Welcome to the "Lie Win Era"
The expected financial report thunder has come. Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) have all delivered financial reports that are not as good as expected, but the market has not experienced violent turbulence and is still quite smooth.
This week, the Dow Jones closed up 0.4%, the S&P 500 closed up 1.33%, and the Nasdaq closed up 2.7%. The three major stock indexes all set record highs. But the careful friends, should have discovered one thing, that is, although the stock index has risen very well, most of the stocks have basically not risen, and even fell quite miserably.
To cite a few important sectors, financial payment sector, Visa (Visa) (NYSE:V) plunged 8.42% in a week, MasterCard (NYSE:MA) plunged 6.45% in a week, PayPal (NASDAQ:PYPL) closed down 3.25%, American Express (NYSE: AXP) closed down 7.11%, and Capital One Financial Corporation (NYSE: COF) closed down 10.02%. It can be said that they underperformed the market by far. Another example is the industrial and military sector. Raytheon Technologies Corp (NYSE:RTX) closed down 3.27% in one week, General Dynamics (NYSE:GD) closed down 3.23% in one week, Northrop Grumman (NYSE:NOC) closed down 12.06% in one week, Lockheed Martin (NYSE: LMT), which has always been regarded as a stable blue chip, plunged 11.29%.
Before we formally predict the future, let's review our forecast in October. At the beginning of the month, I wrote a forecast for October. The overall view can be summarized into the following three points:
1. When the U.S. stock market plummeted in September, it meant that institutions were very cautious about the third quarter earnings. October tended to have considerable fluctuations. According to historical data, there is a high probability of a callback again. Before October 14, the market will continue to oscillate at a low level.
2. After the 14th, the financial reporting season begins, and the financial reports of banking stocks determine the direction of the market. If the financial report is thunderous, the US stock market will plummet 1,000 points directly. If the performance is good, the stock index will resume its upward momentum in the short term, and then continue to wait for the FAAMG five giants to announce the financial report.
3. After the 25th, FAAMG announced its financial report. If FAAMG’s financial report bursts and the stock index hits a new high, institutions will use FAAMG’s financial report to ship goods. The market trend will follow last September and February this year, and finally a double bottom will be achieved. If FAAMG's financial report is thunderous, the Nasdaq may plummet down, ushering in a Davis double play to fill the 13300 gap.
Now that October has passed, many people may not understand our analysis. It is necessary to review the forecast at that time. These three predictions are a step-by-step relationship, and the financial reports of the basic important sectors are the key time nodes.
The first point of forecast is for the broader market that did not start the financial reporting season from October 1st to October 14th. This point can be said to be quite accurate. The stock index has been in a volatile downward state until October 14th, reflecting the market. Be cautious about the earnings season.
The second point of prediction is for the broader market from October 14th to 25th. At this time, the financial report of bank stocks has been announced, but the financial report of FAAMG has not been announced. The direction of the market is mainly determined by the banking sector. After the gap on the 14th, We are aggressively going long from October 14th to 25th. The prediction on this point can also be said to be quite accurate.
The third point of forecast is for the broader market from October 25th to 30th. At this time, FAAMG's financial report has been announced, the overall performance is quite good, and the three major stock indexes are also close to setting a new record high. According to our judgment, institutions will take advantage of favorable shipments, and a callback may be coming, but the final result is to accelerate the rise, setting a record high on Thursday.
Here, on the day of October 28, our judgment on the trend of U.S. stocks in October can be said to have failed. The Nasdaq did not start the expected double bottom adjustment, but went out of a very strong V-shaped reversal.
Why was our prediction wrong? Because it wrongly underestimated the market's enthusiasm for the giants. Throughout October, super giants such as TFAANMG started a super rising wave, and TSLA alone contributed about 3 points to the entire stock index.
If you count the remaining giants of NVDA, MSFT, and GOOG. You will find that the eight giants alone contributed nearly 7% to the Nasdaq. Imagine that the Nasdaq rose by 7.27% in the entire October, but the eight giants contributed 7% of the increase, which means that the remaining companies basically did not rise or fall.
If we focus on the Top 15, you will find that the top 15 giants contributed almost 8.3% of the stock index. This is a more terrifying thing, which means that the remaining 85 companies in the Nasdaq 100 contributed a negative increase to the entire stock index in October, and more than a 1% decline.
If we look at this year, the Nasdaq has risen about 20%, how much did the seven giants of TFAAMG contribute to the stock index? After a rough calculation, it contributed almost 21.15% of the increase. If it is further concentrated to the Top 15, it will contribute almost 26% of the increase.
It is said that now we have entered the era of Baotuan, this series of bloody data is here, I believe no one will deny this fact. This is the reason why I want to review the mispredictions in October at the beginning of the article, because it is really a serious underestimation of the determination of the U.S. stock market to form a group.
If we want to summarize the current wave of market conditions with a concept, we might as well call it a "lying win combination." FAAMG is the most stable large-cap stock, TSLA and NVDA are the best growth stocks. These seven giants cover all aspects of the human economy and society, with both stable cash flow and imaginative prospects.
FB is the strongest king of social media, GOOG is the strongest king of digital advertising, AMZN is the strongest king of e-commerce, MSFT is the strongest king of software services, AAPL is the leader of the universe, TSLA is the strongest king of new energy, NVDA is the chip , Yuan universe, the strongest king of AI.
TSLA has encountered chip supply chain crises and rising inflation during its competitors, which not only achieved a contrarian growth in sales, but also achieved an accelerated increase in profit margins.
AMZN, like other retailers, suffered a severe inflationary cost increase crisis, and brought an impact of 4 billion US dollars, but AWS, Prime membership subscriptions, digital advertising and other high-margin businesses accelerated their growth in the third quarter.
GOOG's strong performance tells the market that although the supply chain crisis has reduced advertisers' spending, the growth of the digital advertising track is still very healthy. FB has suffered the same danger, but the prospect of Metaverse is also worthy of investors' expectations.
AAPL has been affected by the supply chain, but this impact is only $6 billion. In the face of revenue of $90 billion in the first quarter, this impact is negligible, not to mention the current iPhone 13 is setting the best sales record in history.
NVDA's chips are still in short supply. Even if the supply chain will lead to rising costs, they can be easily transferred to downstream demanders. The rapid development of artificial intelligence, big data, autonomous driving and other businesses have all told the market that this company will not slow down its growth.
MSFT is the only super giant that is not affected by inflation. The impact of the economic cycle on it is almost negligible. Next year, there is a super positive expectation of a 15% price increase, and the growth is still worth looking forward to.
TFAAMG's strong third-quarter financial report has made the market understand that only super giants can truly resist inflation. Let’s take a look at other sectors, but most of them have been affected. Here are three comparative examples:
One is LMT, a blue-chip stock in the military industry, which encountered a big thunder in its third-quarter financial report; one is Starbucks in the consumer sector, which was also affected by the rising cost of coffee beans in the third quarter; the other is FDX in the transportation sector. The sharp increase in labor costs led to profits. There has been a serious decline in the rate.
Going back to our October forecast, why did the Nasdaq not see the expected correction after the FAAMG financial report, but broke through the resistance level and set a record high? The fuse in the middle was mainly due to the GDP data released on Thursday.
According to a report released by the US government on Thursday, the annual growth rate of consumer spending in the third quarter slowed to 1.6% after the 12% annual growth rate of consumers in the second quarter. Not only is it lower than 6.7% in the second quarter of this year, it is also lower than the market’s conservative forecast of 3.5%, which is the country’s slowest growth rate since its plunge in the second quarter of 2020.
After the unprecedented release of water, the spread of the epidemic, supply chain bottlenecks, and high inflation, one after another thorny problem is dragging down the US economic growth. It is impossible for the Fed to return to the easing state of last year. The effect of economic stimulus is basically ineffective, and the whole society is about to enter a slow growth stage.
History is the best teacher. The reason for the formation of the “Lying Win Combination” is actually the same as the “Pretty 50” of the last century. It is all because the economy is about to enter an era of stock competition after hyperinflation. Only the super giants can win through competition. Competitors’ market share gains valuable growth.
The three major stock indexes came out of a V-shaped reversal pattern in October. On the surface, FAAMG’s performance is good, leading the broader market to continue to rise. In fact, "the market expects that the economy is about to enter a new downward turning point, and only the super giants can maintain growth. Purchase certainty in the uncertain environment of long-term economic growth, and the overall market valuation system is undergoing transformation.”
So here comes the question. Back then, Baotuan was mainly focused on the consumer medicine sector, why is it now focusing more on the technology sector. In fact, we have to talk about another data, that is, the third quarter of consumer goods expenditure in the United States: the third quarter of the United States consumer goods expenditure fell by 9.2%.
Unlike the previous monetary easing, this round of water release is mainly driven by the epidemic, and the overflow of liquidity basically flows to the financial market instead of the real economy. Americans’ asset prices have indeed increased a lot at this stage, but their disposable consumption levels have declined, especially after the US government stopped issuing relief subsidies.
To make it harder to say, the US economy is likely to enter a "stagflation" stage, and the consumer market is likely to shrink. At this time, only technological innovation may be able to change the future dilemma, and only technological giants can maintain sustained growth. Of course, the most important thing is that now TFAANMG is a money printing machine.
