NASDAQ - BUY THE DIP
Impact on Nasdaq and Broader Market Sentiment
1. Dollar Weakness and Yen Surge
The sharp drop in the US Dollar and the surge in the Japanese Yen after another suspected BOJ intervention at the same time of the news release of the drop in the US Jobless Claims and CPI and should be short-lived, the last 2 interventions over the last 2 months have all eventuated to nothing and undone.
2. Interest Rate Expectations
The market is now pricing in a high probability of a Federal Reserve rate cut in September, with another cut likely by December. Lower interest rates generally support higher Stock prices as borrowing costs decrease and corporate profitability improves. This is typically bullish for growth stocks, which dominate the Nasdaq.
3. Inflation Data
The latest CPI data showing a decrease in consumer prices suggests that inflationary pressures are easing. This could be positive for the Nasdaq as it reduces the chance of the Fed having to maintain higher rates, which has been the headwind for the recent drive-up of tech stocks particularly pricing in the cut way ahead of time.
4. Market Reaction
Although the Nasdaq initially dropped on the news, the dip may be seen as a mean reversion and correction to pick-up stops, providing a buying opportunity for investors who believe in the long-term growth potential of these tech stocks.
5. AI and Tech FOMO
The ongoing FOMO (Fear of Missing Out) related to AI and other tech advancements also continues to drive the Nasdaq higher. This underlying trend is likely to persist as long as there is Investment money on the sidelines and there always is.
Conclusion
Despite the short-term volatility and initial drop in response to the latest economic data, the overall outlook for the Nasdaq remains positive due to the underlying strength in the labor market, easing inflation pressures, and the prospect of lower interest rates. The ongoing enthusiasm for AI and tech innovations further supports the bullish case.
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