What happened last week
- NVDA: Nvidia’s (NVDA) beat and raise was not enough to impress investors, resulting in a nearly double-digit sell-off.
- Strong Data: Second quarter GDP in the U.S. was revised higher as the economy powers ahead.
- Improving Breadth: Concentration may be giving way to a broadening out as the market performed well despite NVDA.
What we’re watching this week
- Labor Market: Friday’s jobs report is the main event and can potentially sway the Fed between a rate cut of 25 bps or 50 bps at their meeting in just over two weeks.
- Monetary Policy: The most influential Fed board member (outside of Chair Powell) gives a speech on Friday after the jobs release.
- Price Action: With trading desks back to full strength, we are watching for signs of new trends into the Fall.
Horizon’s Investment Management Views
August opened with a roar but ended like a lamb, as last Friday marked the official end of summer. The S&P 500 rose modestly to finish within 1% of its all-time highs. The recent market darling – NVDA – sold off almost 8% while both the cap- and equal-weighted versions of the S&P 500 registered positive returns. Since the AI theme really got going at the start of 2023, this was the fifth-worst weekly return for NVDA. But last week was the only one of those five that saw the rest of the market in the green on both measures. This expanding breadth is a very healthy sign for the overall trend in equities. We will watch carefully to see if it holds as summer liquidity gives way to the final push into the holidays.
More on what was arguably the only event that really mattered last week, NVDA’s earnings. The company put up very strong quarterly numbers that beat consensus estimates, but the context matters. The stock was up over 750% since the start of 2023. A beat and raise, which CEO Jensen Huang delivered, was not enough to wow investors and it is notable to us that the beats versus expectations are getting smaller and that margins may have peaked. At the same time, other companies around the AI trade had good weeks, giving us comfort in the durability of the overall theme.
The August jobs print will be the primary macro catalyst this week. Following the print and ahead of the Fed’s blackout period, we are particularly interested in the commentary from the Fed’s de facto number two, Christopher Waller. Circling back to the AI theme, a host of corporate earnings from companies across the AI value chain this week, including upstream infrastructure companies like Broadcom and downstream integrators like UiPath and Onestream.
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