Why Investors Should Focus on Earnings, Not the Fed or Nvidia
The recent GTC conference of NVIDIA wrapped up with great enthusiasm among its attendees. However, market strategist Michael Antonelli believes that investors should not focus on artificial intelligence (AI) or the Federal Reserve. Instead, they should focus on the upcoming earnings season, which is a few weeks away. Antonelli explains that despite concerns of rates staying high for longer, the market has posted gains on the day, with the S&P 500 ending at a new all-time high. In this article, Antonelli shares his thoughts on the current state of the market, where it is headed, and what sectors and industries he believes are currently attractive.
Earnings Are the Next Catalyst, Not the Fed
Antonelli believes that investors should not overthink the current state of the market. Earnings are at their highest levels in history, rising continuously quarter after quarter. Earnings expectations over the next 12 months are currently at 249. Additionally, the consumer has a solid balance sheet, and the AI theme is thriving. He explains that investors should just focus on the fact that earnings season is the next catalyst, not the dot plot, which shows the future path of interest rates.
Fed Decision Should Not Be the Main Focus
While inflation has been high, Antonelli believes that the focus on the Fed and interest rates is overrated. Certain types of inflation, such as shelter, are subject to structural causes, such as a lack of housing in some areas. Though inflation may fluctuate, he believes that consumers with 3% mortgages will likely not move, creating an intractable problem. The Federal Reserve cannot solve these structural problems, so it makes more sense for investors to focus on the fact that the economy and consumer are currently fine, and earnings are steadily increasing.
What Sectors Look Attractive?
Antonelli believes that investors should look beyond tech, which has had a lot of attention on it lately. Instead, investors should focus on sectors like Industrials and Consumer Discretionary, which offer many interesting, well-run companies with the potential for growth. Housing is also an area that Antonelli believes is attractive, as housebuilders are currently doing well. Financials and industrials also show promise and are currently performing very well. However, Antonelli believes that consumer staples and defense-related stocks are not the right choice, as investors should continue to focus on growth.
Energy as a Long-Term Bet
Antonelli believes that a bet on commodities is a bet against human innovation, which is not something he invests in. However, he believes that energy has a place in a diversified portfolio. He believes a big bet on energy is not ideal for long-term growth potential. Instead, he likes industries that involve new products and innovation.
Hot Take: Earnings, Not the Fed or Nvidia, Should Be the Focus
In conclusion, Antonelli believes the current state of the market is straightforward and should not be overthought. The main focus should be on the fact that earnings are currently at an all-time high, constantly improving. Antonelli believes investors should not focus on the Fed or interest rates as these factors are not the most significant measures of market performance. Instead, investors should focus on the upcoming earnings season, which is only a few weeks away and shows strong and continual growth. For the highest potential for future gains, investors should look towards industries that involve growth and new products and innovations.
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