Alpha of the Week ft. BD Investing
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Alpha of the Week
Hey guys, @Bdinvestingg here. A lot of people are bearish on the stock market right now. But I think there are some pretty strong reasons to stay optimistic.
A lot of damage has already happened under the surface.
High-beta and momentum stocks have been crushed, leverage has been flushed out, sentiment has turned extremely negative, and many investors are now positioning for another major leg lower.
Meanwhile, the underlying fundamentals are still holding up:
• Earnings remain resilient
• AI capex is still strong
• Chip demand remains healthy
• Inflation pressures are cooling
• Rate-hike expectations are coming down
Here are 6 reasons I remain bullish for the rest of the year:
1. Huge margin calls have already happened
A significant amount of leverage and speculation has been flushed out, including in Korea and among highly leveraged traders.
2. Oil is falling + inflation is cooling
Oil prices are coming down, rate-hike expectations are easing, and inflation pressures are starting to cool despite the current bearish narrative.
3. Momentum stocks just got crushed
Momentum stocks experienced one of their worst sell-offs in recent history, with the magnitude of the decline rivaling some of the most painful periods of the Dot-Com era.
4. Sentiment is extremely negative
A lot of the newer market content creators have suddenly gone quiet.
Fear and negativity are already extremely elevated, and many people are now afraid to sound overly bullish.
That’s usually when I start paying attention.
5. AI capex + chip demand remain strong
AI infrastructure spending is still accelerating, chip demand remains healthy, and shortages are continuing to appear across key parts of the supply chain.
6. Earnings are still strong
Roughly 90% of S&P 500 companies have beaten earnings expectations so far.
The market can absolutely go lower in the short term, but the underlying picture isn’t nearly as bearish as sentiment suggests.
Now for some stock alpha. I’ve recently been adding to space, connectivity, industrials, and memory. Here are my 4 picks 👇