JD Durkin: Bring in Tim Anderson of TJM Investments. Semiconductors doing really well today. Memory and quantum, a lot of these high-beta names that tend to move very volatile. A lot of green on the board today. Was this expected?
Tim Anderson: And look, a lot of these tech stocks, they don’t really care if rates are 5%, 5.25%, 5.5% because they’re growing at three, four or five times that rate. So it’s really going to have no impact on them.
Getting beyond the question of how much of an impact hikes are going to mean on the whole economy and potentially on consumers, you know, the tech companies, many of them were green yesterday even though we had a sharp sell-off.
So this is, I know there was concern in the past, early in the year last year, oh, higher interest rates. Maybe some CIOs at the margin might say, you know what? Now that bonds are yielding a lot higher, maybe we’ll decrease our stock exposure by 5%, increase our bond exposure by 5%.
But still, what’s really driving the tech stocks is their level of CapEx spending and their revenues in the whole AI stream.
JD Durkin: Yeah, of course. Well, we don’t know. It’s still far too soon to tell whether or not this is really authentically the start of a new rate-hike cycle. This might be a rate hike, kind of a one-off. Only time will tell.
What information right now do you think is baked into the market with regards to expectations?
Tim Anderson: You know, that’s a great question. And I think the most interesting thing about what the market expectations are is that the American Association of Individual Investors survey got very bearish last week. The numbers came out today, and there was a big swing from bullishness to bearishness, to the point where the bearishness in that survey was 25% ahead of the bullishness.
That, to me, was a big sign coming in this morning that we could potentially be set up for a nice reversal off yesterday’s sell-off. And we did get that.
In fact, there was also a data point I saw that the market has a history of rallying on the day of and/or following the beginning of a rate-hike cycle. A lot of people may find that that’s just counterintuitive.
JD Durkin: It could be a little bit of a sell-on-the-rumor, buy-on-the-news effect.
Tim Anderson: Ah, there you go.
JD Durkin: Now, one thing, one of my favorite topics to talk about with you here at the floor, and we talk about this stuff off-camera all the time, is breadth, advance-decline. What is under the hood of this market when you take a closer look? What is that type of information telling you about where else money is being put to work?
Tim Anderson: So look, let’s look at the advance-decline line cumulative over the last two days. And yesterday’s advance-decline line, and we did bounce back from about 3:15 to the close to where we got maybe a quarter or a third of our losses back.
But yesterday, there were five decliners for every three advancers. That’s a little bit more than one and a half to one to the downside. Today, our advance-declines are in the positive by a little bit better than two to one.
So cumulatively, over the last two days, advancers have beat decliners, not by a huge margin. But it’s just significant that after yesterday’s negative reaction, we have such a strong bounce back, not just in the tech sector or in a couple of mega-cap indices, but the whole broad market has reacted very well over the last two days.
JD Durkin: All right. Speaking of very well, how about your performance today on Taking Stock? It went very well.
Tim Anderson, Managing Director at TJM Investments, dear friend of mine. Thank you for coming on. Always great to talk to you.
Tim Anderson: Thank you.
