Investors are gobbling chips
By Holly Mackay, Founder & CEO
7 July, 2023
Almost unbelievably the first half of 2023 is behind us, Wimbledon is underway and we start the summer holidays period with the jolly seasonal headlines about air controller strikes.
If we look at the global stock markets, the average temperature is lukewarm, but the average disguises a small number of blisteringly hot stocks – and a very large number of tepid things.
Welcome to the AI frenzy
Technology is dominating investors’ enthusiasm at the moment. Polar Capital and Allianz Technology are two popular investment trusts to pique investor interest again. The AI frenzy is causing people to gobble up chips (of the Nvidia sort, not the potato sort), and Tesla is driving up to reclaim its spot in the most bought shares charts.
Before you dash in to get yourself a slice of the AI-action, it’s worth reflecting that the share price of these 2 companies has already shot up this year. Tesla has accelerated by over 100% and Nvidia has swollen its waistline by 190% since January. And also don’t ignore the fact that if you have diversified global funds, you’ll already own these companies.
One-quarter of the main US index is naff
Nvidia recently joined the rather exclusive $1 trillion market capitalisation club, nipping at the heels of Amazon and getting closer to Alphabet (Google), Facebook and Apple. This week Apple became the first company in the world to be valued at more than $3 trillion Big Ones. Collectively these 5 companies (which I like to summarise as NAAAF) make up one quarter of the S&P 500 and have accounted for almost all of its gains this year. So it’s a pretty polarised story which can be loosely summarised as AI = good and Everything Else = bad.
And bitcoin and Japan are hot
In other news, Bitcoin is up over 80% this year. This asset still makes me nervous. I have my test account I set up in 2017 which allegedly is worth a fair bit more today but I’m stuck in some Kafka-esque nightmare password reset loop. Are there any humans at blockchain.com…? "Heeeeeelp", she cried, weakly.
Back to more mainstream markets and the Japanese index was up 27% in the first 6 months of the year, as international investors rediscover this forgotten region which has been unloved since the euphoria of the 1980s. China is having a shocker in 2023. And oil and energy stocks have (temporarily?) run out of steam.
People remain uncertain and ‘boring old’ blue chips such as Lloyds Bank and Vodafone are having a moment. Banks typically do well as rates rise because they don’t share the love around. And Vodafone is currently trading at almost a 25-year low but paying an astonishing dividend of 10% – which doesn’t feel very sustainable.
On a final note, of course cash is dominant. Some easy accounts are now paying over 4.3% (the Family Building Society and the Coventry Building Society) and Santander’s new Edge Up current account is paying 3.5%. (Am I the only person who feels a surge of irritability at a current account being named Edge Up? This clearly marks me out as having an attitude problem, but it makes me mutter like Victor Meldrew every time I see it!) And finally, many investors wanting to keep some money in cash-like assets are using the Royal London Short Term Money Market fund which is currently yielding around 4.5%.
For further reading this week, football fans might like Martin Currie’s piece on what investors can learn from the World Cup (not to back England? 😊), we’ve an article on the new BBQ discussion topic – fix or variable? – from mortgage experts at L&C, and Charles Stanley is offering a free 15 minute appointment with a financial planner to talk through any burning questions you have.
Have a great weekend everyone – fingers crossed for some sun!
Holly
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