Wall Street has closed with a mixed sign (Dow Jones: -0.65%; S&P500: -0.05%; Nasdaq: +0.13%) this Friday before the resurgence of the fear over high valuations of technology companiesabove all, from the companies associated with the artificial intelligence (AI). Likewise, the divergences within the Federal Reserve (Fed) They put downward pressure on the indices as a rate cut is in doubt at the next meeting in December. In it weekly calculationthe New York indices have ended a mixed week, with the Dow Jones advancing 0.34%, the S&P 500 rising 0.08% and the Nasdaq down 0.45%. «It is as if the market wanted to apply that price adjustment that many of us expect… and fear. in case it evolves into an overreaction. But it is important to be clear that a price readjustment because the market speed has been excessive is not the same as a serious correction because the valuations do not justify the prices. The latter does not happen,» they say at Bankinter. In fact, these strategists insist that «It is wise to invest in companies that benefit from the AI ecosystem (which are the listed ones: Nvidia, ASML, Amazon, Netflix, Alphabet, etc.), but perhaps not in those that exclusively develop AI, which are the (yet) unlisted ones: OpenIA, Anthropic, etc.) because they are the ones that obtain gigantic benefits that allow them not to go into debt, benefits that will continue to expand rapidly thanks to the development of AI, from which they will be the main beneficiaries. And these readjustments are good opportunities to buy them cheaper (or less expensive).»
MICHAEL BURRY ‘SHAKES’ THE HORSET’S NEST
Against this backdrop, the American manager Michael Burry, famous for anticipating the bursting of the 2008 real estate bubble, has stirred up the hornet’s nest after deregistering his Scion Asset Management fund with the SEC, a step prior to the definitive closure of the firm. And, in a letter, Burry states that his «estimate of the value of the securities is not nowand hasn’t been for some time, in line with the markets«.»You have been thinking for some time that the market is overvalued.. He has been betting short on booming companies like Nvidia and Palantir. And it has its reasons. But, apparently, is increasingly desperate about how long it will take the market to come to its senses. Common sense means valuations that point to ratios like PER, PSR, P (or any other) that make the most sense to him and to many. S&P 500 companies, for example, are trading today with an average P/E of around 23, well above the historical average of around 18,» says Ipek Ozkardeskaya, senior analyst at Swissquote. «I hope the bubble burst doesn’t start right after Burry liquidates his positions. It would be a ingratitude«he emphasizes.
DIVERGENCES AT THE FED
Investors are also looking with concern at the disparity of opinions of the different members of the Fedwhich puts in check a new rate cut in the monetary conclave that the organization will hold in December. In fact, the market gives a 50% probability, according to CME’s FedWatch tool, to both another 25 basis point cut and a pause. Thus, for example, while the governors Stephen Miran, Christopher Waller or Michelle Bowman They have advocated for more declines, Susan Collins (Boston Fed) believes rates should remain at their current level for «some time» and Neel Kashkari (Minneapolis Fed) is still undecided on the move for the last meeting of the year. «The internal debate within the Fed about what to do at its December meeting is revived, but the feeling is getting in that it won’t go down«, they note in Bankinter. What’s more, Ozkardeskaya focuses on «the growing realization that a complete set of data on employment and inflation will not be available before the Fed’s December meeting. And if that is the case—and if the Fed retains a minimum of independence and good sense— I wouldn’t lower interest rates blindly«.
OTHER MARKETS
In other markets, oil West Texas has risen 2.13% ($59.95) and the Brent has gained 1.98% ($64.25). For his part, the euro has depreciated 0.10% ($1,162), and the ounce of gold has lost 2.42% ($4,092). Furthermore, the 10-year American bond yield has revalued to 4.148% and the bitcoin has lost 4.16% ($94,279).
