Latest news with #ChadMorganlander
Yahoo
a day ago
- Business
- Yahoo
Why the AI stock bubble may be just getting started
Valuations for the biggest stocks in the S&P 500 (^GSPC) are starting to look stretched, raising fresh concerns about concentration risk. Chad Morganlander, senior portfolio manager at Washington Crossing Advisors, breaks down why we may be in the early stages of a bubble and how artificial intelligence (AI) hype fits into long-term expectations. To watch more expert insights and analysis on the latest market action, check out more Opening Bid here. Are we witnessing another tech stock bubble? I put this to Apollo chief economist Torsten Slok. Here's what he said. I do think that we'll have a lot of growth, but it looks somewhat extreme to me that the valuations for those significant big stocks in the S&P 500 which make up such a big share of the overall S&P 500 is at these very high levels relative to where we were in the IT bubble where the valuations of the 10 biggest companies in the S&P was a lot lower. So, I do think that there is a bubble from a PE ratio perspective, because these companies have just become so expensive and it's become so concentrated for investors that it's really no longer diversified investment to buy the S&P 500. All right. Still with me is my round table Chad Morganlander of Washington Crossing Advisors and Yahoo Finance senior reporter Alexandra Canal. And Ines Ferre. Chad, over to you on this one. You never know if you're in a bubble until after the fact, right? Yeah, correct. And in fact, uh, your, your clip there was correct. Uh, you are sitting at a 23 multiple. So you during the earlier stages of a bubble. Living through the 90s, one must recall that the S&P earnings or PE multiple got over 30 times, uh, in 1999. Uh, so there will be, look, when you look back at this time, there will be a lot of mal investment made, some silly investment ideas that, that didn't work out. But over the long run, over the next 10 to 15 years, uh, this excitement about artificial intelligence is justified. It's just a matter of the, the, the, the valuation gap and where that valuation gap meets, uh, the reality of, of earnings. Well, it sounds like, Chad, if you want to compare it to the internet craze, we still have more to go in terms of valuations, at least from a PE perspective. Well, that could be true. Uh, again, you know, buyer beware on the type of companies that you're buying. Uh, at Washington Crossing Advisors, we own Alphabet, for example. That's trading at roughly about a 17 times multiple when you look at, when you take, when you take away cash. Um, full disclosure, not only do we own it in our portfolio, but I personally own it. But that company has a full competitive stack to go against OpenAI. Ines, I haven't covered a good bubble in a while. Uh, the last one I covered was cannabis a couple years ago. Every day, cannabis stocks would go up until, well, they did it. Maybe it's time, uh, we do get a bubble bursting and maybe it does start with AI. And we could, for sure. Uh, this is probably different than cannabis, uh, because it is touching all sorts of industries. I mean, if you take a look right now at the different sectors of the S&P 500, you are seeing industrials, which is leading the way. Think big construction, factories, AI centers. Uh, you're seeing tech. You're seeing utilities, which is usually the sleepy part of the market. Utilities is, uh, outperforming the broader market. And then, of course, you're seeing financials as well. So you can tell that it is touching all parts of the market right now. And if you think in the future, like what Chad was saying earlier, um, look, long term, this will be a huge productivity boom for the entire economy. Uh, because just imagine having endless amounts of workers at your disposal, endless amount of AI bots that are doing work for you. And this is not just about AI bots, then you're talking about, uh, later on, having robots doing everything. I mean, this is going to be a massive, massive productivity move. But yes, we could be in a bubble right now. We will see, we would see it deflate, but then we would see, uh, exponential growth. Right on, Ines. I need a thousand personal digital assistants. Thank you. Thank you. And I'm going to get those someday because of AI. Related Videos Amex earnings: What credit card cos. reveal about the US consumer The odds of Trump firing Powell are 'quite low,' perhaps 'zero' Netflix stock slips despite Q2 beat: How valuation factors in How Volvo plans to navigate tariffs with a new product focus Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
a day ago
- Business
- Yahoo
The odds of Trump firing Powell are 'quite low,' perhaps 'zero'
The probability of President Trump actually removing Federal Reserve Chair Jerome Power is low, given this week's market reaction to reports the president would do so, Washington Crossing Advisors senior portfolio manager Chad Morganlander tells Yahoo Finance Executive Editor Brian Sozzi. Watch the video above to hear more from the portfolio manager as well as from Yahoo Finance Senior Reporters Ines Ferré and Allie Canal. To watch more expert insights and analysis on the latest market action, check out more Opening Bid here. Interesting note by the Barclays team caught my attention this morning. Like I just mentioned, uh, suggesting that if Powell were to get fired by President Trump, you can see more risk premium built into bond markets or another way of looking at, uh, yields would go higher. Do you share their concern? Oh, I do. But the probability of that happening is really quite low. Maybe perhaps zero. They're going to continue to bang the drum and and complain about Powell, but overall, uh, they're going to let his term expire and then they're going to hire another conventional central banker to lead the Fed. Uh, with that said, Powell's probably going to at at Jackson Hole this August, announce or signal that he's willing to lower rates. Uh, how much? That's a big question mark, but he will perhaps signal that in August. Chad, when you talk to clients, are they making decisions in their portfolio based on this back and forth between the Fed and Trump? No, there's zero decisions being made on that. Uh, this is all just headlines. I think it's just, you know, it's a summer, it's quiet and, you know, uh, the current administration, uh, does have their issues with Jerome Powell, but by no measure do they want to go off the railroad tracks here when it comes to, uh, the Federal Reserve. And it's been good theater to watch though, right? Oh, for sure. I mean, look, the Fed right now is in a catch 22 situation because even if Jerome Powell wanted to lower rates right now, that would look like he's appeasing to President Trump. And then if they do lower rates in September, uh, then we have to see if they will or not because now the market is kind of iffy on that. But if he doesn't lower the rates in September, then you're going to think that that's because of political issues as well. So, they're really in a catch 22 situation. The question is, why would they lower rates now if you have unemployment at 4.1%? Uh, if you have the markets at all-time highs? Um, but what the note that you were alluding to earlier, Brian, uh, really is saying that yes, this would be counterproductive if he did if he were to be replaced, you would see the, uh, rates on the long end going higher. I so the yields on the long end going higher. So, uh, it's all a catch 22 right now. It's gotten politically messy, but as Chad was saying, the market may be right now saying, this isn't going to happen. Alizés, the last thing we need here is, uh, more concerned about the health of the bond market. Feels like we just got past that. Uh, now that even in the face of the one big bill adding more debt onto this, uh, US economy, the bond market had quiet down, but this week things started to pick back up a little bit. Heard some, uh, more concern, not crisis level, but people are getting worried out there again. Yeah, it just shows how jittery the bond market is, especially when it comes to these Fed developments and we've been talking about all week that if we were to see Trump go ahead and fire Powell or remove a Fed chair, that is going to have an immediate impact on stocks, equities and like we've been discussing, the bond market. And we know when the 10-year treasury yield gets to a level of around 4.6%, that starts to weigh on US equities and we're in a market that's pretty sensitive right now. Stocks are at record highs. We do seem to have market breadth, but on a company specific level, it's still very concentrated in those tech names. So, any pressure is going to be felt by investors. So, on the on the Fed front, it seems like there's just a lot of unknowns and uncertainties on when we could see that Fed rate cut. Uh, we were just talking about Fed Governor Waller and he's been really prioritizing the the jobs and labor market side of the Fed's dual mandate. Others are focusing on the inflation side of the equation and you can even look at the Fed dot plot to see how dispersed all the different opinions are there. And that's leading to various opinions on Wall Street, like Alizés was just alluding to, markets now only pricing at a 50/50 chance of a September rate cut. It's quite possible we might not see any rate cuts this year. So, markets just trucking along, trying to pick up all the breadcrumbs that they can and we do have stocks currently at record highs, but very sensitive that any big, uh, move on removing a Fed chair or Fed independence, that's going to jitter investors for sure. Alizés, Chris Waller's all but put like a sign around his neck saying, hire me, I want to be the Fed chair, please, please Mr. Trump, hire me. I mean, what is this guy doing? Um, Chad, are the candidates that we've heard rumored to be vying for this candidacy, of course, Chris Waller's has that sign around his chest. Is anyone exciting you in particular that if they get this job, you're going to back up the truck and go out and buy more stocks? Well, you know, the the reality is that all of these candidates will be moderately dovish, uh, initially in their term. Uh, and they're all conventional central bankers. So, they all get a B+ rating from my perspective overall. Um, I will tell you though that, you know, the the financial conditions currently are really lenient and really loose. Uh, so the Federal Reserve isn't pressured to drop rates in a great in a great radical fashion. So, our expectation is that maybe perhaps they tap the brakes once, uh, with a quarter point rate reduction.
Yahoo
a day ago
- Business
- Yahoo
Netflix stock slips despite Q2 beat: How valuation factors in
Netflix (NFLX) stock is under pressure despite its second quarter earnings beat. Yahoo Finance Senior Reporter Allie Canal and Washington Crossing Advisors senior portfolio manager Chad Morganlander join Opening Bid with Executive Editor Brian Sozzi to take a closer look at what's driving the stock lower, despite the strong results, and what it could signal about upcoming Big Tech earnings amid valuation concerns. To watch more expert insights and analysis on the latest market action, check out more Opening Bid here. Ali stock selling off on this news. Um, but look, you go into the fundamentals of Netflix. They hit everything that I want to see as a former stock analyst. Margins up, revenue growth accelerated quarter over quarter, outlook raised, they got a new giant content slate coming out in the second half of the year. Not only live experiences, what with the double header on Christmas Day, you have Happy Gilmore 2 dropping. That's exciting. I don't know what else Netflix could have did yesterday. Yeah, and if you look through all the analyst notes, it's what I've been doing all morning. Everyone is still pretty bullish, but they did say that it's really hard as a company to surpass elevated expectations. Earlier, I was talking about the valuation, 40 times forward earnings. The stock is up over 40% since the start of the year. So perhaps they wanted that full year guidance to come in a little more ahead of where we're at, considering where the stock is trading right now and all those catalysts still to come, like you were just mentioning, Brian. But by and large, this is a company that has a solid balance sheet. It even has some AI touch points. They are going to be using generative AI in their shows. And as we know, any company that has those AI adjacent business propositions, that's going to be rewarded by investors. So there just seems to be a lot of growth drivers here. Advertising, in particular, has been one that's stuck out. It's one of the cheapest ad plans on the market. They're continuing to see solid growth there, and they are expected to double their revenue by the end of this year to around 3 billion, and a lot of analysts and sources who I speak with say that now subscriber numbers are no longer available, to focus on those ad numbers because that's an area where we're going to consistently see a lot of top-line growth. So that's, that's really strong. We have the content side of the equation that's really strong, a really solid back half of the year, and like you said, nothing really disappointed me in this report either. But when you're dealing with investors that just have a high bar, sometimes, even that struggles on the stock price side of things. Uh, so I'm going to sum up what Ali just said, Chad. Netflix is a fundamental beast. Now, having said that, this reaction that we're seeing in the market to these very strong earnings and outlook, any read, any read through there to large cap tech earnings that are going to come over the next two weeks. Microsoft, bioindications are probably going to come out here, good quarter, beat, relatively upbeat earnings call. Is the risk here, we got to sell off there too? Well, I mean, all these tech names, uh, on the MAG 7 side have been moving higher in anticipation of a really white hot earnings, uh, top line revenue growth, and whatnot. Uh, so, yes, you can get a breather where there is some consolidation within the market overall. But again, you know, there's a lot of tailwind here when it comes to the AI related companies, revenue growth. This is real revenue growth, real earnings coming through. Uh, so, over the long run, if that you have that, then you should see higher highs within these names. Related Videos US Consumer Sentiment Rises to a Five-Month High Chevron's $53 billion Hess deal finally approved: What to know Talen Energy, 3M outlook, SLB earnings: Trending Tickers Waller calls for rate cut, GENIUS Act, Netflix earnings: 3 Things Sign in to access your portfolio
Yahoo
10-07-2025
- Business
- Yahoo
'Some complacency has crept in': How FOMO and speculative bets are driving the 2025 market rally
The stock market continues to hit new highs in 2025, buoyed by a surge in megacap stocks and more speculative trades as investors' appetite for risk continues to grow despite lingering economic uncertainties. Palantir (PLTR), sometimes described as the quintessential meme stock, and Super Micro Computer (SMCI), the most heavily shorted stock in the S&P 500 (^GSPC) in April, have been among the top-performing equities this year, far outpacing the broader index. While this speculative rally exists alongside record highs for AI giants like Nvidia (NVDA) and Meta (META), a fear of missing out appears to be a key force behind recent investor behavior. "Retail traders' fingerprints [are] all over it," Liz Ann Sonders, chief investment strategist at Charles Schwab, said on Yahoo Finance's Opening Bid this week, describing the market's powerful rebound since the early April lows. The rally, she said, has been strengthened by a surge in "retail favorites or meme stocks, unprofitable tech," and a "lower quality tilt" that has lifted riskier names — even penny stocks. "Some complacency has crept in," she said. According to data from Goldman Sachs, the riskiest corners of the market, including high-beta momentum stocks, a bitcoin-sensitive index, and unprofitable tech, far outpaced the S&P 500 in the second quarter as investors chased speculative momentum. Stablecoin issuer Circle (CRCL) and AI cloud provider CoreWeave (CRWV) have skyrocketed since their public debuts earlier this year, surging nearly 500% and 300%, respectively. Shares of Quantum Computing (QUBT) have also jumped, rising more than 60% over the past month amid a broader rally of the sector. That surge in risk-taking is raising red flags for some on Wall Street, particularly as certain trades show an increasing disconnect from fundamentals. "It's the gamification of the financial markets that we've seen over the last five years," Chad Morganlander, senior portfolio manager at Washington Crossing Advisors, told Yahoo Finance on Tuesday. "It's a considerable concern ... There's a lot of speculation there. Buyer beware." Read more: How to protect your money during turmoil, stock market volatility According to Bespoke Investment Group, nearly 420 stocks in the Russell 3000 jumped more than 50% between the lows on April 8 and June 27, including 14 that soared over 200%. Of those highfliers, only four are profitable. On average, the 858 unprofitable companies in the index gained 36.4% during that stretch, more than doubling the 15.6% return seen among the 500 stocks with the lowest price-to-earnings ratios. That kind of price action, driven more by momentum than financials, has become a defining feature of the current market environment. "MOMO and FOMO are likely to dominate until proven otherwise," Steve Sosnick, chief strategist at Interactive Brokers, wrote in a client note this week, noting that many investors chasing market leaders aren't relying on traditional valuation metrics. "I don't think the traders who are buying Nvidia and other market leaders at continual all-time highs are doing an analysis of the companies' discounted future cash flows," he said, adding that momentum strategies, by nature, imply "fundamentals don't matter" — at least for now. "Ultimately, fundamentals do matter," Sosnick continued. "But that reconciliation can come months, or years later." For now, investors seem content to ride the wave. "Whatever hasn't killed this market made it stronger," Sosnick added. "But just because none of [the risks] have so far doesn't mean they won't." Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at Sign in to access your portfolio
Yahoo
07-07-2025
- Business
- Yahoo
Risky trading could keep outperforming this summer
Washington Crossing Advisors senior portfolio manager Chad Morganlander, Yahoo Finance Senior Reporter Allie Canal, and Yahoo Finance Senior Reporter Brooke DiPalma join Opening Bid host Brian Sozzi to discuss how riskier trades, like penny stock trading, outperformed in the first half of the year. To watch more expert insights and analysis on the latest market action, check out more Opening Bid here. uh new research out of Goldman Sachs. The bank found that trading in shares of worth uh worth less than a dollar, aka penny stocks accounted for more than 47% of total volume across the US equity market on June 12th. That's the last time they measured. Um, Shall, when you see people piling into penny stocks, A, what is your first thought? And then B, what are some of the risks associated with doing this? Well, it's the gamification of the financial markets that we've seen over the last 5 years. Uh it's a it's a it's a concern, a considerable concern. Uh you know, not to beat up on uh the cryptocurrency markets, but that too there's a lot of speculation there. Buyer beware. Uh we would, you know, perhaps curtail all of that speculative excess if one has it in their portfolio. It's, you know, you want to take shots, you want to take risk in your portfolio, but, you know, gambling is another thing. You want to just be mindful of that. Shall, is this gambling? Would you could would you characterize this volume or this push into penny stocks? Is this in fact gambling? People that have no clue what they're what they're even investing in, right? 1,000% gambling 1,000% gambling Well, it's 1,000% gambling and it's the gamification of the financial markets and it's a real concern. Uh and you know, this too shall pass, but these poor investors will really get hurt at the end. And Brook, on the other side of the spectrum, uh you know, we're still seeing a strong move in some of the mag 7 names, some of the areas that had to hit 52 week highs, those gains are continuing. Yeah, what we're really seeing is this broader market rally when it comes to these AI names, think Broadcom, think Nvidia, think Meta, who are really diving into this opportunity around that AI uh revolution rather than many people are calling it. But what we've also seen in this Q2 when we've heard so much about the impact or the uncertainty of inflation, of tariffs, of the war, or rather not, you know, the the shortened war in Iran, uh what we've seen is investors really take on this risk, this willingness to jump into that mag 7, especially after that low uh in April following President Trump's liberation day. And really now we've seen those investments pay off with both Nvidia, Meta hitting an all-time high, Microsoft hitting just just a hint away from intraday highs on Monday during uh during Monday's trading session. But we've also seen this riskier uh investments as well in things like Bitcoin, uh traditionally seen as maybe perhaps a safe haven amidst all this noise, but certainly lots of momentum behind the mag 7 as that AI revolution really is just getting underway. Ally, we're not leaving this block without me getting your thoughts on penny stocks. Look, this just has retail traders all over it, right? And Brian, you can look at some of the best performing stocks of this year. Palantir, Super Microcomputer. Super Microcomputer was the most heavily shorted stock in April. It wasn't too long ago that Palantir was trading at as a meme stock. And now we see two of those uh stocks as the best performers here. So we're in this momentum chasing market. This suggests potentially some frothiness, but I think we will see this speculative trading, unprofitable tech continue throughout this summer. But you know, I I wonder sometimes if it's because these retail traders are younger, they don't remember a time when we've seen some significant downturns that last in this market, even the Covid pandemic. We had a V-shaped recovery, this bounce back pretty quickly. So they didn't suffer as much. So again, something to continue to keep your eye on, but strategists continue to say focus on those high quality tech names, and like Brook was alluding to, that's your Nvidias and Metas of the world. I'll leave it on this, uh and this comes from an old person in me. Just because a stock is priced at 50 cents doesn't mean it's cheap. We'll leave it there. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
