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BUZZ Investing: Strong Earnings Boost Optimism

U.S. markets swung due to economic shifts, with initial drops from inflation fears followed by recovery hopes of relaxed Fed policies. Despite setbacks like weak GDP and rising treasury yields, improved earnings and employment data drove optimism.

U.S. markets exhibited increased volatility, yet closed little changed, during the recent period between Index selection dates (April 11, 2024 – May 9, 2024, the “Period”). Equities saw substantial declines during the first part of the Period, with the S&P 500 and the tech-heavy Nasdaq Composite posting losses which nearly halved the year’s earlier gains. The downturn was triggered by the April 10th release of March’s Retail Sales report, which unexpectedly showed robust consumer spending, heightening inflation fears. This led to a spike in treasury yields, with both 2-year and 10-year Treasury yields rising to their highest levels since November 2023, prompting a sell-off in stocks, particularly growth-oriented equities that are typically sensitive to interest rates. Economic growth also underperformed expectations, with GDP increasing at only a 1.6% annualized rate in the first quarter, below the forecasted 2.4%.

In the second half of the Period, domestic equities experienced a revival as investor optimism grew, fueled by expectations that the Federal Reserve might lower interest rates. Weaker-than-expected U.S. employment data prompted this shift in sentiment for April and indications of slowing wage growth from government reports. Additionally, positive momentum was supported by solid earnings reports for the first quarter. With nearly 90% of S&P 500 Index companies having reported for this earnings season, upbeat first-quarter results have pushed some Wall Street analysts to boost profit projections as quarterly earnings reports came in largely above expectations.

The BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index”) returned -8.25% during the month of April compared to a return of -4.08% for the S&P 500 Index during the same period. Year-to-date, the BUZZ Index lags the S&P 500 with returns of 5.40% and 6.04%, respectively, as of the end of April.

Shares of Paramount Global Pace Advancing Stocks within the BUZZ Index

Shares of Paramount Global (NASD: PARA) led advancers within the BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index”) during the recent Period. Paramount Global has recently garnered extensive media attention due to multiple parties’ takeover interest. The contest features offers from David Ellison’s Skydance Media, Apollo Global Management, and Sony Group Corp. Shari Redstone, Paramount’s influential nonexecutive chairwoman and daughter of its founder, plays a key role in the ongoing boardroom drama. On April 29th, Bob Bakish resigned as President and CEO of Paramount, and the company established an office for the CEO to lead. The board is now considering a “go-shop” approach to explore additional offers. In a notable development, Warren Buffett announced at Berkshire Hathaway’s annual meeting that he had sold all his shares in Paramount at a significant loss, adding another twist to the company’s ongoing saga as the company’s future remains uncertain amidst a high-stakes battle for control.

CompanyTickerAverage Weight (%)Return Contribution (%)
Paramount GlobalPARA3.140.55
Carvana CoCVNA1.330.54
Viking Therapeutics IncVKTX0.870.24
Alphabet IncGOOGL3.260.20
Lucid Group IncLCID2.260.18
Apple IncAAPL3.100.16
Boeing Co/TheBA3.030.15
JPMorgan Chase & CoJPM0.860.10
Pfizer IncPFE1.110.09
Rivian Automotive IncRIVN2.110.08

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

Crypto-related stocks were featured among the top detractors to BUZZ Index performance. Cryptocurrency exchange platform Coinbase Global Inc (NASD: COIN) and Bitcoin-invested software company MicroStrategy Inc (NASD: MSTR) fell 20% and 18.6% respectively as the price of Bitcoin declined over 11% during the Period. Bitcoin’s price decline may be due to a post-halving correction, a slowdown in ETF inflows, and broader economic conditions including stock market fluctuations and Federal Reserve policy expectations. Despite an initial surge post-halving, Bitcoin’s extraordinary pre-halving bull run may have been a contributing factor to an expected market correction.

CompanyTickerAverage Weight (%)Return Contribution (%)
Coinbase Global IncCOIN2.75-0.66
MicroStrategy IncMSTR2.49-0.52
Super Micro Computer IncSMCI2.66-0.48
Intel CorpINTC1.67-0.35
Advanced Micro Devices IncAMD2.78-0.31
Meta Platforms IncMETA2.88-0.30
SoFi Technologies IncSOFI3.03-0.24
Lyft IncLYFT0.74-0.21
Palantir Technologies IncPLTR2.98-0.21
Robinhood Markets IncHOOD2.68-0.18

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

BUZZ Index May 2024 Rebalance Highlights

Trump Media & Technology Group

Trump Media & Technology Group (NASD: DJT), one of the most controversial SPAC merger announcements, has been under intense scrutiny since its proposed combination with former SPAC Digital World Acquisition Corp (DWAC) was announced in October 2021. The merger aimed to launch Donald Trump’s media company Truth Social, a social media platform akin to Twitter but centered on conservative values. The announcement initially catapulted DWAC’s stock to $175, but the stock later plunged nearly 90% during the 2022-2023 bear market. Despite this volatility, the stock rebounded to above $50 per share in January when DWAC shareholders, and regulators, finally approved the merger. Post-closing, shares of DWAC now trade under the appropriately reimagined ticker symbol “DJT”. As the 2024 Presidential elections approach, increased political rhetoric could once again place DJT in the spotlight. This month, DJT makes its debut in the BUZZ Index with a maximum 3% weight.

SNAP Inc

Snap (NASD: SNAP) surprised the market with its Q1 earnings report last month, showing substantial growth across various advertising revenue streams. While Snap still lags Meta Platforms Inc. (NASD: META) in user numbers, it has recently excelled in attracting and retaining advertisers. The company has been cutting costs, reducing its workforce by 10% in February, and has benefited from political developments like the proposed congressional bill to ban TikTok, potentially removing a major competitor. Following the earnings report, SNAP shares surged 50% in a week, signaling a potential uptrend after nearly a year of stagnation. This month, SNAP rejoined the BUZZ Index with a 1.57% weight, reflecting renewed positive investor sentiment towards the company’s prospects.

For more on rebalancing results and a full breakdown of index constituents added and removed for the month, view the BUZZ Index reconstitution report.

Originally published 20 May 2024. 

For more news, information, and analysis, visit the Beyond Basic Beta Channel. 


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