Too much optimism?

00:00:00: Marcus went from optimism to euphoria yesterday on reports that a peace proposal between the US and Iran could help end conflict, sending oil prices sharply lower equities.

00:00:16: But investors may be getting a little bit ahead of themselves, because previous peace headlines ultimately ended in disappointment.

00:00:25: And I don't want to kill Joy but the risk of sudden reversal still remains high with oil shortages and renewed price spikes still possible if tensions escalate again.

00:00:36: So, welcome to Swisscoats.

00:00:38: Daily Market Talk is Thursday, the seventh of May.

00:00:41: I'm Ipeko Skardeshkaya and will try put pieces together To understand why markets are behaving in their way.

00:00:48: But before i do And as always Please keep that opinions on my own This

00:01:01: show brought you by SWISQUOTE.

00:01:04: So optimism on no further escalation in the Middle East, turn into euphoria yesterday.

00:01:09: On news app there is a peace proposal at the table that could eventually end war with Iran.

00:01:15: The headlines have not flipped yet this morning At time I'm talking here.

00:01:19: So US could be shortly traded below the ninety dollar per barrel level yesterday on the news and brands created spell below ninety seven dollars per barrel.

00:01:33: Level considering that the price was flirting with one hundred fifteen dollars per battle mark just two days ago, seeing levels below a hundred dollars per bar psychological.

00:01:43: Mark got investors probably a little bit ahead of themselves.

00:01:47: The yields dropped sharply.

00:01:49: pricing to end off the inflationary risk along fell across the board.

00:01:56: The U.S.

00:01:56: dollar index is actually now back to levels that we saw before the Iran war started and equity markets rallied.

00:02:04: of course, major technology heavy indices hit fresh record high-levels also bolstered by strong earnings from chip companies that were announced this week smanting the AI's growth story.

00:02:17: Samsung, for example joined the Trillionaires club after announcing a nearly fifty-fold profit rise for its chip unit alone.

00:02:25: That basically makes up around ninety four percent of his total earnings and he rose more than eighteen percent rewarded for it's own record earnings and strong guidance.

00:02:36: And Leather didn't even prevent the rival MVDL from rallying nearly six per cent on side as assigned at The AI.

00:02:45: cake is big enough for everyone to be fully fed.

00:02:49: At least this is what investors think, as such NASDAQ hundred gained more than two percent yesterday and gold rallied nearly three percent taking advantage of the sharp drop in U.S.

00:03:00: dollar on global sovereign yields that compressed opportunity cost of holding non-interest bearing metal.

00:03:07: Now all this is great but there's no certainty that it will last.

00:03:12: Because

00:03:12: we had

00:03:13: peace proposals before and market rallies over the course of past weeks, And ALL OF THEM ANDED IN DISAPPOINTMENT!

00:03:19: Given the chaotic diplomacy and given how the US lost control over the situation in Iran... ...and given earlier and founded announcement on progress I would like to say I'll clap when Iran confirms Because longer this drags on, the greater the risk of oil shortages and sharper spikes in oil prices.

00:03:40: Well a one hundred eighty degree turn-in situation is just ONE headline away!

00:03:45: Just ONE headline way... But I think you can't enter a super winning trade underneath After the news, you must enter a great rate in expectation of an event.

00:03:58: and this is what's leading to this maybe premature rush to equities along with earnings.

00:04:04: This morning oil prices are higher than yesterday's dip levels still lower then early week.

00:04:12: but risks remain two-sided.

00:04:15: Topics and Hansang Index, on the other hand are up to date to catch-up with past days' holiday lag while costs be passed.

00:04:21: a small gain at that time following a forty eight percent release since the beginning of April.

00:04:27: Now remember most these gains were thanks to rising memory chip demand which created shortage and push memory chip prices notably higher due to AI's primary demand.

00:04:40: And now we're talking about triple digit price increases in these memory chips.

00:04:45: Now, the membership makers are used to boom and bus cycles.

00:04:49: during the boom cycles like The one you see today they increase their capacity They produce more chips and they ultimately end up with too much chips In there hands which then pull prices lower and weigh on their margins.

00:05:00: But today many bet that a ointment will break that cycle and keep the memory chip sector in an eternal boom cycle.

00:05:08: Is it possible?

00:05:09: On one hand, computing needs double every six to seven months.

00:05:13: And this could accelerate as AI adoption accelerates and AI models grow meaning that we will always need more chips.

00:05:20: there will never be enough chips in the market.

00:05:22: On the other hand, such demand and margins would pull players in and eat into them.

00:05:28: In fact today, the parabolic rise in Samsung's PE ratio warns that the soft price is rising faster than its earnings despite that fifty-fold rise in chip profits.

00:05:39: So rationally there should be a correction But sometimes it takes time until investors come back to their senses.

00:05:45: What is interesting, however, Is that the AI trade has changed hands or at least brought into other hands because there's no longer Nvidia alone That's carrying this rally was a cocktail of AI model providers like open AI and anthropic through their partnerships.

00:06:01: And they're partnership prices a bunch of different chipmakers GPU makers CPU maker CPU makers membership makers who keep this system together in growing as also constructed Equipment makers remember like Caterpillar for example, because you need to build all these data centers.

00:06:17: on the flip side of this trade.

00:06:18: The software companies are shaken by headlines Like the one that freshly dropped this week about Anthropics new agents For performing financial services tasks.

00:06:30: in reaction.

00:06:31: LSEG was down two and a half percent yesterday again In London which I think maybe an opportunity to buy today when you think that AI can actually replace their models and their platforms, but the data is still theirs to sell.

00:06:45: But anyway, with all these changes happening the earning season is sure going well.

00:06:50: Besides a fact that more than eighty percent of S&P five hundred companies are already reported earnings reported better than expected results.

00:06:58: Deutsche Bank analysts also call this Earning Season one of the best earnings season in twenty years and they're probably right!

00:07:05: The Middle East war impact was nowhere to be found...the trade war when nobody really talks about it anymore?

00:07:11: The ADP report yesterday in the US printed lower than expected figure for job additions, suggesting that U.S economy added around one hundred nine thousand new private jobs last month versus one hundred eighteen thousand expected by analysts.

00:07:26: inflation numbers on other hand also start heating up or notably higher energy prices since beginning of Iran war and they started moving away from central banks.

00:07:36: two percent inflation target meaning if the wall doesn't stop coming down literally in the coming days and if oil prices, energy prices don't come down sustainably.

00:07:46: The central banks must step-in with higher borrowing costs.

00:07:50: that would suck really In the middle of such a beautiful party.

00:07:54: but optimism was such yesterday That investors around the world rather saw the glass half full And cheer the fact I. the US job additions for example were notably up compared to the sixty one thousand editions off the month earlier.

00:08:09: And you know, as we discussed yesterday a softer than expected figure also justifies lower US yields.

00:08:15: or simply no one really cares about the jobs data anymore.

00:08:18: The war headlines and the chip earnings are way more exciting then the good all-jobs figures.

00:08:23: but whatever it is that market move today Is too optimistic to last in my opinion because higher this market goes faster will fall if anything goes wrong.

00:08:33: So best thing to do is to remain diversified and well-conscious that we will, more likely than not face high volatility in the coming days.

00:08:42: So let's cross fingers for this peace proposal to become reality!

00:08:46: This is all for today.

00:08:48: I'm Yipega Skardeshkaya And thank you for joining me.

00:08:51: Thank you for your beautiful and supportive comments.

00:08:56: This episode of Market Talk has been helpful and it's been insightful to you, so please do not hesitate to leave your comments, reactions under all questions below as usual.

00:09:07: Follow us on Instagram on X on LinkedIn but also on WhatsApp, Threads, Telegram & Blue Sky for regular market updates.

00:09:15: Subscribe our YouTube channel for daily market commands!

00:09:19: And don't forget the hit like button.

00:09:23: all these videos to let us know that you enjoy them.

00:09:27: So I will meet again tomorrow

00:09:33: and until then, good day trading!