September 2023 Market Update
- Federico Donadio
- Sep 4, 2023
- 5 min read
Have you heard, “That’s the best thing since sliced bread!”
When the bread slicer was first invented it took a lot of convincing
over many years before it was widely used.
Invented and placed into use 1928 by Otto Rohwedder
The year is 2030. Life has changed a bit. Much more quickly than you thought it would just a few years ago. Each morning, you wake up and your favorite morning news channel (maybe the daily five-minute update from Guardian Rock™ )! It starts to play on your device that is not even visible.
Soon after grabbing a quick breakfast, which has already been made from the devices in your kitchen, you don your virtual reality headset and step into the metaverse, which is your office space, to start your first meeting or, for those of you still heading into the office, a car with no driver picks you up out front and while you ride to work you are either entertained, informed or already working during the entire commute. Your job has changed; however, you have now adapted to merge your knowledge and experience with AI (Artificial Intelligence) to create better outcomes faster, no matter what your occupation.
While some believe that AI will eliminate jobs and cause mayhem, I continue to think that we are headed into a new “roaring 2020’s. When automation was introduced by Johannes Gutenberg with the printing press in 1439 the fear of commoditization nearly caused riots. When Ford introduced automation to the factory floor in 1913 there was widespread fear of unemployment. Following both of these events, prosperity ensued, and I could continue with many more examples.
This month I will address the three most common questions from the past month all while reminding you that nothing I write should be construed as investment guidance. This is just for informational purposes and is my opinion only.
Is AI overpriced?
Is it time to bet on bonds?
Is it all over for Nvidia or TSLA (those two are tied)
Is AI overpriced?
Certain companies’ stock prices have soared well over 100% this year and are, in my opinion, priced to perfection (that is to say, priced in such a way that any slip in earnings or even an errant news item could derail their upward trajectory. The market runs on sentiment, not numbers, over the short and even intermediate term. Further, we have barely touched the surface of what practical applications may come about due to AI. AI is just getting started in my opinion, but it behooves investors to dig a little deeper and think a little harder about what companies may benefit or be hurt most by this new wave of innovation that is likely to happen faster than most believe.
Is it time to bet on bonds?
Opinions on this question vary considerably and largely depend on your situation. Long-term readers know that we all but exited the scene entirely on traditional bonds about three years ago, favoring other substitutes to take care of our income requirements. Certainly, bonds are more attractive, but this market is also far more complex than most realize. While some areas of the bond curve (maturity dates) now provide a real return (a return more than inflation), loading up on these maturities may leave you susceptible to sequence of returns risk and more volatility than expected, as we saw during 2022. The short answer is that, in limited circumstances, we are back to utilizing the traditional bond market.
Is it all over for Nvidia or Tesla?
Full disclosure: Guardian Rock™ owns both of these names in some portfolios, and I personally own Tesla. This is not a recommendation to buy or sell either of these companies.
By my calculations, Nvidia is priced to perfection as defined above; however, in my opinion, it will likely continue to move higher and surprise us further with additional earnings growth. Both Nvidia and Tesla are highly volatile and thus not to be held by the faint of heart. I would also note that Nvidia has some supply chain risk that, at present, is not a problem but could be at some point in the future. Both companies have wide leads over their competitors. Many make what I consider to be a mistake in assuming that Tesla is just another car company that now has competition from the other major car companies. These folks see the reduction in Tesla’s car prices as a weakness and a sign of increasing competition, which I do not believe is an accurate analysis when you dig a little deeper.
If you would like to learn more about these two companies or another company, reach out to us at the Contact Us section of Guardianrockwealth.com or by texting the word LIFE to 321-421-5213
This note is not investment guidance for you; it is information and opinion only.
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Please remember that this note is our opinion from a broad perspective based on over three decades of money management experience and is not personal investment advice.
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John Browning, MBA, and CSA®
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Nothing in this communication should be construed as personal investment advice, and past performance does not guarantee future results. Investing is only appropriate for some. There is a risk of loss associated with investing in the markets. No representation or implication is made that using any methodology or system will generate profits or ensure freedom from losses. Please remember that investing carries risk. Guardian Rock Wealth™ LLC and its affiliates are fiduciary investment advisors. Please consult an experienced, qualified investment advisor before making any investment decisions and/or trying to implement any strategies and tactics we may discuss in any of our publications. Written in West Palm Beach, Florida
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