In this week’s episode of Money Wise, the show kicks off with a review of the latest market numbers, noting that the Dow Jones Industrial Average increased by 302 points (0.7%), while the S&P 500 decreased by 46 points (0.8%) and the NASDAQ dropped by 369 points (2.1%). Year-to-date, the Dow is up 7.7%, the S&P 500 is up 14.5%, and the NASDAQ is up 15.6%. The Money Wise guys discuss the market’s volatility, particularly highlighting the NASDAQ’s worst day since 2022, followed by a significant rebound on Friday. They also mention the strong performance of the Russell 2000, which rose by 3.5% for the week, indicating a rotation out of high-flying tech stocks into smaller-cap stocks.
The conversation continues to cover several topics, including the reaction to Google’s earnings report and the impact of ChatGPT’s beta test of a search engine on market dynamics. The Money Wise guys emphasize the ongoing issue of market adjustments due to tech stocks being "priced for perfection" and how algorithmic trading responds to any negative news or guidance adjustments. They also express their frustration with the heavy reliance on computer trading over human judgment, particularly regarding how forward guidance is handled during earnings seasons.
The Impact of Tech Earnings and Algorithmic Trading
In their discussion on the significant impact of tech earnings and algorithmic trading on market dynamics, the Money Wise guys highlight how Google’s satisfactory earnings report still triggered a sell-off due to high market expectations and valuations. This reflects a broader trend where tech stocks, often "priced for perfection," face sharp declines if they fail to meet lofty expectations. The guys explained that algorithmic trading, driven by complex computer programs, reacts swiftly and significantly to news and earnings reports, often exacerbating market volatility. They expressed frustration with the dominance of computer-driven trading, which lacks the nuanced understanding of human traders and tends to punish conservative forward guidance from CEOs managing uncertainties. This discussion underscores the challenges tech companies face in maintaining market confidence and the influential role of algorithmic trading in market movements.
In the second hour today, the Money Wise guys share their ‘Are You Ready for Retirement’ quiz. You don’t want to miss the details! Tune in for the full discussion on your favorite podcast provider or at davidsoncap.com, where you can also learn more about the Money Wise guys or take advantage of a portfolio review and analysis with Davidson Capital Management.
