We have upcoming major earnings reports from Microsoft and Alphabet, coinciding with an impending Fed meeting.
Concerns among significant money managers revolve around the current market situation. Matthew McLennan, co-head of the global value team at First Eagle Investments, expressed apprehension stating, “The problem is we’re priced for a soft landing. But there’s been no landing.” With high U.S. employment levels, McLennan believes that the Fed may face challenges in implementing significant easing measures without triggering further inflation. Additionally, he is worried that the market is overlooking the concerning U.S. fiscal scenario, characterized by escalating government debt leading to higher rates.
To mitigate these concerns, McLennan recommends a strategy of diversified and balanced investments. As the co-portfolio manager of the First Eagle Global Fund SGENX, he emphasizes the importance of investing in businesses with an “incumbency advantage in industry niches available at the right price.”
The portfolio overseen by McLennan is evenly divided between U.S. and international entities, with a portion allocated to gold. Approximately 70 to 75% of the investments are focused on businesses intended for long-term ownership, while around 15% is dedicated to gold and gold miners as a potential hedge against uncertainties in the U.S. fiscal landscape.
In terms of stock selections, McLennan highlights the promising artificial intelligence (AI) sector. He mentions Meta Platforms and Oracle as significant holdings with reasonable valuations relative to their growth potential. McLennan also favors companies integrating AI into their operations, such as Japan’s Fanuc, a major player in industrial automation leveraging AI for predictive maintenance of its robots.
Moreover, McLennan identifies AmBev, Latin America’s top beer producer, as an attractive investment opportunity due to its stable business, lack of debt, net cash position, and a substantial dividend yield. He views AmBev, along with other established brands trading below market value, as appealing options for investors seeking stability.
In the realm of overlooked markets, McLennan mentions investing in China through Prosus, a Dutch-listed holding company with a significant stake in Tencent, a leading Chinese online business. He notes the favorable valuation metrics of Tencent and Prosus, emphasizing their potential for long-term growth and value.
Lastly, McLennan recommends Exxon Mobil as an essential infrastructure investment, citing its strategic energy assets and resilience in challenging environments. He believes that holding quality businesses offering relevant products at rational prices is a sound long-term strategy.
The markets are currently reflecting a cautious sentiment, with stock futures showing a decline and bond yields experiencing a slight dip ahead of the two-day Fed meeting. Gold prices are up, while the Hang Seng index dropped significantly.
In the news, UPS faces a decline following a revenue drop and a pessimistic outlook, while General Motors stock surges on positive earnings results. After hours, Alphabet, Microsoft, AMD, Starbucks, and Electronics Arts are set to report their earnings. Additionally, Berkshire Hathaway-held BYD reported disappointing earnings guidance, leading to a decline in its shares.
Key economic data releases include the S&P Case-Shiller home price index, job openings, and consumer confidence reports. Europe continues to grapple with economic stagnation as indicated by recent data.
Elon Musk announced a successful brain implant by Neuralink in a human patient, with early results showing promise.
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The most searched tickers on MarketWatch currently include Tesla, Nvidia, Advanced Micro Devices, Microsoft, AMC Entertainment, NIO, Apple, GameStop, Amazon.com, and SoFi Technologies.
