by Jason Bodner
May 31, 2023
The explosion was completely unexpected, but how often are explosions on planes expected?
I always fly in the window seat – a leftover habit from when I was a kid. I still love to look out into the expanse. Only this time, I hated what I saw: The lightning was too close, and it hit one of the plane’s engines. It was engulfed in flames. Things suddenly got bumpy.
The bell went off.
The fasten seat belt sign came on.
While everyone fiddled with their buckle, I saw something they always explain but I never expected to see. The panel over my head exploded and oxygen masks tumbled out. This happened in a sudden burst in my field of view, like a swarm of dead jellyfish attacking with tubes, bags, and yellow cups cascading out.
I nervously started laughing – a bad reaction in tense times, I admit. While I went for my mask, the woman next to me signed a cross from head to chest and across. Her prayer became a muffle when she assumed the crash position, despite not being instructed to do so – at least not yet.
Not liking what I saw out the window, or next to me, I looked right. A flight attendant was moving up the aisle toward the front of the plane. Only she was lumbering slowly, laboring backwards, bent over. She was dragging another flight attendant from under her arms – apparently unconscious – her legs just dragging along. She buckled her in, up front. It seemed no matter where I looked, I hated what I saw.
Clearly, I survived this awful scenario. Our flight from Fort Lauderdale to Newark was forced to land in Charlotte, North Carolina. Kudos to the pilots and crew, as there were no casualties, only some injuries.
Unbelievably, this is not my only disaster survival tale, and not the scariest. But why am I telling it?
It’s simple: if I can calmly survive things like that, then a little market turbulence is nothing.
The latest fear out there is the debt ceiling. It caused selling like we haven’t seen since the start of May. Here, we see that it’s dragging on the BMI. We also see the uptrend in buying of stocks suddenly slowed:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The debt ceiling debate is a scary proposition. In reality, we all know a deal will emerge. Politicians use potential stalemates like this as a way to embarrass each other and strong-arm their issues.
Rest assured, a deal will get done. There simply isn’t a world in which the U.S. defaults on its debt. To date, Congress has raised the debt ceiling 78 times. Believe me, this will be #79. It’s really a matter of us enduring names getting dragged through the mud and political arm wrestling. It’s their moment on stage!
It’s a perfect time to look at the market facts as well. Earnings season is over, liquidity is low, and breadth is thin. Speaking of earnings, as of May 19th, for Q1’23, 95% of S&P 500 companies reported earnings. Of those reporting, 78% beat earnings and 76% beat sales estimates. Earnings Apocalypse never arrived.
In fact, in many cases, it’s the opposite. Take NVDA for example: it reported an earnings beat of $1.09 vs. $0.92 per share. And revenue was a blowout too, reporting $7.19 billion vs. $6.52 billion estimated. Perhaps the most important thing was that the CEO forecast a 50% increase in quarterly sales. He said that as companies roll out AI on a trillion-dollar infrastructure, NVDA is poised at the forefront to benefit. The buying frenzy that ensued lifted not only Nvidia stock, but the entire sector of technology companies. Chipmakers rose substantially as well, as the Technology sector just continued its strength.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The recent selling over the debt ceiling and post-earnings lull didn’t seem to affect tech stocks:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
All other sectors, however, saw selling pressure:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
I believe the selling offered a perfect excuse for short sellers and algorithms to splash around in a thin liquidity market. But the NVDA phenomenon highlights one of the dangers of short selling: if you get caught off-sides, you can be swept up in an entire sector repricing higher. I believe short selling increased in technology stocks as they have been the clear out-performer in recent months. It’s human nature to believe that things can get “too pricey” and ought to come down again. Mean reversion is a real phenomenon, but not a rule written in stone. As we see, a strong tech sector can get even stronger.
That said, we are still in a seasonally weak period of the stock market. Sell in May and go away, has real relevance. As you can see below, summer for all major indexes has been lackluster on average since 1990:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The bad news is that we may have a turbulent summer. The masks may even come down. But the good news is that this would only set us up for a strong fourth quarter. October through December is the strong seasonal period of the year, historically. Add this to the likelihood that the Fed is done raising rates, despite recent talk in the media. Also, factor in that we are not even in a recession, technically speaking.
Could this be another case like the “Taper-Tantrum,” when investors sold in anticipation of something that never came? Maybe so, maybe not. But even if it does come, it’s rarely as bad as what we think.
I successfully made it through a flight with an exploded engine, falling oxygen masks, a passed-out flight attendant, and an emergency landing. It wasn’t fun by any means, but it wasn’t as bad as my praying neighbor feared. Fearing market crashes that usually don’t come seems like a terrible waste of energy.
Seneca wisely said, “Our fears are more numerous than our dangers, and we suffer more in our imagination than in reality.”
Navellier & Associates owns Nvidia Corp (NVDA), in managed accounts. Jason Bodner owns Nvidia Corp (NVDA) personally.
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
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Global Mail by Ivan Martchev
“AI.com” Is the New Market Magic Formula
Sector Spotlight by Jason Bodner
Recall All Those Crashes That Never Happened
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Jason Bodner
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT
Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation/distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner
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