Risk of including a meme stock to major indices

00:00:00: Mark has started the week on a positive note as falling oil prices ease inflation fears, pushed bond yields lower and lifted equities on expectation that the war in Iran will soon come to an end.

00:00:11: Yet good news comes at times central banks start reacting to rising inflation by raising interest rates meaning part of this optimism could be jinxed higher borrowing costs.

00:00:22: Still if the War in Iran really ends and energy price is durable or rotation from highly valued tech technology too.

00:00:30: Cheaper non-technology peers will be the only healthy mood to keep this market somewhere closer.

00:00:37: So the week started on a positive note, RBC as oil prices fell to levels last seen in the first weeks of the Iranian war sending global yields lower and equities higher.

00:01:14: The European stock index for example advanced to an all-time high level yesterday at the end that the world would narrow gap between the technology heavy indices that amassed huge capital inflows.

00:01:29: since early days industries that were more exposed to higher energy prices, did not do well.

00:01:38: But at the end of today, it has stocked six hundred which is most cyclical.

00:01:42: Paired gains and close just point nineteen percent higher while major technology heavy US indices at perform with a one-point sixty five percent rise in this happy five hundred under three percent rally in NASDAQ hundred.

00:01:57: SpaceX on other hand rallied another twenty percent.

00:02:01: ladies and gentlemen even more after hours trading pushing companies valuation to two and half trillion US dollars, that is just a touch below Amazon's.

00:02:12: The only difference is that SpaceX is burning cash today as the revenue from Starlink and other businesses has been unable to counter the heavy space exploration spending whereas amazon made more than seven hundred billion us dollars in revenue last year.

00:02:27: So yes, it looks like a speculative bubble.

00:02:30: This valuation makes absolutely no sense!

00:02:32: People are buying SpaceX today in expectation that others will be buying too and the latter And that's all the definition of speculation.

00:02:44: But one day, someone will say hey!

00:02:46: The emperor is naked and on that day the company's fundamentals won't be there to stop the sell-off unfortunately.

00:02:53: so make sure you set your stock laws and stick to your risk management strategy if you are trading in when you're trading this stock which promises to be extremely volatile hence fun but also very much risky.

00:03:07: But there's a bigger problem, and that is the fact that meme stocks have been around for years.

00:03:12: And they have mass retail investors' attention sending companies like GameStop and AMC, for example to incredibly high levels just because people wanted it do so Just because people thought that they could send share prices as high as they want them To see how these companies go that the fundamentals of course caught up.

00:03:36: GameStop is down today by more than eighty percent compared to its January twenty-twenty one top and AMC is down by more then ninety nine percent because the movie theaters are empty, almost empty And it was foreseeable when the stock traded nearly four hundred US dollars per share back in May.

00:03:54: two thousand and twenty one Today, it's worth around two dollars a share and I believe that valuation makes more sense than four hundred dollar per share given the growth potential of the movie theater business.

00:04:06: Now obviously i don't expect SpaceX to share similar destiny then AMC or GameStop as the company still got big potential to do whatever dreams are doing in this space like Space Data Center on orbit stuff.

00:04:18: And if not well The Company is still got Starling for example and few data centers from XAI out to make decent revenue.

00:04:27: I'm thinking of the nearly one billion US dollar a month worth of computing power that is contracted with Google recently for thirty-two months, but at the end of today whoever's buying SpaceX sucks like there is no.

00:04:39: tomorrow we'll understand that the space exploration dreams will come at a cost and SpaceX stockholders will be paying that costs.

00:04:47: so back to the problem That i started talking about.

00:04:50: SpaceX will be included in major us indices like nasaq n russell And that worries me the most.

00:04:56: A company with no fundamental support to justify such valuation will be built by these indices, and also the ETFs that attract these indices meaning this meme stock will make part of everyone's portfolios – not a small portion!

00:05:11: If included in the NASCARDA today, SpaceX would make up more than six percent off the indexed.

00:05:19: so if you hold any of those or ETFs tracking these indices, it is today very important to understand the ingredients of these indices and probably diversify.

00:05:31: diversify toward indices that do have healthier, sure more boring but healthier ingredients.

00:05:37: Remember we simply need less sugar for a longer and healthier life!

00:05:41: Now zooming out and looking at the global macro if the war in Iran comes to an end really this time bringing energy prices sustainably lower The non-technology pockets of the market should eventually see some capital rotation as these companies have become relatively cheaper compared.

00:06:00: technology peers, especially during the Iranian war months and a healthy and durable rally in markets should be based on more than Anyway, that means at some point we should start seeing the technology appetite ease and money start flowing toward a non-technology pockets of the market.

00:06:20: Otherwise, narrowing market breadth today will be exposing global financial markets to potentially heavy sell off if something happens in technology stocks.

00:06:30: Now looking at the geopolitical and macroeconomic setup it looks like this could be good time for you rotate towards Non-Technological Pockets Of The Market.

00:06:39: but The main challenge today is that the central banks have just started to react to rising inflation at the same time, and will potentially end it.

00:06:47: Meaning that higher borrowing costs may jinx a part of the end-of-war optimism and lower energy cost.

00:06:54: Because remember, the European Central Bank last week raised its interest rates for their very first time in almost three years to fight inflation And the bank of Japan went ahead and raise this policy rate by twenty five basis points To one percent.

00:07:08: as expected.

00:07:09: The rest of the week is not expected to bring any more rate hikes from major central banks.

00:07:14: The RBA didn't do anything today, it just kept its policy rates unchanged.

00:07:17: The Fed, Bank of England and Swiss National Bank are also expected to hold fire at this weeks monetary policy meetings And could eventually get away without raising their interest rates if inflation comes lower as fast as went higher.

00:07:32: I believe that European Central Bank would.

00:07:35: Also, Wolfback is the latest decision to raise its interest rates.

00:07:39: Before that happens again inflation should prove temporary.

00:07:43: When does inflation go from being temporary and sticky?

00:07:47: It's when it spills energy at other prices And more importantly shows up in salary negotiations.

00:07:53: This is where workers ask for a higher pay To counter loss of purchasing power due to higher price.

00:08:00: When they obtain a pay rise They can spend more and the latter feels inflation.

00:08:05: That's called a wage price spiral.

00:08:07: It is nightmare of central banks, it's everything they want to avoid.

00:08:10: so in the coming days and months The wages growth will be closely watched by investors To understand how anchored the latest rise In inflation has become.

00:08:20: Today for example the wages in the eurozone Will give an idea on How the wages were affected By the rising inflation pressures.

00:08:27: Thinking as if the wages growth remains relatively soft.

00:08:30: ideally close inflation.

00:08:32: Inflation and pressures will be manageable, allowing a softer monetary policy stance in the coming months.

00:08:38: but if not expect more monetary policy

00:08:40: tightening.".

00:08:41: And the FX Markets.

00:08:42: The US Dollar Index is stronger again this morning as investors have started questioning The euro-dollar felt quite uncomfortable about the one-sixteen mark yesterday, hinting that the pair needs more time and probably a few more answers to the peace deal questions.

00:09:04: While the Bank of Japan's rate hike today did nothing to ease selling pressure in the Japanese yen confirming how broadly investors were expecting this hike from the bank bearish hand positions which rose to a nine-year high according to Bloomberg.

00:09:26: Again, investors demand more rate hikes from the Bank of Japan to leave the Japanese yen alone but in the shorter run it cleaning off the crowd at bearish shampositions appears to be inevitable.

00:09:38: So this is all for today.

00:09:39: I'm Ipek Oskar Deshkaya and thank you for joining me, And Thank You For All Your Beautiful And Supportive Comments!

00:10:02: Threads, Telegram and BlueSky for regular market updates.

00:10:06: Subscribe to our YouTube channel for daily market commands!

00:10:10: And please don't forget to hit the like button on these videos so that you can enjoy them.

00:10:18: So I will meet again tomorrow and until then good day trading!

00:10:30: SwissQuote assumes no responsibility for accuracy or losses from its use.

00:10:34: Products and services are offered only where legally

00:10:37: permitted.".