 2024.””


— Peter Spina, SilverSeek.com

He expects silver prices to “re-challenge” $30 an ounce within the coming months, “if not sooner.”

Watch gold prices for the initial direction, he said. “If the gold price is moving to record price highs in the coming weeks, silver is in the perfect set-up to test $30, with a likely breakout to $50 [and ounce] coming in 2024.”

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#Silvers #window #opportunity #closing #prices #poised #explosive #move

I don’t want to leave my financially irresponsible daughter my house. Is that unreasonable?

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I am at my wit’s end and hope someone can recommend ways to help my daughter’s unwillingness to manage her money. When I am gone her chances are slim to none. I am a senior citizen and I’ve had cancer four times in the last three years, so I don’t know how much longer I have. 

I already told her I’d leave her a few thousand dollars from my retirement funds, but I know she’ll blow through whatever I give her. I don’t want to leave her my house in my will. Am I being unreasonable? The loan balance is only $28,000 and mortgage payments are very low. One reason: She’ll be even less motivated to manage her finances wisely if she knows she will get it.  

I’ve talked to my therapist and he has no solutions. All my daughter’s friends are similarly ill-equipped, and there is no adult that she would heed. My therapist said: “Why should I care?” But I do. Plus, she won’t be able to pay the ongoing taxes, insurance and maintenance because of her free-wheeling spending.  

I told her not to spend her modest retirement balance from a previous job. She did and her reason was that she said it was small. I let her use my car, and pay maintenance and insurance.  I pay for her phone. She pays no rent and nor does she do many chores. Oftentimes, she is short of money, and I have to give her a loan. She keeps getting credit cards, pays them off, then repeats the cycle.

When I try to talk to her calmly, she argues. I tried to get her to set up a budget. She won’t do it.  Earlier she agreed to pay the entire phone bill as her contribution. She simply auto-paid using her credit card. The card went into arrears so I had to make good on that, and resume responsibility.

I try to set up small goals for her, but she’s not receptive. Yet she buys plenty of snacks, cosmetics and goes on vacations. I’ve offered to have us meet an adviser of her choice to tackle these issues, but again she’s not interested. I’ve even suggested I’m going to take a home-equity loan to spend on myself and she’d have to pay it back but again, no response.

I love her very much, but don’t know what to do. My wife sabotaged my efforts in her misguided kindness when our daughter was younger. She no longer does that, but it’s too late.

In short, she’s not willing to manage her money properly. She is in school now, but worked several years full time, and is now working part time. I promised her I’d put money toward her degree, but I’m going to pay it directly to the school.

I have calmly told her of the dire consequences of her actions, but it doesn’t get through to her.

The Father 

“You may not realize it, but your daughter, your wife and your good self are all playing a game.”


MarketWatch illustration

Dear Father,

Think twice before disinheriting your daughter. If she is your only child, don’t allow your frustrations to posthumously punish her.

First things first: Take care of yourself. You have had recurring battles with cancer, and that may have taken a toll on your health. Your fears and concerns about your own mortality may be contributing to this laser focus on your daughter’s wellbeing. It could be that you believe you have a shorter period of time to ensure your daughter balances her books, and gets back on the right track, but the truth is that she is operating on her own timetable.

That said, the situation you describe sounds extremely dysfunctional. You are both the enabler and the avenger — paying her phone bill and rent, and threatening to cut her out of your will. What’s more, you and your wife — intentionally or not — are playing good cop/bad cop. This is a “Kramer vs. Kramer” situation where your daughter is able to play her parents off against each other. One rewards, the other chastises. 

It seems like your daughter’s cycle of taking out credit cards is mirrored by the cycle of cat-and-mouse you play with her, even if you do it without realizing it. You are all caught inside a long-running saga that is, perhaps, inherited from your own parents. Your daughter will never be who you want her to be. She can only be who she is, make mistakes, learn from them (or not) and hopefully grow and mature over time. 

You may not realize it, but your daughter, your wife and your good self are all playing a game. Your daughter rebels, you threaten to disinherit her, and your wife plays peacemaker. You are tough with your daughter, your wife shows her kindness, and your daughter plays you both off against each other. Not all games are fun, but they do form a pattern that is so embedded in the family dynamic that it’s hard to see it from the inside.

The ‘games’ people play

Eric Berne wrote a landmark book in 1964 entitled “Games People Play.” He defined these games as follows: “A game is an ongoing series of complementary ulterior transactions progressing to a well-defined, predictable outcome.” It could be “If It Weren’t For You” (perhaps a common one between unhappy spouses) or “Yes, but” (where one person cajoles another to take action, but the other person always has an excuse for inaction). 

Each game has a gimmick and a payoff. I’m not sure what game you’re playing, but it’s repetitive and everybody is getting some kind of reward, even if it is an unhappy one. That is something you will have to figure out. You get to be the leader who knows how the world works, your wife gets to be Switzerland (while surreptitiously fanning the flames) while your daughter gets to defy you and assert her independence, knowing it will provoke you to repeat the cycle.

My point is: You all need family therapy! Not just your daughter. Or you. Or your wife. You need to process this together. Whether or not you leave your daughter your house is, at this point, irrelevant. The threat that you will withhold a large part of your inheritance is the key part. Why would you do that? Would it really solve anything to make your daughter even more financially insecure? Is punishing her more practical and effective than rewarding her?

Elephant in the room

The other elephant in the room is what happens if you predecease your wife. You may wish for your daughter to be disinherited except for a few thousand dollars, but this game of good cop/bad cop and rebellious daughter may continue after you’re gone with your daughter convincing your wife to not act in accordance with your wishes. That may be the final denouement to this “game,” or perhaps a relative or lawyer would take your place.

Your daughter is, I suspect, being infantilized by the constant criticisms and interference in her finances. You don’t trust her enough to make her own decisions, so you interfere and get frustrated by all her bad habits and, as you see them, mistakes. But it also helps prevent her from standing on her own two feet and facing the music when things go wrong. Why? She knows you will step in to show (a) you care and (b) you told her so.

There are financial therapists who can help you analyze your emotional relationship to money and why you make the decisions we do. But it may be that you all have to make decisions that go against your instincts. Stop trying to change your daughter, and stop bailing her out. She may do her utmost to provoke you to lose your cool with her. No more loans. Let her go on vacation. Just don’t be around to pick up the bill.

You could set up a trust with stipulations: when your daughter receives certain amounts of money and how she is allowed to spend it. There is a balance between being too controlling and prescriptive enough to encourage her to make good choices. But ultimately that is out of your hands. As I said at the beginning of my response, I worry that your responses to her are exacerbated by your fears over your own health.

It would be a shame to waste these years sparring with your child when you could put all that aside, and enjoy each other for you are, instead.

More from Quentin Fottrell:

Is it OK for my new boyfriend to ask me to split the bill? ‘I don’t want him to get used to me paying for my own meals.’

My stepdaughter is executor to her late father’s will, and believes she’s now on the deed to my home. Is that possible?

I inherited $246,000 from my late mother and used $142,000 to pay off our mortgage. If we divorce, can I claim this money?

You can email The Moneyist with any financial and ethical questions at [email protected], and follow Quentin Fottrell on X, the platform formerly known as Twitter. The Moneyist regrets he cannot reply to questions individually.

Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write to me with all sorts of dilemmas. Post your questions, or weigh in on the latest Moneyist columns.

By emailing your questions to the Moneyist or posting your dilemmas on the Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.



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#dont #leave #financially #irresponsible #daughter #house #unreasonable

Stock-market rally faces make-or-break moment. How to play U.S. October inflation data.

Post By Stock , , , , , , , , , , , , , , , , , , , , , , , ,

It has been a while since a hot inflation report sparked wild gyrations in U.S. stocks, like it frequently did in 2022, but that doesn’t mean Tuesday’s consumer price index for October is destined to be a snooze-fest for markets.

To the contrary, some Wall Street analysts believe it is possible, even likely, that the October CPI report could emerge as a critical catalyst for stocks, with the potential to propel the market higher on a softer-than-expected number.

At least one prominent economist expects the data to show that consumer prices were largely unchanged last month, or even fell.

“I would not be surprised to see a negative CPI inflation print for October,” said Neil Dutta, head of economics at Renaissance Macro Research, in commentary emailed to MarketWatch.

“After all, retail gasoline and heating oil prices declined a little over 10% over the month and we know that energy, while representing a small share of total CPI, roughly 7%, can account for a large chunk of the month-to-month swings in CPI.”

Markets at a crossroads

The October CPI report arrives at a critical juncture for markets. Investors are trying to anticipate whether the Federal Reserve will follow through with one more interest rate increase, as it indicated in its latest batch of projections, released in September.

Speaking on Thursday, Federal Reserve Chairman Jerome Powell left the door open to another move, but qualified this — as the Fed almost always has — by insisting that whatever the Fed decides, it will ultimately depend on the data.

These comments added even more emphasis to next week’s data, said Thierry Wizman, Macquarie’s global FX and interest rate strategist, in commentary emailed to MarketWatch on Friday.

“Our own view — expressed over the past few days — is that the Fed — and by extension the fixed-income markets — won’t be anticipatory. Rather, the Fed will be highly reactive to the data,” he said. “The next milestone is…CPI. It is likely to have a calming effect on markets, as traders weigh the prospect that a very low headline CPI result will further cool the prospect of excessive wage demands in the labor market.”

Asymmetric risks

While assessing the potential impact of a soft inflation report next week, at least one market analyst expects the market’s reaction to the June CPI report, released on July 12, might serve as a helpful template.

Stocks touched their highest levels of the year within that month, as many interpreted the slower-than-expected increase in prices as an important turning point in the Fed’s battle against inflation. The S&P 500 logged its 2023 closing high on July 31, according to FactSet data,

Tom Lee, who anticipated both the outcome of the June CPI report and the market’s reaction, told MarketWatch that, at this point, inflation would need to meaningfully reaccelerate to have an adverse impact on the stock market.

The upshot of this is that the risks for investors heading into Tuesday’s report are likely skewed to the upside. Even a slightly hotter-than-expected number likely wouldn’t be enough to derail the market’s November rebound rally. While a soft reading could reinforce expectations that the Fed is done hiking rates, likely precipitating a rally in both stocks and bonds.

“I’d say the setup looks pretty favorable,” Lee said.

Even a modestly hotter-than-expected number likely wouldn’t be enough to derail the market’s November rebound.

“I think the reaction function is changing for the stock market,” Lee said.

“Because the Federal Reserve and public market kind of viewed the September CPI as a pretty decent number, and Powell even referred to it as such. Earlier in 2023, I think people would have viewed it as a miss.”

U.S. inflation has eased substantially since peaking above 9% on a year-over-year basis last summer, the highest rate in four decades. The data released last month showed consumer prices climbed 0.4% in September, softer than the 0.6% from the prior month, but still slightly above expectations.

However, the more closely watched “core” reading reflected only a 0.3% increase, which was in-line with expectations.

How long will the ‘last mile’ take?

There is a perception on Wall Street and within the Federal Reserve that driving inflation down from 3% to the Fed’s 2% target could pose more difficulty for the Fed. After all, most of the easing from last summer’s highs was driven by falling commodity prices and supply-chain normalization as the economic impact of the COVID-19 pandemic faded.

Powell has repeatedly warned of a “bumpy ride,” and he reiterated on Thursday that the battle against inflation is far from over.

See: Powell says Fed is wary of ‘head fakes’ from inflation

Inflation data released this month, and in the months to come, could help to define investors’ expectations for how long this “last mile” might take, helping these reports regain their significance for markets.

“I like a calm market, but I think CPI is coming more in focus these days now that we’re getting closer to that 2% target,” said Callie Cox, U.S. investment analyst at eToro, during a phone call with MarketWatch.

Since the start of 2023, the S&P 500 index hasn’t seen a single move of 1% or greater on a CPI release day, according to FactSet data. By comparison, the biggest daily swings seen in 2022 occurred on CPI days, with the large-cap index sometimes swinging 4% or more in a single session.

Economists polled by FactSet expect consumer prices rose 0.1% in October, following a 0.4% bump in September. They expect a 0.3% increase for core prices, which excludes volatile food and energy. Powell has said that he’s keeping a close eye on core inflation, as well as so-called “supercore” inflation, which measures the cost of services inflation excluding housing.

To be sure, the CPI report isn’t the only piece of potentially market-moving news due during the coming week. Investors will also receive a monthly update from the Treasury that includes data on foreign purchases and sales of Treasury bonds, as well as a flurry of other economic reports, including potentially market-moving readings on housing-market and manufacturing activity.

There is also the producer-price index, another closely watched barometer of inflation, which is due out Thursday.

U.S. stocks have risen sharply since the start of November, with the S&P 500
SPX
up more than 5.3%, according to FactSet data.

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#Stockmarket #rally #faces #makeorbreak #moment #play #October #inflation #data

I’m a 61-year-old single librarian and ‘proud’ Democrat from Maine. Should I move to Florida like Jeff Bezos?

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I finally have something in common with Jeff Bezos. He is moving to Miami. I too am thinking of moving to Florida in the next year or so. My parents retired there 25 years ago; my father passed away in 2019, but my mom is still alive. I am also nearing retirement, and thought I would follow in their footsteps. I have a house in Maine, which I intend to sell when I finally make the move. I’ve lived here for 11 glorious years, and made a lot of friends. I’m a librarian, but don’t believe anything or everything you have heard about librarians, we are a social lot. 

I’m 61 and earn $85,000 a year, and have a lot of friends. But I reckon my mom has only a few good years yet, and she is slowing down. I bought my house for $160,000 and it’s now worth $350,000 or thereabouts, if I can sell it with the way interest rates are going. If not, I could rent it out. So my question is: Should I retire to Florida like Jeff Bezos? I’ve been window shopping for properties around Sarasota and Tampa, but I’m flexible. I am proud to live in a blue state, but I also want to be within an hour or so of my mom, so I can see her as often as possible. 

I’ve been feeling restless and, frankly, glum lately. And I thought this change would do me good. Am I mad? Is this a good move?

Florida Bound

Related: My ex-husband is suing for half of our children’s 529 plans — eight years after our divorce. Is he entitled to plunder these accounts?

“No matter how many billions of dollars you have in the bank, there’s one thing that money can’t buy — time.”


MarketWatch illustration

Dear Florida Bound,

You and Jeff Bezos do share that one concern about wanting to be near your aging parents. No matter how many billions of dollars you have in the bank, there’s one thing that money can’t buy — time. The Cape Canaveral operations of his space company, Blue Origin, are also in Florida, so it’s a convenient business move and a tax-savvy one. Maine has a capital gains and income tax; but Florida, like Washington, has no state income tax; unlike Washington, it has no capital-gains tax. You and Bezos will be following in the footsteps of former president Donald Trump, who lived in New York before he tax domiciled at his Mar-a-Lago Palm Beach estate. 

Billionaires — not unlike retirees — tend to move out of states with estate taxes, according to a recent study by researchers at the University of California, Berkeley and the Federal Reserve Bank of San Francisco. The trend grows stronger as billionaires grow older. But whether you’re a billionaire or a mild-mannered librarian, when you move, you should move. If you spend more than 183 days in Maine per year and/or still have a home there, and you do not spend a similar amount of time in Florida, the tax folks in Maine could ask you to pay Maine income tax. You may have to keep records of your comings and goings (airline tickets and credit-card receipts etc.), but tax agencies can also subpoena your cell-phone records.

Should you move to Florida? Be prepared for the humidity — and the culture shock. You may be used to those lovely 78°F/26°C summers in Maine. Try swapping that for 95°F/35°C. Florida is a very different place to Maine, both culturally and politically. You may find yourself living next-door to an equally proud Trump supporter. If you enjoy living in a blue state, assuming you are a supporter of President Joe Biden, how would that make you feel? Or are you living in a Democratic blue cocoon (or lagoon)? Do you have friends across the political divide? We have a presidential election in November 2024. Expect nerves to be frayed.

The good news — yes, I have good news too — house prices in Maine and Florida are almost identical. The average price hovers at $390,000 in both states, according to Zillow
Z,
-1.58%.
Just be aware of the rising cost of flood and home insurance in the Sunshine State. You are also likely to be surrounded by people your own age: Florida is the top state for retirees, per a report released this year by SmartAsset, which analyzed U.S. Census Bureau migration data. A warm climate and zero state income taxes consistently prove to be a double winner: Florida netted 78,000 senior residents from other U.S. states in 2021 — the latest year for which data available — three times as many as Arizona, No. 2 on the list.

I spoke to friends who have retired to Florida and they say it’s not a homogenous, one-size-fits-all state. “It’s not all beaches, hurricanes, stifling year-round temperatures, and condos,” one says. “It’s possible to escape northern winters without committing to these conditions.” One retiree cited Gainesville in north-central Florida, the home of the University of Florida, as “diverse and stimulating,” but noted that the nearest airports are in Jacksonville (72 miles), Orlando (124 miles), and Tampa (140 miles). Another Sarasota retiree was more circumspect, and told me: “Be careful how you advertise your political affiliation.”

Perhaps where you belong for now is close to your mother. Spending time with her is a top priority, but brace yourself for a new living experience in Florida (and, while we’re at it, alligators). The siren call of home grows stronger as we get older, but “home” also means different things to different people. For some, it’s a place where they can live comfortably, and within their means. For others, it’s where they have a strong sense of community, be that friends, family, or like-minded individuals, or those with whom we can respectfully disagree. People who have a support system around them tend to live longer, so keep that in mind too. 

We can change so much about our circumstances: buy a new car, try a new hairstyle, even go to a plastic surgeon for a new face. There are all sorts of remedies at our fingertips. If all else fails, there’s a pill for that. Or an app that will change our life, or at the very least lull us to sleep with the sound of whales or waves. We may be tempted to believe that if we could change our circumstances, our house, our job, our bank account, or even the town, city, state or country where we live, that we could reinvent ourselves in our own eyes and the eyes of others, and turn our frowns upside down.

There’s just one, not insubstantial problem: we take ourselves — and all of our neuroses — with us.

You can email The Moneyist with any financial and ethical questions at [email protected], and follow Quentin Fottrell on X, the platform formerly known as Twitter.

Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

The Moneyist regrets he cannot reply to questions individually.

Previous columns by Quentin Fottrell:

If I buy a home with an inheritance and only put my name on the deed, does my husband have any rights? 

I cosigned my boyfriend’s mortgage, but I’m not on the deed. I didn’t want to marry again after a costly divorce. How do I protect myself?

My mother claims I’m in her will but refuses to show it to me. Should she put my name on the deed to her home?



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‘The high for equities is not in,’ says technical strategist who unpacks the stocks to buy now.

Post By Stock , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Siegel argues that bonds, which have been giving stocks the shove, have proven to be a terrible inflation hedge, but investors have forgotten that given it’s 40 years since the last big price shock. “Stocks are excellent long-term hedges, stocks do beautifully against inflation, bonds do not,” he told CNBC on Tuesday.

Don’t miss: ‘Bond math’ shows traders bold enough to bet on Treasurys could reap dazzling returns with little risk

Other stock cheerleaders out there are counting on a fourth-quarter rally, which, according to LPL Financial, delivers on average a 4.2% gain as portfolio managers snap up stock winners to spiff up performances.

Our call of the day from Evercore ISI’s head of technical strategy, Rich Ross, is in the bull camp as he declares the “high for equities is not in,” and suggests some stocks that will set investors up nicely for that.

Ross notes November is the best month for the S&P 500
SPX,
Russell 2000
RUT
and semiconductors
SOX,
while the November to January period has seen a 6% gain on average for the Nasdaq Composite
COMP.
He says if the S&P can break out above 4,430, the next stop will be 4,630 within 2023, putting him at the bullish end of Wall Street forecasts.

In addition, even with 10-year Treasury yields back at their highs, the S&P 500 is still ahead this week and that’s a “great start” to any rally, he adds.

Evercore/Bloomberg

What else? He says “panic bottoms” seen in bond proxies, such as utilities via the Utilities Select Sector SPD exchange-traded fund ETF
XLU,
real-estate investment trusts and staples, are “consistent with a bottom in bond prices,” which is closer than it appears if those proxies have indeed bottomed.


Evercore/Bloomberg

Among the other green shoots, Ross sees banks bottoming following Bank of America
BAC,
+1.14%
earnings “just as they did in March of ’20 after a similar 52% decline which culminated in a year-end rally which commenced in Q4.”

He sees expanding breadth for stocks — more stocks rising than falling — adding that that’s a buy signal for the Russell 2000, retail via the SPDR S&P Retail ETF
XRT
and regional banks via the SPDR S&P Regional Banking
KRE.

The technical strategist also says it’s time to buy transports
DJT,
with airlines “at bear market lows and deeply oversold,” while railroads are also bottoming and truckers continue to rise.

As for tech, he’s a buyer of semiconductors noting they tend to gain 7% on average in November, and Nvidia
NVDA,
-2.88%
has been under pressure as of late. He also likes software such as Microsoft
MSFT,
+0.82%,
Zscaler
ZS,
+0.66%,
MongoDB
MDB,
+0.90%,
Intuit
INTU,
-1.43%,
Oracle
ORCL,
-0.05%,
Adobe
ADBE,
+0.93%,
CrowdStrike
CRWD,
+0.55%
and Palo Alto Networks
PANW,
+1.38%.


Evercore/Bloomberg

“The strong tech will stay strong and the weak will get strong,” says Ross.

The markets

Stocks
SPX

COMP
are dropping, with bond yields
BX:TMUBMUSD10Y

BX:TMUBMUSD02Y
mixed. Oil prices
CL.1,
+1.82%

BRN00,
+1.69%
have pared a stronger rally after a deadly hospital explosion in Gaza City, with Iran reportedly calling for an oil embargo against Israel. Gold
GC00,
+1.84%
has shot up $35.

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

The buzz

Morgan Stanley
MS,
-6.02%
posted a 10% earnings fall, but beat forecasts, with shares down. Abbott Labs
ABT,
+3.12%
is up after upbeat results and aguidance hike and Procter & Gamble
PG,
+2.91%
is up after an earnings beat. Tesla
TSLA,
-0.89%
(preview here) and Netflix
NFLX,
-1.20%
(preview here) will report after the close.

Read: Ford CEO says Tesla, rival automakers loving the strike. He may be wrong

United Airlines shares
UAL,
-7.83%
are down 5% after the airline lowered guidance due to the Israel/Gaza war. Spirit AeroSystems
SPR,
+22.60%
surged 75% after the aircraft components maker announced a production support deal with Boeing
BA,
+0.88%.

Housing starts came short of expectations, with the Fed’s Beige Book of economic conditions coming at 2 p.m. Also, Fed Gov. Chris Waller will speak at noon, followed by New York Fed Pres. John Williams at 12:30 p.m. and Fed Gov. Lisa Cook at 6:55 p.m.

China’s third-quarter GDP rose 4.9%, slowing from 6.3% in the previous quarter, but beating expectations.

Middle East tensions are ratcheting up with protests spreading across the region after a massive deadly blast at a Gaza City hospital, and airports evacuated across France over terror threats. President Biden told Israeli Prime Minister Benjamin Netanyahu that “it appears as though it was done by the other team.”

Read: Treasury says Hamas leaders ‘live in luxury’ as it unveils new sanctions

Best of the web

Bridgewater says the market has entered the second stage of tightening

Why the FDA needs to halt Cassava Sciences’ Alzheimer’s clinical trials

Hail, heat, rot in Italy push France to top global winemaking spot

Attacks across Europe put Islamist extremism back in spotlight

The tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

Ticker

 Security name
TSLA,
-0.89% 		Tesla
AMC,
-0.73% 		AMC Entertainment
AAPL,
-0.39% 		Apple
GME,
-1.20% 		GameStop
NIO,
-2.99% 		Nio
AMZN,
-1.10% 		Amazon
PLTR,
-0.59% 		Palantir
MULN,
-0.06% 		Mullen Automotive
TPST,
-11.20% 		Tempest Therapeutics
TTOO,
-8.20% 		T2 Biosystems

Random reads

Loudest purr in the world. Congrats Bella the cat.

Asteroid sample offers window to ancient solar system

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Here’s where ETF investors could turn to hide as Treasurys sell-off upends U.S. stocks

Post By Stock , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Hello! This is MarketWatch reporter Isabel Wang bringing you this week’s ETF Wrap. In this week’s edition, we look at how ETF investors can navigate the choppy financial markets which remain on edge after a sell-off in U.S. government bonds drove long-term borrowing costs to the highest level in more than a decade, undercutting stock prices.

Sign up here for our weekly ETF Wrap.

A renewed rout in the U.S. government bond markets that sent the yield on the 10-year Treasury bond to 16-year highs as a new era of higher-for-longer interest rates takes hold, is leaving ETF investors scrambling for the exits on a wide range of exchange-traded funds in the past week, most notably the iShares 20+ Year Treasury Bond ETF
TLT.
 

TLT, one of the most popular fixed-income ETFs that tracks a market-weighted index of the U.S. Treasury bonds with maturities of 20 years or more, earlier this week suffered its lowest close since the early days of the 2007-2009 financial crisis. The yield on the 10-year Treasury 
BX:TMUBMUSD10Y
slipped 2 basis points to 4.715% on Thursday, after reaching 4.801% on Tuesday, its highest closing level since Aug. 8, 2007, according to Dow Jones Market Data.

See: Bond investors feel the heat as popular fixed-income ETF suffers lowest close since 2007

The bond market, particularly the U.S. Treasury market, has historically been less volatile and and has often performed better than other financial assets during economic slowdowns. However, that doesn’t mean bonds don’t come without their own risks.

Rising yields reflect a diminishing price for the securities when interest rates rise, and hit existing holders of Treasuries.

See: Rising Treasury yields are upsetting financial markets. Here’s why.

The surprising strength of the U.S. economy, as demonstrated by this week’s labor-market data, coupled with hawkish talk from Federal Reserve officials indicating the central bank may need to keep tightening monetary policy, have led to the bond sell-off this week.

Meanwhile, a positive Treasury term premium, or the compensation that investors require for the risk of holding a Treasury to maturity, have also contributed to a steep sell-off as a ballooning U.S. budget deficit and the Treasury’s need to issue more debt have pushed Treasury prices to 16-year lows.

TLT
TLT
has fallen over 50% since its peak in August 2020, according to FactSet data. The losses are “pretty much” what the equity-market loss was from peak to trough during the global financial crisis, said Tim Urbanowicz, head of research and investment strategy at Innovator ETFs. 

“It is not insignificant… It really makes you think about how you’re doing risk management because you can’t have the piece of the portfolio that’s supposed to be the risk mitigator falling the worst we’ve ever seen in the equity-market fall. That’s a big issue,” Urbanowicz told MarketWatch. 

That’s why ETF investors have very few options when developing or adjusting their asset allocation play in the higher-for-longer rates environment, but there are still some shockproof assets for safety, according to ETF strategists. 

Ultra short-term bond funds 

ETF investors that still favor bonds can consider hiding in ultra short-term bond funds to avoid duration risk as the Fed may still need to raise interest rates to curb inflation by the end of 2023, said Neena Mishra, director of ETF research at Zacks Investment Research. 

The SPDR Bloomberg 1-3 Month T-Bill ETF
BIL,
which tracks all publicly issued U.S. Treasury Bills that have a remaining maturity of less than 3 months and at least 1 month, offers a yield of 5.43%. The fund attracted over $1 billion of inflows in the week to Wednesday, the largest inflows among over 800 ETFs that MarketWatch tracked in the past week, according to FactSet data. 

Meanwhile, Mishra said investors who want active management with “better navigation to the markets” can consider the JPMorgan Ultra-Short Income ETF
JPST,
which is an actively managed fund that invests in a variety of debts including corporate issues, asset-backed securities, and mortgage-related debt as well as U.S. government and agency debt. JPST recorded $15 million of inflows in the past week and has yielded 5.76%, according to FactSet data. 

Flows into longer duration bonds, utilities sector

Despite the bond rout hitting the popular TLT fund hard as the 10-year Treasury yield surged, some retail traders have already started to buy the historic dip of the fund devoted to longer-dated Treasuries, said a team of Vanda Research data analysts led by Marco Iachini, senior vice president.

TLT attracted a total of $686 million flows in the week to Wednesday, ranking the 8th out of over 800 ETFs that MarketWatch tracked in the past week, according to FactSet data. 

Along with the strong “dip buying” in TLT, retail traders have also poured an “unprecedented amount” of capital into the utilities sector, Iachini and his team said in a Thursday note. The Utilities Select Sector SPDR Fund
XLU
recorded $141 million of inflows last week, according to FactSet data. 

“While purchases of utilities stocks are typically of a significantly smaller scale than purchases of tech stocks, the inflow seen over the past week is far larger than any other prior 5-day stretch, easily surpassing inflows into the sector at the onset of the Covid downturn,” the Vanda team said. “The flip side of this dynamic is that institutional investors have likely lightened up their utilities exposure during this bond sell-off episode, making the sector a potentially more appealing equity bet should rates be nearing a local peak.” 

See: Utilities stocks ‘decimated’ by rising rates fall into uncommon trading territory, Bespoke chart shows

Small-caps are ‘cheap for a reason,’ so don’t buy them too soon

Many small-cap stocks have traded at a significant discount to their larger-company counterparts, creating an attractive entry point for some investors who think the forward price-earnings ratio for small-caps are low enough to offer potential for outperformance in the longer run. 

However, small caps
IWM
are by nature more sensitive to higher interest rates compared with a lot of the larger-cap stocks which have the ability to be “nimble” with strong cash flow, said Urbanowicz.

“It is really important right now not to just rely on a specific sector but really have that built-in risk management at the index level to take a lot of that guesswork out of the equation,” he added.

See: Small-cap ETFs may look attractive as recession concerns fade, but blindly chasing the rally is not without risk

Defined-outcome ETFs

That’s why Urbanowicz and his team at Innovator ETFs think the increasingly popular defined-outcome ETFs, or the “buffer” funds, could limit the downside risk and help investors navigate a stormy rates environment.

See: An ETF that can’t go down? This new ‘buffer’ fund is designed to provide 100% protection against stock-market losses

For example, the Innovator Equity Defined Protection ETF
TJUL,
the “first-of-its-kind” fund, aims to offer investors the upside return of the SPDR S&P 500 ETF Trust
SPY
to a 16.62% cap, as well as a complete buffer against its downside over a two-year outcome period. 

Meanwhile, the Innovator Defined Wealth Shield ETF
BALT
offers a 20% downside buffer on the SPY every three months, which is a “very shortened outcome period” and doesn’t require the equity market to actually go up for the strategy to appreciate a value, Urbanowicz said. 

“A big reason [to consider this strategy] is it gives investors a place to not only maintain equity exposure, but also to hide out because they [funds] have known levels of risk management that are in place,” he added. 

As usual, here’s your look at the top- and bottom-performing ETFs over the past week through Wednesday, according to FactSet data.

The good…

Top performers

 %Performance
YieldMax TSLA Option Income Strategy ETF
TSLY 		6.2
United States Natural Gas Fund LP
UNG 		2.0
Quadratic Interest Rate Volatility & Inflation Hedge ETF
IVOL 		1.6
Technology Select Sector SPDR Fund
XLK 		0.9
ProShares Bitcoin Strategy ETF
BITO 		0.9
Source: FactSet data through Wednesday, October 4. Start date September 28. Excludes ETNs and leveraged products. Includes NYSE, Nasdaq and Cboe traded ETFs of $500 million or greater.

…and the bad

Bottom performers

 %Performance
AdvisorShares Pure U.S. Cannabis ETF
MSOS 		-11.3
Sprott Uranium Miners ETF
URNM 		-10.6
Global X Uranium ETF
URA 		-10.2
VanEck Oil Services ETF
OIH 		-9.2
SPDR S&P Oil & Gas Exploration & Production ETF
XOP 		-9.1
Source: FactSet data

New ETFs

  • J.P. Morgan Asset Management Friday announced the launch of a new actively managed hedged equity ETF, JPMorgan Hedged Equity Laddered Overlay ETF
    HELO.
    The outcome-oriented ETF invests in U.S. large-cap equities with a laddered options overlay designed to provide downside hedging relative to traditional equity strategies.

  • Zacks Investment Management Tuesday announced the launch of the Zacks Small and Mid Cap ETF
    SMIZ,
    which seeks to generate positive risk-adjusted returns by investing in small and mid-cap companies.

  • Calamos Investments LLC Wednesday announced the launch of the Calamos Convertible Equity Alternative ETF
    CVRT,
     the first product of its kind to provide ETF investors with targeted access to equity-sensitive convertibles.

Weekly ETF Reads

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