Big-Tech’s Performance
Market styles have been changing rapidly in recent weeks, with the election sentiment moving quickly from a "Harris trade" to a "Trump trade", and macroeconomic data further lowering expectations for interest rate cuts and rekindling the view that "the economy is far from a recession!The view that "the economy is far from entering a recession" has been rekindled. The U.S. dollar regained its strength, U.S. bond rates picked up again, and the market's risk-on returned.
Right now it's earnings season again, with bank stock earnings widely exceeding expectations, also helping the Dow hit new highs.Tech companies are also performing strongly, with TSMC's earnings beating expectations, AI demand being further confirmed, solid fundamentals, and strong buybacks.The next two weeks of earnings-driven "event-driven" trading will further define the broader market.
By the close of trading on 18 October, the big tech companies have been volatile so far this week. $Apple(AAPL)$ +2.02%, $NVIDIA Corp(NVDA)$ +1.58%, $Tesla Motors(TSLA)$ +1.42%, $Microsoft(MSFT)$ +0.10%, $Meta Platforms, Inc.(META)$ +0.02%, $Alphabet(GOOG)$ -0.19% and $Amazon.com(AMZN)$ -0.68%.
Big-Tech’s Key Strategy
What is Netflix Earnings’ clue?
This week, Netflix took the lead in announcing its Q3 results, with revenue growth from incremental advertising and a profit margin of nearly 30% that exceeded expectations, which is a microcosm of the current global economy and a guide to other giants' businesses.
From the subscription business, North America is more active, and users are more active in renewing their contracts after the "price hike", so their purchasing power is relatively strong, while Latin America, because of its relatively low income level, is not very active in renewing their contracts after the "shared account crackdown", manifesting itself in the form of a lack of motivation to renew their contracts.Latin America, with its relatively low income levels, has been less active in renewing contracts after the "shared account crackdown", and new subscriptions have fallen far short of expectations.Such a situation could be repeated in several other regions around the world, e.g., Europe and Japan and Korea could be similar to North America, while Southeast Asia, India, and Africa could be closer to the situation in Latin America.
In terms of streaming hours, META's Reel and Google's YouTube may also see more favourable results.Looking at Nielsen's survey data, YouTube is way ahead in terms of viewing hours from July-September and is widening the gap with Netflix.And the key to YouTube's growth in recent quarters has been the development of its short-form video end, YouTube Shorts.With that in mind, short-form video content dominated during the summer break on the TV side.Meanwhile, the advertising business may continue to outperform given that the economic activity is strong.
In addition, in terms of secondary market performance, the market may not be sensitive to over-expectation trades, as the expectations of tech companies (especially software tech companies) have been slowed down after consecutive big rallies and record highs in the indexes, and a considerable portion of the "soft landing" or "no-landing" expectations have been Price-in.No-landing" expectations, so the market is also relatively optimistic about the expectations for 2025.
On the other hand, now that the election is approaching, Google/Meta in the field of social media, search and other areas are more sensitive, at the same time, the candidates on the "monopoly" of technology giants and spin-offs, etc., but also behave differently, Trump has a certain view of Google and Meta, that they have a bias against him and favour Harris, may even launch a lawsuit against them after the election of the President.He is biased in favour of Harris and may even sue them if he is elected president.
Big-Tech Weekly Options Watcher
Tesla's post-Robotaxi Day "Sell in fact has a lot of power", and after the big drop, it didn't extend the decline.Judging from the week's performance, the current bearish and bullish sentiment is quite balanced, making the stock price fluctuate very little, hovering around $220, with only option traders shorting IV taking profits.In terms of trading volume, the market hasn't placed many bets so far on its earnings report next week, which will be followed by the election, and TSLA is currently almost the most important company for Trump's concepts, so you can imagine the potential volatility.
TSLA's IV Rank is currently just 47% and its IV Percentage is just 74%, which is very low for the week before earnings.Gaming the big swings during earnings season could become a much more cost-effective way to go.From the distribution of options on 25 October, the largest pain point in $ 225, higher than the current price, and 240, 250, 260 Call distribution are relatively large, while the open PUT is relatively small, basically concentrated in the 200 round number off.
Big-Tech Portfolio
The Magnificent Seven form a portfolio (the "TANMAMG" portfolio) that is equally weighted and reweighted quarterly.The backtesting results are far outperforming the S&P 500 since 2015, with a total return of 2,098.3%%, while the SPY returned 236.4% over the same period, again pulling ahead.
Big tech stocks were strong this week, with the portfolio returning 38.97% year-to-date, outperforming the SPY's 23.68%.
The portfolio's Sharpe Ratio over the past year has rebounded to 2.11, the SPY is flat at 2.5, and the portfolio's Information Ratio is 0.94.
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