Possible $1 Trillion Dollar Shock Ahead.
Currently, our analysis indicates that liquidity levels in the system are elevated due to the U.S. Treasury's reduced borrowing caused by the debt ceiling situation. This increased liquidity is partly responsible for the upward trend of the stock market and the flow of funds towards large-cap companies, fueled by the excitement surrounding artificial intelligence (AI).
According to some of our analyst, there is a potential impending shock of around $1 trillion for the stock market. Once a resolution is reached regarding the debt ceiling, it is expected that the U.S. Treasury will aggressively sell bonds, leading to a depletion of liquidity in the stock market. As a result, some of the funds currently invested in Apple (AAPL) and Microsoft (MSFT) are likely to be redirected towards bonds.
We will watch this closely over the coming days and weeks to make sure we are not taking unnecessary risk.
Stock market totally ignores three fed speakers and leading economic indicators on artificial intelligence excitement.
Despite three negative developments that occurred yesterday, the stock market has surprisingly remained unaffected, primarily due to the prevailing frenzy surrounding artificial intelligence (AI). Let's delve into these developments:
Firstly, the release of leading indicators, depicted on the chart, revealed a figure of -0.6%, slightly below the consensus estimate of -0.5%. This typically serves as a negative signal for the market.
Secondly, there has been an increase in yields. As yields rise, it generally has a negative impact on stocks, particularly in the tech sector.
Furthermore, three Federal Reserve speakers adopted a particularly hawkish stance yesterday. Bullard, for instance, views higher interest rates as a precautionary measure against inflation. Jefferson also expressed concern about persistently high inflation and slowing progress according to certain metrics. Additionally, Logan emphasized the potential necessity for further rate hikes based on current economic data, before considering a pause.
Despite these negative developments, the stock market has chosen to disregard them today, largely due to the overpowering excitement surrounding AI.
As we mentioned last week, we could see some near-term weakness in the markets. However, time frames also suggests that stocks could put in a longer-term bottom in June before turning higher again.
The artificial intelligence frenzy has been further fueled by recent developments.
The availability of the ChatGPT app has expanded to iPhones, with an upcoming release planned for Android devices. This broader accessibility has contributed to the growing excitement surrounding artificial intelligence.
Despite experiencing significant growth already, Nvidia (NVDA) received upgrades from two analysts. This positive appraisal adds to the enthusiasm surrounding the company's prospects in the AI field.
Japan has decided to provide a substantial subsidy to Micron (MU) for establishing a new plant in the country. Micron plans to utilize cutting-edge extreme ultraviolet (EUV) technology in Japan to manufacture the next generation of Dynamic Random Access Memory (DRAM). As artificial intelligence continues to drive the demand for DRAM, this development further intensifies the AI frenzy.
The availability of the ChatGPT app on iPhones and soon on Android, analyst upgrades for Nvidia, and Japan's subsidy to Micron for advanced DRAM manufacturing are three recent developments that have contributed to the growing excitement surrounding artificial intelligence.
The Golden Age of AI
We are currently in the midst of a revolutionary period that will significantly alter our lifestyles, work environments, and investment strategies. This era marks the golden age of artificial intelligence (AI), where the potential for growth and innovation seems boundless. The transformative power of AI is already evident in various aspects of our world. It is propelling advancements in self-driving vehicles, revolutionizing healthcare practices, enhancing business productivity, and reshaping our interactions with technology.
Looking ahead, the next several years hold immense potential for us to generate substantial profits through AI-related opportunities. However, it is crucial we recognize that this landscape presents risks as well. Without a certain level of sophistication, it can be challenging to navigate and capitalize on these opportunities. Disruptions in the business models of numerous existing companies are anticipated, leading to potential declines in their stock prices.
Our teams have conducted extensive research on the latest developments in the AI industry, including emerging technologies, trends, and noteworthy industry events. Considering the enormous potential AI offers in the years to come, it is prudent for us to proactively enhance our understanding of AI and its implications. By building knowledge and staying informed, we will be able to position our portfolios to capitalize on the vast opportunities AI presents while mitigating potential risks.
The excitement surrounding the AI frenzy is expected to continue intensifying in the upcoming weeks and months. As advancements and breakthroughs in artificial intelligence persist, there will likely be a continuous stream of developments, news, and opportunities in this field.
Stay tuned for further updates on this ever-evolving AI landscape.
Cheers to our well-being and prosperity!
Your Prestige Wealth Management Team