Friday, March 22, 2024

$RDDT and Everything Else Is Up

  • New all-time highs abound.
  • $RDDT is live.
  • This is really important…
Senior Editor, StockPick Daily
MARKETS

This Is a Happy Friday

There’s almost nothing to upset things.

The S&P 500 hit an all-time high on Thursday.
That’s the 20th time the index has done so in 2024. If it keeps up the pace, it’ll reach 90 and break the previous record of 77, set in 1995.
As Ryan Detrick of Carson Group noted, 1995 was marked by strong productivity growth, solid wages, contained inflation, excitement over the internet, and a Fed that had turned dovish after an aggressive round of tightening.

[The number of new highs per year for the S&P 500 Index from 1957 through 2024.]
And there’s more where that came from: The S&P 500 is up just a shade below 10 percent so far this year. It was up about 25 percent last year.
Checking in on the Election Cycle, Ryan points out that when stocks fall in a midterm year – like they did in 2022 – double-digit returns the two following years are totally normal.
Stocks are not alone. As Ben Carlson notes, net worth, housing prices, economic activity, and air travel are also at all-time highs, and you can earn 5 percent on your cash to boot.
And there’s nothing on the calendar with potential to upset things.
Midnight on March 22 is the deadline for the US Congress to button-up budget negotiations in time to prevent a federal government shutdown. But even that deal seems to be on track to get done.
Enjoy the calm!
And let’s hope it stays this way… 
deep dive |
March 22, 2024
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DEEP DIVE

Scenes From an IPO

OK, so this one might not be just about “price.”

This was the view inside the New York Stock Exchange at 9:30 a.m. ET on Thursday, Snoo ringing the bell as Reddit $RDDT was about to become a publicly traded company:

[Reddit mascot Snoo rings the bell at the New York Stock Exchange on March 21, 2024.]
Here’s how one of the members of the r/wallstreetbets community saw things from his couch:

[A screenshot taken by a redditor of Reddit mascot Snoo ringing the bell on the NYSE on March 21, 2024.]
“They should have had the WSB guy up there” read the first comment on the thread headlined “Capturing the moment #RDDT,” from redditor mistalanious.
Here’s how the market saw RDDT during the last hour of its first day:

[A screenshot of Reddit’s $RDDT performance on its IPO day, March 21, 2024.]
RDDT closed the regular trading day up 48.35 percent to $50.44. It went off as high as $57.80, as low as $45.05. It was down to $49.12, or about 2.62 percent, early in after-hours trading.
Network effects, building an audience, the power of community: Those things are real, they have value, but it’s difficult to monetize them.
Perhaps management has found a way, after nearly two decades of losing money, by licensing its content to AI research and deployment outfits.
That’s one way of making a strength of your community.
Perhaps it’s irony, maybe it’s mere coincidence, but some of the clearest-eyed analyses of this offering are available on Reddit.
There’s bound to be drama here, both comedy and tragedy. 
cybersecurity

This Could Be Your Critical Hedge

Everything Is OK… But What If It’s Not?

Everything Is OK… But What If It’s Not?At the top of his StockPick Interview Ophir Gottlieb says the data suggest the US economy is softening but not in an alarming way. 
According to the Capital Market Laboratories CEO, “If there's a weakness in the economy, and if that weakness is gonna create a crack, and if that crack is going to create a recession, it would be because of monetary policy that is too restrictive.”
The further we get from the irritant that was the COVID-19 pandemic, the less irritated we will be, Ophir notes, though during the last several years the US has certainly reminded the world of its economic exceptionalism.
That exceptionalism is demonstrated by its resilience through tightening monetary policy, shocks to the supply chain, and geopolitical risks. And that relative strength should persist over the next three to five years.
“I don't see anything that separates it from that track other than some really cataclysmic sort of externality that I don't think anyone can really predict,” Ophir explains. “and, therefore, I'm not going to try to predict it.”
So here’s the thing: This AI boom and the emergence on the scene of large language models is going to create a geometric explosion in vulnerabilities to actually run-of-the-21st-century-mill sort of externalities and a corresponding demand for cybersecurity.
As Ophir emphasizes, you can’t do anything without security.

[A one-year price graph of the Global X Cybersecurity ETF $BUG.]
He doesn’t name names.
But the potential he describes is certainly illustrated in the one-year chart of the Global X Cybersecurity ETF $BUG.
BUG launched in 2019 and has outperformed less concentrated peers like First Trust Nasdaq Cybersecurity ETF $CIBR, the largest pure cybersecurity ETF play in terms of assets under management.
Check Point Software $CHKP, Palo Alto Networks $PANW, and NortonLifeLock $NLOK comprise nearly a quarter of BUG’s holdings.
Stocks are at all-time highs, which is good news, because the historical record shows that all-time highs are followed by more all-time highs. Still, as Ophir says, the required return to participate in the US stock market is higher than it would otherwise be in 2019 or in 2014.
But there are pockets of strength for long-term investors.
Cybersecurity is one of them.
Be sure to check out the StockPick Interview with Ophir Gottlieb.

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