In my experience – growth ultimately defies fear. And whilst stocks will always climb the wall of worry – over time – growth prevails. The challenge for investors is the pathway is rarely in a straight line. Put another way, markets are constantly in a tug-of-war between opposing forces. Consider what we see today… we have a surprisingly robust US economy, defying expectations of a slowdown. Tailwinds include Fed easing, disinflation and a consumer which continues to spend. The counterforce to the further growth are escalating geopolitical tensions in the Middle East – which threaten to disrupt the global economic order
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Nvidia Can’t Stop Stocks Wobbling
What we’ve seen from Nvidia the past 18 months reminds me of Cisco in the late 1990’s. I wrote about this recently… not much has changed. The path of earnings and the share price have been similar. NVDA’s revenues are up over 2.5x on a YoY basis, causing EPS to be up over 4x over the same period. 18% EPS growth in a single quarter is very impressive but here’s my question… will we see that in 2 or 3 years from now? We didn’t from CSCO – it collapsed. Time will be the judge of that…. not me. Despite the expected “beat and raise” from the AI chip maker – the rest of the market fell sharply. Without NVDA’s ~9% share price gain – the S&P 500 would have been down 1.5% for the day. That tells us how narrow this market is – extremely dependent on stellar earnings from a handful of companies like NVDA. That’s not a healthy setup.