Economy not derailed by energy shocks so market is looking past it, says Bespoke's Paul Hickey
Speakers
Paul Hickey
— Co-Founder, Bespoke Investment Group
Summary
Paul Hickey discusses the Nasdaq's recent performance and argues that the market is looking past short-term energy shocks due to a strong underlying economy. He highlights potential positive surprises in the consumer discretionary sector and remains bullish on semiconductors and AI infrastructure stocks as leading indicators of the digital economy.
- Nasdaq's 11-day streak reflects market optimism that concerns are resolving.
- Strong economy evidenced by high bank loan growth, low unemployment, and positive Beige Book.
- Energy shocks have not derailed the economy after one month, but prolonged disruption could be a problem.
- Earnings season may see more benign reports than negative outlooks, similar to last year.
- Consumer discretionary sector, with negative sentiment, could see positive surprises.
- Semiconductors are a leading indicator of the digital economy, hitting new highs with relative strength.
- AI infrastructure stocks are also hitting new highs and are an area to watch.
Trade Ideas
Nasdaq looking past short-term energy shocks.
The Nasdaq's 11-day streak reflects market optimism that we are seeing a resolution to concerns; the underlying economy is strong with high bank loan growth, low unemployment, and positive Beige Book reports, so the market is looking past the short-term energy shock disruptions which, if they last only one month, are not a problem, but if they last three months could become an issue.
Consumer discretionary set for positive surprises.
The consumer discretionary sector has seen negative sentiment heading into earnings season, which sets a low bar, and could therefore see positive surprises as companies report.
Semiconductors are a leading indicator hitting new highs.
Semiconductors, represented by the Philadelphia Semiconductor Index (SOX), are the leading indicator of the digital economy; they are hitting new highs and showing relative strength versus the S&P 500, making them a critical area to watch for future market direction.
AI infrastructure stocks still hitting new highs.
AI infrastructure stocks are still hitting new highs and represent an area to look for going forward as part of the digital economy transformation.
