The Lead-Lag Report: Gareth Soloway on Market Psychology, Risk Management, and Economic Forecasts
Markets are dynamic. Today’s leaders can be tomorrow’s laggards, and vice versa. What drives a stock’s price higher is supply and demand. But understanding how changes in supply and demand interact can make a huge difference in returns.
If investors clamor for a stock, that soaring demand for shares will move the price fast. If a stock has little demand, but continues to reduce supply with a share buyback, the gains will prove slower.
Currently, investors love all things AI. In that space, the chipmakers are the most attractive of all. They’re the key component for AI programs to use.
However, ramped-up production and increased global competition could mean a supply saturation. In time, that could compress the wildly-growing earnings of semiconductor stocks.
Once that slowdown starts, investor demand for semiconductor stocks could shift overnight. And that could lead to big losses. Especially for investors who buy at the top.
Meanwhile, global investing has taken a backseat to the AI space. That’s creating an opportunity for investors to get significant value from a number of emerging market countries. That includes China and Brazil.
Investors tend to have a love/hate relationship with international investing. Right now, feelings are cool. If that changes, money could pour into emerging markets, leading to a massive rally for those stocks.