To The Moon

Following a stellar start to 2023, the S&P 500 index has now recorded close to a 15% gain year-to-date. However, most of the rally has been concentrated in Large Cap US Tech stocks. The S&P 500 Ex-Information Technology Index is up less than 2% YTD, heavily underperforming the S&P. This underperformance can be attributed to the rise of Generative AI, with companies such as Nvidia, Meta and Tesla contributing to a significant portion of the gains in tech. Best-Performing Stocks of Q1 2023 | Morningstar Macroeconomic Update The US economy is showing no signs of recession despite echoes from the Fed maintaining its hawkish stance. The labour market remains extremely tight with the unemployment rate at 3.6% as of Jun 2023. Following this week’s mixed job data, traders will be looking toward next week’s CPI release which has significant implications on monetary policy. Economists are forecasting inflation to fall to 3.2% in June, reducing the need for further interest rate hikes. United States Inflation Rate Ending the current rate hike cycle would be very beneficial to cyclical sectors such as energy, chips and financials. Once the Fed starts to cut interest rates, business spending and consumer confidence is likely to improve and could lead to a rally in cyclical names. Recent developments suggest that the US economy is entering a cyclical upturn, as signs of demand recovery start to emerge. Energy After witnessing fresh production cuts implemented by Russia and Saudi Arabia, the XLE concluded the week with a gain of over 2%. Despite concerns about an ongoing recession, the energy sector has lagged behind the S&P index year-to-date. However, a noteworthy development emerged this week as US crude inventories recorded a more substantial decline than anticipated, potentially signaling the beginning of a recovery in crude oil demand. In addition, the Biden Administration recently disclosed its decision to acquire an additional 6 million barrels of crude oil for the Strategic Petroleum Reserve, providing further bolstering support to oil prices. Oil in Reserves | US emergency crude stockpiles haven't been this low in 40 years Recommended Stock: $APA Corporation(APA)$ Apache is one of the most operationally efficient companies in the energy sector which remains extremely tight and bottlenecked. Chips As the popular saying suggests, "chips are the new oil," the global semiconductor revenue has witnessed a significant surge, nearly tripling over the past 15 years. While the industry is known for its cyclicality, the consecutive month-to-month growth in semiconductor sales for the third month in a row has ignited optimism regarding a potential market rebound in the latter half of this year. This encouraging trend has been primarily driven by notable gains in China, recording a 3.9% increase, and Europe, with a growth of 2.0%. Additionally, other regions have also observed modest month-to-month sales growth. China's economic recovery and the dovish monetary policy implemented by the People's Bank of China (PBOC) have contributed to favorable industry conditions, potentially serving as catalysts for continued growth in the upcoming months. Recommended Stock: $Micron Technology(MU)$ Micron’s oligopolistic business is poised to benefit from secular growth trends in AI and digitalisation. Financials In the aftermath of the SVB crisis, financial institutions have adopted cautious and responsible measures to safeguard their stability and resilience in the face of potential crises. Notably, recent developments have indicated that numerous prominent banks in the United States successfully cleared the rigorous stress test conducted by the Federal Reserve last week. As a result, these banks are now contemplating increasing their shareholder payouts, demonstrating their confidence in their financial soundness and their ability to navigate challenging scenarios. US bank dividends reach all-time high in 2022 | S&P Global Market Intelligence Recommended Stock: $Citigroup(C)$ A strong balance, cheap valuation and strong dividend track record make Citigroup an attractive investment in the financial sector. @TigerStars @TigerEvents @CaptainTiger