Last week was a particularly strong week for the tech sector. The tech-heavy NASDAQ surged 2.5%. The reality is the tech sector was given a major boost by NVIDIA Corporation’s (NVDA) blowout earnings report last Wednesday. (I reviewed NVIDIA’s earnings last Friday. If you missed the update, you can check it out here.)
The S&P 500 and Dow didn’t stage nearly as impressive performances leading into the long Memorial Day weekend, with the S&P 500 rising 0.3% and the Dow slipping 1%. One reason why the S&P 500 and Dow lagged last week is due to concerns surrounding the debt ceiling. The deficit ceiling negotiations between the White House and the House of Representatives hit a temporary impasse last Wednesday. If you’ve been following the headlines in the news, then you know that the House has a few demands – new energy projects, work requirements for Medicaid, changes to food stamps, budget cuts, etc. – before it will vote to raise the debt ceiling.
Over the long Memorial Day weekend, though, the White House and House Speaker Kevin McCarthy reached a two-year deal to lift the debt ceiling. McCarthy’s House negotiators seek to rescind some of the $80 billion approved last year to expand the IRS. Many of the outspoken Democratic representatives in the House seem perturbed by the White House, which is indicative that a deal may be imminent. The House has 72 hours to review the deal and a vote is anticipated on Wednesday.
Treasury Secretary Janet Yellen revealed that the real deadline for a decision isn’t June 1 but rather June 5, as that’s when the Treasury Department expects to run out of money. So, the negotiations between the White House and the House of Representatives could last a few more days.
If Congress would fail to lift the deficit ceiling this week, the U.S. would default on obligations – i.e., Treasuries or Social Security payments – and it would impact our credit rating. Even though there is a deal on the table, the probability of a partial Federal government shutdown is still possible if negotiations break down over the next few days.
I still do not expect the Treasury Department will default on Treasury interest payments or Social Security benefits, but pensions payments for Federal government retirees could be delayed a few days. Any partial government shutdown is not anticipated to last more than several days.
The bottom line is that most of our elected leaders are lawyers who love to “jam” each other during negotiations. That’s what’s happening right now – and that’s what’s causing the recent uptick in market volatility.
This Week’s Ratings Changes
Now, also over the Memorial Day weekend, my Portfolio Grader revised its ratings on 107 big blue chips. 42 were downgraded from a “Buy” (B-rating) to a “Hold” (C-rating), and 37 were downgraded from a “Hold” to a “Sell” (D-rating). The reality is there has been a lot of movement in the Portfolio Grader ratings because ratings tend to fluctuate more during the end of a quarterly earnings announcement season.
I’ve listed the first 10 stocks that were downgraded to a D-rating below, but you can find the full list – including their Fundamental and Quantitative Grades – here. Chances are that you have at least one of these stocks in your portfolio, so you may want to give this list a skim and act accordingly.
|Ticker||Company Name||Total Grade|
|ACI||Albertsons Companies, Inc. Class A||D|
|BF.B||Brown-Forman Corporation Class B||D|
|CBRE||CBRE Group, Inc. Class A||D|
|CINF||Cincinnati Financial Corporation||D|
|CME||CME Group Inc. Class A||D|
Buy These Stocks Next
To further strengthen your portfolio, consider my Growth Investor stocks. My Growth Investor stocks are now characterized by 180.7% average annual earnings growth, yet only trade at 15.7 times median forecasted 2023 earnings. So, it’s clear to me that we remain invested in fundamentally superior stocks that are benefiting from some of the strongest trends right now, including:
- The artificial intelligence boom,
- Peak summer crude oil demand and higher energy prices,
- The green revolution push,
- And the continuing demand for semiconductors.
I should also add that on Friday, I recommended four new stocks in my Growth Investor Monthly Issue for June. These stocks are well-positioned to benefit in the current market environment. I also shared my latest Top Stocks lists and revealed the catalysts that could serve as a “spark” to trigger a major market rally.
(If you are already a Growth Investor subscriber, you can log in here to view your subscription.)
P.S. There is a great divide opening up in America – and investing in my Growth Investor stocks will help get you on the right side of it. On one side is a new aristocracy that’s amassing more wealth more quickly than any other group in American history. For people like me, the one percent, life has never been better, more prosperous.
On the other side, the opposite is happening. Wealth is flowing out of the pockets of ordinary Americans at an unprecedented rate.
What’s happening is only going to gather in strength over the coming decades. It certainly won’t weaken.
Few Americans even know that any of this is going on. I’ve never seen anyone from my side of the chasm step forward to explain any of these things.
It’s why I put together this video. In it, I’ll lay out exactly what is happening, including several key steps every American should take right now.
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
NVIDIA Corporation (NVDA)