I. Performance of Global Equity Indices (in US dollars)
Source:Bloomberg,2024/06/10-2024/06/16
II. Key Market Themes
i. "Big Three" Continue to Surge, Mid- and Downstream Actively Narrate: How Should AI Be Positioned?
Recently, AI concept stocks have continued to be hot. The AI "Big Three" composed of Microsoft $微软(MSFT)$ , Apple $苹果(AAPL)$ , and NVIDIA $英伟达(NVDA)$ have, as previously expected, moved forward in tandem. NVIDIA has hit consecutive new highs after its stock split; after the WWDC conference, although Apple's products weren't very "wow," it hasn't stopped the tech giant from continuing to soar.
Interestingly, recently released financial reports from mid- and downstream companies like Oracle $甲骨文(ORCL)$ and Adobe $Adobe(ADBE)$ show that even with mediocre performance, as long as their narratives are strongly tied to AI, they can still attract capital. For example, despite Oracle's performance not meeting expectations, its stock price still surged after announcing major collaborations with Microsoft and Google.
We believe that the current AI revolution is still in its very early stages, with major cloud providers still investing heavily in training models. Even if some mid- and downstream companies have gained some traffic or growth through AI, their long-term profitability and stability have yet to be proven. Therefore, investing in AI mid- and downstream companies at this time requires great caution. On the other hand, apart from the "Big Three," upstream companies like TSMC and Broadcom currently have more certain profit models and are more worthy of attention at this stage.
Source:Bloomberg
ii. U.S. Inflation Finally Improves, Powell Remains Composed, But There's More Than Meets the Eye!
Last week, the U.S. May inflation data was released, showing the core CPI rising 3.4% year-on-year and 0.2% month-on-month, significantly better than market expectations. Notably, core inflation excluding housing achieved zero growth. In response, the market immediately entered a celebratory mode.
On the same day, the Federal Reserve's FOMC decided to maintain the current interest rates. The meeting statement was largely consistent with previous ones, but the dot plot was much more hawkish than before. Currently, no officials believe there will be three or more rate cuts this year, and the numbers for one and two rate cuts are almost evenly split. Powell continued to maintain a "data-dependent" stance, stating, "The U.S. economy is very strong, and it's good to see inflation improving, but one month of good data is not enough; we need more to support this...".
But upon further investigation, some of Powell's detailed remarks are quite subtle. For instance, he mentioned that "previous employment data may have been overstated, and the Fed has noticed the weakening job market." Additionally, he pointed out that "high inflation is particularly severe for low-income groups." We believe that the Federal Reserve has likely seen some early signs of economic weakening. While it appears hawkish, claiming that the data is insufficient, they are in fact preemptively warning the market. The upcoming economic data might not be as optimistic.
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