BUZZ Investing: U.S. Stocks Fluctuate Amid Fed Policy Predictions

Domestic equities were little changed during the recent period between Index selection dates (October 12, 2023 to November 9, 2023, the “Period”). The recent Period was marked by two distinct market phases. Initially, market caution prevailed, driven by the Federal Reserve’s firm stance on maintaining high-interest rates and concerns over U.S. fiscal health. This sentiment pushed the benchmark 10-year Treasury yield to its highest since 2007, at 5%. The S&P 500 index experienced a downturn, extending its decline to over 10% below its late-July peak. The technology-focused Nasdaq Composite Index also fell, influenced by disappointing earnings from major technology companies like Tesla Inc (NASD: TSLA), Alphabet Inc (NASD: GOOGL), and NVIDIA Corp (NASD: NVDA), leading to a reassessment of their valuations and growth prospects. Additionally, rising geopolitical tensions from the Israel-Hamas war further weighed on investor sentiment as the conflict threatens to draw in others from the region and beyond.

The latter part of the recent Period witnessed a significant shift in these trends. After the November 1st meeting of the U.S. Federal Reserve (Fed) Open Market Committee, Federal Reserve Chair Jerome Powell’s remarks hinted at an end to the intense tightening cycle, as the Committee refrained from raising interest rates for a second consecutive meeting. This development was positively received by investors, resulting in a drop in Treasury yields and a decrease in other financial market risk indicators. Relative to levels observed prior to the FOMC meeting, the Markit CDX North America High Yield Index, a measure of credit risk, fell by about 75 basis points, and the Chicago Board Options Exchange Volatility Index, known as the “fear gauge,” decreased by over 4 points.

VIX Index & CDX HY Index

(Recent Period between BUZZ Index selection dates)

Source: Bloombreg / Periscope Capital.

The BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index” or “Index”) returned -6.22% during the month of October compared to a return of -2.10% for the S&P 500 Index during the same period. Year-to-date, the BUZZ Index leads the S&P 500 with returns of 19.16% and 10.69%, respectively, as of the end of October.

Shares of Coinbase Global Pace Advancing Stocks within the BUZZ Index

Shares of Coinbase Global Inc (NASD: COIN) paced advancing stocks within the BUZZ Index during the recent Period. COIN’s surging stock reflects increased optimism in the cryptocurrency market. This optimism stems from a federal appeals court instructing the SEC to reevaluate Grayscale Investments’ Bitcoin ETF proposal. The potential approval of Bitcoin ETFs is seen as a positive development for the crypto market, promising to enhance trading volumes and increase broader interest in Bitcoin and other cryptocurrencies. As a major cryptocurrency exchange, many may be of the view that Coinbase stands to gain from this heightened activity.

Shares of Netflix Inc (NASD: NFLX) also positively contributed to BUZZ Index performance during the recent Period. The digital streaming giant released its third-quarter earnings on October 19 which exceeded most analyst expectations. Key takeaways from the Q3 report were the addition of almost 9 million new subscribers and a revised upward full-year cash flow projection. Further enhancing investor sentiment were management’s initiatives on a new advertising tier, stricter controls on password sharing, and upcoming price hikes. These factors collectively propelled Netflix’s stock to an impressive gain of over 20% during the Period.

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

Shares of EV manufacturers were featured in the top detractors to BUZZ Index performance for the third consecutive Period. EV upstarts including Rivian Automotive Inc. (NASD: RIVN) and Lucid Group Inc. (NASD: LCID) had been previously featured within the segment, shares of industry leader Tesla Inc. (NASD: TSLA) led the segment lower during the recent Period. TSLA missed third-quarter profit and sales forecasts due to challenges from rising interest rates and shifting consumer spending. TSLA’s margins have dropped significantly amidst an aggressive price cut strategy attempted to spur demand. CEO Elon Musk expressed concern about economic uncertainties, and TSLA shares stock fell nearly 10% following its Q3 earnings report.

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

Sentiment Stock Highlight – RTX Corp.

One of the most notable additions to the BUZZ Index this month is aerospace defense company RTX Corp (NYSE: RTX), formerly known as Raytheon. In addition to manufacturing engines and aircraft components for commercial customers, RTX is well known for its defense division, which produces fighter jets and air weapons systems for militaries. Since July, RTX has been mired in a downtrend, declining as much as 30% until Oct 7, when Hamas launched a widely condemned surprise attack in Israel. It marks the first major geopolitical conflict since Russia’s invasion of Ukraine in 2022 and has kicked off what looks to be a prolonged period of fighting in the region. The US increased its presence in the region, directing multiple aircraft carriers to Israel’s coast as tensions with several neighboring nations escalated. The turmoil has boosted shares of defense stocks such as RTX and Lockheed Martin (NYSE: LMT), and positive investor sentiment increased commensurately. RTX joins the BUZZ Index this month with a 1.29% weight.

RTX Corp Stock Price | January 2022 – November 2023

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

BUZZ Index November 2023 Rebalance Highlights

Bill Holdings Inc.

It has been a wild month for shares of Bill Holdings Inc. (NYSE: BILL). The payroll management service company, which completed its IPO just months before the onset of the COVID-19 pandemic, recently reported Q1 earnings, announcing disappointing results and lowering revenue guidance. The macro picture has been challenging for many companies outside of the top mega-cap stocks, as the effects of rising interest rates and increasing costs have eaten into many companies’ margins, while reducing demand for BILL’s services. Shares of BILL fell 30% after the earnings release. The story was not finished there however, as speculative reports spread the following week that BILL was close to acquiring Melio Payments for $1.95B. Shares of BILL opened lower by another 15% on the speculation; however, the company subsequently released a statement denying the takeover news, stating that it was not pursuing any acquisitions at the time. BILL instantly jumped 10% following its announcement, prompting a trading halt in its stock. Investors appear undeterred by the volatility, as sentiment has recently been rising. This month, BILL enters the BUZZ Index for the first time ever, with a 0.7% weight.

For more on rebalancing results and a full breakdown of index constituents added and removed for the month, view the BUZZ Index reconstitution report.

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