🤔 How Do Successful Investors Think?

What’s on the Menu 🍴

We’ve got another PACKED week ahead…

So in today’s newsletter we’re showing you what to watch out for, and how to go from rookie to expert investor.

Let’s get it:

• What to Watch This Week 👀

• How Do Successful Investors Think? 🤔

• Q1 Earnings: A Mid-Season Update ⏳

Today’s newsletter is a 3 minute read.

What to Watch This Week 👀

Strong earnings from Google and Microsoft helped tech stocks and the Nasdaq index bounce back sharply last week.

Bulls & bears will duke it out again this week with several market moving catalysts on the horizon including a Federal Reserve meeting, unemployment releases, and more earnings reports.

Tech titans Amazon and Apple will be reporting their Q1 results, along with several other big companies such as Paypal, Coinbase, AMD, and Qualcomm:

Paramount Global is likely to be especially interesting as Q1 earning collides with boardroom drama this week.

Commodities took a breather last week but are still in an uptrend so far this year.

We’ll be watching how they respond to all of the macroeconomic data releases this week:

• China manufacturing (Mon)

• Germany inflation (Mon)

• Euro area GDP (Tues)

• Euro area inflation (Tues)

• US Federal Reserve rate decision (Wed)

• US ISM Manufacturing (Wed)

• US JOLTS job openings (Wed)

• Japan consumer confidence (Thurs)

• US unemployment report (Fri)

• US ISM Services (Fri)

One major trend on the minds of global investors lately has been the rapid depreciation in the Japanese Yen:

US government bond yields remain near their highs, which is helping USD against the Yen in particular.

However, keep an eye out for central bank interventions in the currency markets if these trends continue.

Chinese tech stocks have been on the rise lately, but the passing of the TikTok “forced divestiture” bill in the US could escalate US-China tensions further.

We’ll keep an eye on that as well as the following assets & sectors:

📈 Rising Recently:

• Semis (SOXX)

• Software & Internet (IGV)

• Chinese tech (KWEB)

• Energy (XLE / XOP)

• Cleantech & Solar (TAN / PBW)

• Homebuilders (XHB)

📉 Falling Recently:

• Japanese Yen (JPYUSD)

• Silver (SLV)

• Bonds (TLT / IEF)

• Biotech (XBI)

How Do Successful Investors Think? 🤔

Every investor starts somewhere, and the journey from newbie to savant is not just about luck but a deliberate evolution of tactics and temperament.

Here’s how savvy investors evolve their game:

Newbie Moves: They often start with high enthusiasm but little strategy.

• They typically overtrade, chasing the high from quick wins or trying to recoup losses.

• They hop onto hot tips from friends or online, entering positions without proper research.

• Their portfolios typically look like a scattered arsenal of small, hopeful bets.

• Their emotions swing with their portfolio's performance, feeling sky-high when trades go well and despondent when they don't.

Essentially, they're gambling, not investing.

Seasoned Strategy: They're playing chess, not darts.

• They invest more substantial amounts in fewer positions, choosing quality over quantity…

• And often hold these positions longer, looking for long-term growth rather than quick flips.

• A profound change is their emotional detachment from the daily ups and downs. They understand that the market will test their patience and their resolve.

• Once they build a large portfolio, they shift focus from aggressive growth to capital preservation, recognizing the importance of safeguarding their portfolio against downturns rather than stretching for every possible gain.

Investment Wisdom Fire Round:

• Less is more. Fewer positions, greater focus.

• Patience pays. Hold investments longer to realize gains.

• Go big on confidence. Larger stakes in fewer positions.

• Wins and losses? Just part of the game. Keep emotions in check.

Going from rookie to expert is about sharpening your focus and stabilizing your strategy. It's a shift from playing the slots to becoming the casino.

Q1 Earnings: A Mid-Season Update ⏳

Roughly half of the S&P 500 has reported Q1 earnings so far this month.

While there are still big reports to come (Apple, Amazon, etc), let’s take a closer look at how things are going so far.

Large cap companies have continued to post solid earnings growth in aggregate, with 8 out of 11 major sectors growing on a year-over-year basis:

Average earnings growth for the companies in the S&P 500 index has been about 3.5%, though the market still expects growth to accelerate to ~10% later this year.

Stock reactions have been somewhat muted however.

Among all companies that have reported thus far this earnings season, the median return since earnings season started is roughly -2.8%.

Some of that has to do with the overall market correction, but it’s not the most encouraging sign.

The good news is that valuation of the major indices has improved a bit with lower prices.

Here are some notable winners & losers from earnings season thus far:

As far as forward guidance goes, the number of companies issuing positive guidance is slightly outpacing those that gave negative guidance so far.

In addition, the market currently expects 10 out of 11 sectors to grow earnings in Q2.

The most recent week of earnings reports also saw an improvement in stock reactions.

So the bottom line is this: although the market has corrected this month, we haven’t seen any concerning downward trend shift in actual corporate earnings.

We’ll continue to stay on top of the big reports over the next couple weeks and keep you updated here at the Daily Dough!

Food For Thought 🧠

“The goal of a successful trader is to make the best trades. Money is secondary.”
- Alexander Elder

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.