Appreciate Newsletter
S&P 500 Up 25% This Year
Market Watch
The equity markets have remained volatile in the past week due to rising geopolitical tensions and high valuations surrounding large-cap tech companies. Investors should note that the S&P 500 has had a historic year, surging close to 25% in 2024 despite the ongoing turbulence.
According to a Deutsche Bank report, the cyclically adjusted price-to-earnings ratio for the S&P 500 has been higher on two other occasions in the last century than it is today.
These include the dot-com bubble of the late 1990s and the period before the financial crisis in 2008 when there was little scope for further gains due to overstretched valuations.
Moreover, in the near term, there is a possibility of an escalation of the tariff war with China as U.S. President-elect Donald Trump aims to raise import duties on multiple products. This, in turn, could lead to higher inflation, forcing the Fed to maintain interest rates higher for longer-than-expected periods.
Nvidia Stuns Wall Street
Nvidia just announced its fiscal Q3 of 2024 (ended in October) results, reporting:
Despite beating earnings and sales estimates in Q3, Nvidia stock is down over 2% in pre-market trading.
Nvidia projects revenue at $37.5 billion in the current quarter, above estimates of $37.08 billion.
The market bellwether’s Q2 forecast indicates a 70% year-over-year growth rate, which is impressive but much slower than its 265% growth in the year-ago period.
In Q3, Nvidia grew sales by 94% year over year as it remains at the epicenter of the artificial intelligence boom. Its data center business, which generates sales from AI processors, has more than doubled sales to $30.8 billion, higher than estimates of $28.8 billion.
Several Nvidia end-customers, including Microsoft, Oracle, and OpenAI, have begun receiving the next-generation AI chip called Blackwell. Nvidia will start ramping up the production of these chips in 2025, which will be a key revenue driver for the company over the next 12 months.
Further, Nvidia also develops and sells chips for gaming devices such as personal computers, laptops, and consoles. In Q3, its gaming business reported sales of $3.28 billion vs. estimates of $3.03 billion.
Its automotive sales rose by 72% to $449 million due to self-driving car chips and chips for robots. Finally, the professional visualization business grew sales by 17% to $486 million.
Target Tanks Over 20%
Big-box retail giant Target announced its fiscal Q3 of 2025 (ended in October) results yesterday and reported:
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During its earnings call, Target reversed course and cut its profit guidance for fiscal 2025, three months after hiking the forecast. It expects EPS between $8.30 and $8.9, below the prior midpoint estimate of $9.35.
In fiscal Q3, Target missed EPS estimates by 20%, its biggest miss in two years. It also missed revenue estimates for the first time in five quarters, plunging to a 52-week low.
Target attributed its performance to softness in discretionary categories combined with cost pressures.
Target is well-known for its broad portfolio of cheap clothing, home goods, and other discretionary merchandise. However, inflation and higher interest rates have impacted the company’s ability to attract steady foot traffic amid slower consumer spending.
Customer traffic across its stores and website increased by 2.4%, while digital sales grew by 10.8%, powered by double-digit gains in curbside pickup and same-day home deliveries. However, comparable store sales were down 1.9% year over year in Q3.
Target cut prices on frequently purchased items this year, such as diapers, toys, and ice cream, to attract price-sensitive customers. By the end of the holiday season, Target said it will lower prices on more than 10,000 items this year.
Target stock has trailed the broader markets significantly in 2024, falling over 15% this year.
Bitcoin ETFs Continue to Attract Funds
Spot Bitcoin exchange-traded funds were launched in the U.S. in January 2024 and have since attracted $84 billion in assets under management, according to a Bloomberg report.
At the time of writing, Bitcoin prices have more than doubled in 2024 to over $97,000, as investors expect the Trump administration to be crypto-friendly, driving the adoption of these digital assets.
The rising popularity of Bitcoin ETFs has meant they already hold 66% of the AUM compared to gold ETFs. Spot Bitcoin ETFs are likely to overtake the AUM of gold ETFs by the end of January 2025.
Macro Trends
USD vs. INR
According to a report from SBI, the Indian rupee may depreciate 8-10% against the US dollar over the next year. The report explains that a Trump presidency may result in economic ramifications and supply chain realignments, resulting in the depreciation of the INR.
The INR has depreciated from $40 in April 2008 to $84.8 today.
Gold
Earlier this week, gold prices rose as Goldman Sachs advised investors to “go for gold” and reiterated a forecast for bullion prices to reach $3,000 an ounce in 2025.
Following Donald Trump’s win, gold prices were under pressure, spurring a dollar rally that weighed on the yellow metal and other commodities.
Goldman Sachs expects rate cuts, geopolitical tensions, and steady demand from global central banks to act as tailwinds for gold prices.