By Barbara Kollmeyer
Critical information for the U.S. trading day
Nvidia-fueled gains are ahead for Thursday, as the AI chip king logged some spectacular results.
The big tech faithful seem rewarded for now, even though some have been nervous after last year's big gains. Count the chairman and partner at Bel Air Investment Advisors, Todd Morgan, in the unworried camp.
His simple advice for retail investors in our call of the day? Think long-term and stay the course.
Morgan, whose wealth-management firm looks after $10 billion, shares a long-game lesson from his industry start in the 1970s, when the Dow Jones Industrial Average DJIA traded at 500 to 1,000. "When it broke 1,000, everybody said 'You gotta get out of the market. It's too high,'" he says of the index that's now 40 times higher, in a MarketWatch interview on Wednesday.
And he's got some optimistic predictions for the decades to come. Based on compounding interest rates, he said if the Dow rises 7% a year going forward, it will hit 80,000 by 2035. Here's another: "Before my grandchildren pass away in 64 years, the Dow will be at 2.8 million."
(Editor's note: The math checks out, if the Dow compounds at about 7% per year.)
The adviser said while he's a believer now, in the early days he couldn't have imagined the index tapping 40,000. "I think you just have to figure out the economy's going to continue to grow with us," he says. And while global tensions are a concern, the market has endured plenty of wars, recessions, elections, and other crises, he adds.
The key to Morgan's 26-year strategy of wealth building and preservation is owning high-quality companies. An overweight in technology has been an integral part of that as he sees tech outperforming the rest of the market in coming years, largely because of artificial intelligence.
He started overweighting tech via the "Magnificent Six" - excluding Tesla - back in 2000, 2005 and 2006. While he admits to some "challenging years," he says they now have great companies with low cost bases.
Morgan says they also own a lot of the S&P 500 SPX companies, as not just tech gets credit for helping clients retain wealth. He invests in "a lot of great, large-cap multinational companies that have a good return on equity, that have long track records of consistent growth that we are comfortable with, and their household names that most people would be familiar with."
Morgan declined to discuss specific names, but consumers buy their products daily drinks, clothing, apparel, drugs, etc. And investors might not think much of them as they're "slow growers...but they've been great companies."
As for finding new stocks, he's "sprinkled in some AI companies, even though we own the Magnificent Six that are substantial in AI and that's what's been driving these companies."
He's also "working very hard to find the derivative of some of these big AI names that are beneficiaries...and I'm trying to sprinkle those in right now..companies that these AI producers, these chips or producers are reliant on for energy..."
Away from stocks, Morgan says 15% of client money, on average, goes to alternative investments, including multifamily real estate.
Morgan says for investors who missed Big Tech's run, remaining diversified and buying quality names is a good strategy. For older investors, say Gen X., he suggests buying 65% or 70% of the S&P 500 and put the rest in tax-free municipal bonds or U.S. government obligations.
And for those 25 or younger? "You should be all in equities."
"The moral of the story is that you don't have to be a genius or a rocket scientist. Buy the S&P, buy the Dow, plug your nose, shut your eyes, don't get frightened, stay the course and you will be shocked at how well your portfolio does," says the adviser.
Read: Just 9 days account for all the stock market's 2024 gains. Here's what they have in common.
The markets
The Nasdaq COMP is surging, with the S&P 500 also pushing higher, but the Dow industrials DJIA dragging (Check out MarketWatch's Live markets blog here). Treasury yields BX:TMUBMUSD10Y BX:TMUBMUSD02Y are steady. Gold (GC00) and silver (SI00) are tumbling after Wednesday's Fed minutes. Oil (CL.1) is up 1%.
Read: Inflation, EVs and rising fuel efficiency put unexpected dent in gasoline demand
Key asset performance Last 5d 1m YTD 1y S&P 500 5307.01 0.19% 5.12% 11.26% 27.84% Nasdaq Composite 16,801.54 0.62% 7.62% 11.93% 32.32% 10-year Treasury 4.418 3.70 -29.00 53.71 59.58 Gold 2364.1 -1.16% 1.51% 14.11% 20.66% Oil 77.95 -1.17% -5.89% 9.28% 5.03% Data: MarketWatch. Treasury yields change expressed in basis points
The buzz
Nvidia (NVD) stock is climbing after a whopping 262% jump in quarterly revenue, beat on guidance, plus a 10-for-1 stock split. Nvidia is also about to be worth as much as the entire German stock market.
Opinion: Nvidia just created a new multibillion-dollar business from scratch
Shares of Snowflake (SNOW) are up after the cloud-computing group lifted its forecast.
Medtronic stock (MDT) is up after the medical devices and therapies company beat forecasts.
E.l.f. Beauty's (ELF) forecast disappointed, but executives played down industry slowdown worries.
News Corp. (NWSA), the media company that owns The Wall Street Journal and the publisher of this report, MarketWatch, is up 7% on a deal with OpenAI.
Live Nation (LYV) stock is tumbling after reports the Justice Department will seek its breakup in an antitrust suit.
DuPont shares (DD) are up after the multinational chemical group announced plans to split into three publicly traded companies.
Weekly jobless claims fell again to 215,000, reaffirming low layoffs and core support for the economy. S&P flash services and manufacturing PMIs are coming at 9:45 a.m., new home sales at 10 a.m. and a speech by Atlanta Fed Pres. Raphael Bostic at 3 p.m.
Geopolitical quivers: Taiwan scrambled jets over Chinese military drills on Thursday.
Best of the web
Here's how long it took these 401(k) millionaires to reach $1 million.
Leaked OpenAI documents reveal aggressive tactics toward former employees.
A second flag carried by Jan. 6 rioters is reportedly on display outside house owned by Supreme Court Justice Samuel Alito .
Top tickers
These were the top-searched tickers on MarketWatch as of 6 a.m.:
Ticker Security name NVDA Nvidia GME GameStop TSLA Tesla AMC AMC Entertainment AMD Advanced Micro Devices GWAV Greenwave Technology TSM Taiwan Semiconductor Manufacturing FFIE Faraday Future Intelligent Electric AAPL Apple SMCI Super Micro Computer
The chart
"The consumer remains more likely to cruise than crack," and that's thanks to strong job growth, says a team at Goldman Sachs, led by chief economist Jan Hatzius.
"Despite the recent softer signals, we maintain our long-held view that a worker-friendly labor market will support consumer outperformance," says Goldman, adding that softer signals seen this spring are backward looking, assuming inflation cools off, they say. That said, they're also watching delinquency rates and signs of weakness in lower-income households, though see the latter having only a moderate effect on overall spending.
Random reads
"Unlucky in love" flamingo finally lays an egg.
Mom wins race that dad almost ruins.
Bill Gross is selling his stamp collection.
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-Barbara Kollmeyer
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05-23-24 0937ET
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