To The Moon

Big-Tech’s Performance Finnally it is December, the long-term US treasury yield continued to rapidly decline as the rate cut expectation priced in, which provided further upward momentum for the stock market after consolidation at high levels. As of the close of December 7, return of big techs seems in divergence, with $Alphabet(GOOG)$ $Alphabet(GOOGL)$ a 3.32% increase after releasing Gemini, followed by $Apple(AAPL)$ of 2.27% increase, $Tesla Motors(TSLA)$ with a 1.07% increase, $Amazon.com(AMZN)$ with a 0.54% increase, however, $Meta Platforms, Inc.(META)$ shows a -0.17% decrease, followed by $NVIDIA Corp(NVDA)$ a -0.37% decrease, and $Microsoft(MSFT)$ a -2.1% decrease. Overall, big tech outperforms market. $S&P 500(.SPX)$ $Invesco QQQ Trust-ETF(QQQ)$ $NASDAQ(.IXIC)$ Big-Tech’s Top Newsfeed Apple is preparing to launch new iPad and MacBook Air models to reverse sales decline; Apple hopes to produce iPhone batteries in India. Microsoft adjusts cloud service pricing levels, effective February 1, 2024; Microsoft launches "Bing Depth Search" to integrate GPT-4 to provide more relevant and comprehensive answers for complex user queries; Google opens up Gemini permissions to expand application scenarios while upgrading computing power requirements, competing with OpenAI; Amazon significantly lowers commission rates for low-priced clothing sellers; $Advanced Micro Devices(AMD)$ launches MI300X accelerator and raises the expected market size of AI accelerators by nearly twice by 2027; Meta will begin encrypting information on Facebook and Instagram; The starting price for Tesla's non-discounted Cybertruck electric pickup is $61,000; The head of Tesla's Dojo supercomputer project resigns and is replaced by a former Apple executive. Big-Tech’s Key insights Apple for sure? Watch out "tax loss harvesting" This year, the seasonal trend in the US stock market is particularly strong. Although the Silicon Valley bank crisis at the beginning of the year brought some risks, the market found a new anchor - AI. In the second half of the year, the decline in inflation and the expectation of a "soft landing" led to the market's upward trend after a weak September. Big tech undoubtedly benefits the most. The combination of the seven giants accumulated more than 60% excess returns over the S&P 500 index in the middle of the year, and surprisingly maintained stability and even further growth during the volatility in the second half of the year, with current excess returns approaching 80%. Entering December, investors are particularly looking forward to the Christmas Rally, One important factor is that fund managers want to "boost performance" at the end of the year, maximize returns, and earn higher bonuses. And big tech stocks are still the undisputed top choice during this period of performance boosting. First, the "tax loss harvesting" effect. Fund managers avoid closing positions with high returns this year (because they have to pay taxes), but instead close positions with poor performance (because they can be used for tax deduction). This is a trading strategy (mainly in areas with capital gains tax such as the US and Canada) that intentionally generates "capital losses" to offset capital gains tax or personal income tax. Of course, this only delay the tax payment, not exemption. However, in the current high rate environment, reducing cash outflow as much as possible and reinvesting is one of the ways to achieve higher allocation efficiency and higher returns. It is worth noting that the "losses" that have already been closed this year cannot be offset against capital gains and can be deferred for future gains without expiration. All seven giants have had at least 50% or more returns this year, and even TSLA, which had a huge decline last year, has achieved returns of over 100% this year. It is obvious that closing positions at the end of the year may face higher taxes. Second, concentrated advantageous holdings for safety. Everyone now knows that inflation is falling and interest rates will definitely be lowered next year, so market expectations are very consistent and everyone wants to get ahead. However, there are still uncertainties about whether a "soft landing" can be achieved. Even if betting on interest rate cuts, it also depends on whether the economic environment "deviates." Therefore, investing in top tech companies carries lower risks to some extent while maintaining a certain proportion of holdings, thus "reducing risk." During the "Silicon Valley Bank" incident, companies like Apple and Microsoft received a lot of capital inflows, not because they were fundamentally more favorable but rather because they served as a "rest stop" during "market liquidity overflow." At the end of the year, when facing the same consistent expectations but also worrying about additional risks, choosing large tech companies offers a higher margin of error. The Big-Tech Portfolio "We will combine the top 7 companies with the highest weights into an investment portfolio called the 'TANMAM' portfolio. By equally weighting and rebalancing the portfolio every quarter, the performance since 2015 has far exceeded the S&P 500, with a total return of 1431%, maintaining its historical high. In the same period, the $SPDR S&P 500 ETF Trust(SPY)$ as returned 161.17%, but has not reached a new high. Year-to-date return is 102.3%, higher than SPY's 21.16%. The Sharpe ratio is 4.3, while SPY's is 1.4. This week, the portfolio's return is 0.7% with a Sharpe ratio of 1.6, while SPY's return is 0.4% with a Sharpe ratio of 2.0."