November 22, 2023
Performance chasing into mid-December could continue, but the tailwind from positioning will likely fade after the recent bout of outsized CTA buying. In our opinion, leadership in the SPX needs to broaden out in the weeks ahead to avoid a bearish repricing in early Q1. A healthy bull market is usually led by cyclical equity sectors and the post-CPI lift in these stocks looks almost entirely based on short-covering. Sustained cyclical sector leadership from here will require evidence that the business cycle has more room to run. And long-only investors will likely wait for CQ4 earnings season in mid-January before rendering a verdict. Q4 results will need to inflect higher and forward guidance will need to be less negative than it was during the Q3 reporting season. In our opinion, forward guidance has a better chance of turning more negative given fading supports for above trend growth in ’24. The unofficial pre-announcement season will likely begin the week of January 8.
Last night’s NVDA report was the first of a series of AI-related catalysts into year-end: 1) AMZN AWS re:Invent on 11/27; 2) SNOW earnings on 11/29; 3) AMD datacenter event 12/6; 4) ORCL earnings 12/12 and; 5) INTC AI event on 12/14.