top of page
  • Writer's pictureThomas Schorn

May Market Review

May reversed the market reductions of April, and all three indexes below hit new all-time highs. The Dow Jones Industrial Average closed for the first time above 40,000, but that didn’t hold long. The market was choppy in May and was positively impacted by Nvidia (NVDA) earnings and interest rate reduction expectations. I expect interest rate expectations to keep the markets choppy. As I have stated for many months, I don’t expect the rate to decrease this year.


Market Returns for May 2024 and YTD as of May 31, 2024:

Index

May

YTD

S&P 500

4.8%

10.6%

Nasdaq

6.9%

11.5%

DJIA

2.3%

2.6%

Source: wsj.com


Based on the above returns for May, I don’t believe in the “Sell in May” idea. See last month’s market review for the reasoning for not following “Sell in May.”


Earnings were the market's focus in May. Nvidia's (NVDA) earnings report moved the stock to $1,096.33 per share at the end of the market, producing a 32% return for May. See below where I compare Nvidia (NVDA) to Cisco (CSCO). In addition to earnings, inflation data, released May 31, increased the market’s belief that we may see interest rate cuts this year, which I mentioned above, I don’t believe.

 

May Portfolio Changes

We made no changes in the portfolios for May, which worked in our favor.

 

June Possible Changes

As we did in March, we may move another small percentage of VanEck Morningstar Wide Moat ETF (MOAT) and Invesco S&P 100 Equal Weight ETF (EQWL) to Fidelity Fundamental Large Cap Core ETF (FFLC), iShares S&P 100 ETF (OEF), and iShares Core S&P 500 ETF (IVV). This decision has not yet been made, nor has the percentage of moves been determined.

 

Nvidia Comparison to Cisco (2)

I wanted to take a quick look at Nvidia (NVDA) and its impressive run.

 

While stocks come and go in terms of capturing the market's period, it’s hard to remember a stock that has become so seemingly central to the market and overall economy. The way things are right now, it seems that AI wouldn’t exist without NVDA (NVDA).

 

Thinking back over time, a similar situation existed with Cisco (CSCO) in the 1990s. In the early days of the internet, switches and routers were essential in building the Internet's infrastructure. While several companies made switches and routers, Cisco (CSCO) was the best. The company had an enormous lead in the competition, just as NVDA (NVDA) is the only real serious player regarding AI.

 

In the chart below, we have overlaid the performance of NVDA (NVDA) since May 2016, when Alphabet CEO Sundar Pichai first formally referred to the company as a leader in an “AI first world,” to the performance of Cisco (CSCO) starting in February 1992, when America Online had its IPO. Both stocks had insane and strikingly similar runs in the eight years following each event. On an ominous note, Cisco's (CSCO) run at this point was only a month from its ultimate peak before an epic collapse. Then again, Nvidia (NVDA) CEO Jensen Huang has said that he expects AI to be “bigger than the internet,” so maybe it’s not a fair comparison.

 

I didn’t put a lot of science into this comparison; instead, I just picked a seminal point in the early days of each technological era. I could have probably just as easily picked different starting and ending points for each period with different results. The critical point to remember, though, is that just as everyone thought Cisco (CSCO) had an insurmountable lead in networking during the early days of the internet, NVDA (NVDA) currently has no real competition in the AI space. Much of that advantage has also already been reflected in the company’s stock price, which has increased tenfold in less than two years.


Nobody knows how long this advantage will last, but it won’t last forever, and when it ends, margins could shrink just as fast as Cisco (CSCO) stock did in the early 2000s.


We hold 2.2% of Nvidia (NVDA) in our 100% stock ETF (exchange-traded fund). This percentage reduces for more conservative portfolios.

 

(3)


Our regular portfolio reviews are essential to how we provide you with our services. It gives us your thoughts and insights. We all look forward to talking with you soon during our regular meeting.


(3) Chart by Bespoke.com



MOAT - VanEck Morningstar Wide Moat ETF
.pdf
Download PDF • 661KB

FFLC - Fidelity® Fundamental Large Cap Core ETF
.pdf
Download PDF • 654KB

IVV - iShares Core S&P 500 ETF
.pdf
Download PDF • 570KB

OEF - iShares S&P 100 ETF
.pdf
Download PDF • 606KB

SPY - S&P 500 ETF Trust
.pdf
Download PDF • 597KB

Schorn Wealth and Fiduciary Planning, LLC, believes all information in this report to be accurate, but we do not guarantee its accuracy. None of the information in this report or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. This report is not personalized advice. Investors should do their own research and/or work with an investment professional when making portfolio decisions. As always, the past performance of any investment is not a guarantee of future results. Schorn Wealth's and Fiduciary Planning, LLC's representatives or clients may have positions in securities discussed or mentioned in its published content.

188 views1 comment

1 Comment


gpagano14g
Jun 02

Congrats to you Tom for receiving your award!

Like
bottom of page