Now That 'Everybody Knows'

The 'Great Rotation'... 'Everybody knows'... A potential trade setup we haven't seen since early 2022... Interest-rate-sensitive sectors and the AI megatrend took a breather today... Is it time to panic about AI?... Some are calling it the 'Great Rotation'... I (Corey McLaughlin) wrote about the idea of "rotation" yesterday. As we explained, small-cap stocks and […] [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] The 'Great Rotation'... 'Everybody knows'... A potential trade setup we haven't seen since early 2022... Interest-rate-sensitive sectors and the AI megatrend took a breather today... Is it time to panic about AI?... --------------------------------------------------------------- Some are calling it the 'Great Rotation'... I (Corey McLaughlin) wrote about the idea of "rotation" [yesterday](. As we explained, small-cap stocks and industrials have been soaring over the past week or so – though that trend paused today – and mega-cap stocks have been selling off. Even though it was down today, the small-cap Russell 2000 Index is up more than 10% since July 9. Meanwhile, the Dow Jones Industrial Average hit another new all-time high today. But since July 10, the tech-heavy Nasdaq Composite Index is down more than 3% and the benchmark S&P 500 Index is down a little more than 1%, including losses today. Even by rough math, it looks like a textbook "rotation." As MarketWatch shared this morning... Andy Constan, who runs the macroeconomic and commodity research firm Damped Spring, points out over the last five trading sessions, the Magnificent Seven market cap dropped by $349 billion, while the Russell 2000 rose by $324 billion. That's representative of capital moving around the market, not out of it. And as the so-called "Godfather of Technical Analysis," Wall Street veteran Ralph Acampora, has famously said, this kind of action – money flowing around the market among different sectors and styles but not out of it in a panic – is the "lifeblood of a bull market." But now that 'everybody knows'... I'm reminded of the phrase that our colleague Dan Ferris often talks about (like in [this April essay](. When "everybody knows" one thing, it's time to think differently because that story is already priced into the market... And it looks like everyone knows about this rotation now. The same headline writers and mainstream analysts who were quick to pick up on the phrase "Magnificent Seven" to describe the big-tech market leaders last year are now using the term "Great Rotation" to describe the trading action lately... The catalyst for this rotation has been the rising odds of a Federal Reserve rate cut coming in September. Just a few weeks ago, many investors didn't consider a rate cut a certainty. But [as we reported]( Fed Chair Jerome Powell started laying breadcrumbs on July 2. And last week's consumer price index report for June included a "[whiff of deflation](... which ratcheted up expectations for a rate cut as soon as September. More comments from Powell this week have only reinforced the idea of a rate cut. The idea is just about fully baked into the market now, with federal-funds futures traders putting almost 94% odds on it, compared with 70% a week ago and 57% a month ago. So traders and investors are taking gains in tech and putting money to work in beaten-down, capital-intensive, and rate-sensitive small-cap businesses, which could get a boost from an easier monetary environment. That makes me wonder... Is the suddenly popular "Great Rotation" closer to its end than the beginning now that "everybody knows" about it? Perhaps... because small caps have been trending higher, with volatility, since late last year. A potential trade setup we haven't seen since early 2022... As our Ten Stock Trader editor Greg Diamond wrote to his subscribers yesterday in a post titled "[Remarkable Price Action](... Last week, I mentioned we're seeing sectors that were shorted or not owned (small caps and industrials) outperform the AI and tech stocks that are overbought, and a rotation was in place. This week, a rotation has happened that I haven't seen in a long, long time. Imagine waking up as a portfolio manager and seeing the Dow Jones Industrial Average up 1% and then seeing the AI/semiconductor sector down. You're following the trend, but losing money on the AI trade. This is what's happening right now. Greg says oversold small-cap stocks and industrials could be in a "catch up phase" right now. But he is also looking ahead to what's coming next... If stocks continue to rally, Greg says, "it means a trading setup is coming along that I haven't seen since early 2022." You'll likely recall that this last setup was the start of a nearly yearlong bear market. We're not in that type of danger zone yet, but Greg will be tracking his indicators to size up risk and reward in the market and specific sectors, as usual. Today, [he told subscribers]( to take around an 8.5% profit off the table in a trade on industrials. Interest-rate-sensitive sectors and the AI megatrend took a breather today... Biotech stocks and other interest-rate-sensitive sectors that have been on the move, like homebuilders, were down today. For example, the iShares U.S. Home Construction Fund (ITB), which rose 11% last week, was down about 2% today. The AI megatrend is also taking a breather... thanks to politics, in part. Former President Donald Trump, now the front-runner to win November's presidential election, laid his cards on the table about an important piece of the AI story... a geopolitical hot spot in the South China Sea. Trump said in an interview with Bloomberg Businessweek published yesterday that Taiwan – home to key microchip maker Taiwan Semiconductor Manufacturing (TSM), which makes chips designed by Nvidia (NVDA) – "should pay us for defense." That idea raises questions about Taiwan's future security. The mainland Chinese government, across the Taiwan Strait, considers Taiwan its territory, but the democratic island nation has disputed that claim since the Chinese Civil War decades ago. Concerns about a potential Chinese invasion of Taiwan, and U.S. involvement in a conflict, have grown over the last few years, as China has built up its naval capabilities. And now the market is thinking about potential Trump policies again. You should read our colleague Dave Lashmet's work on this story to learn more. As he explained last year in a Digest titled "[The Next Black-Swan Event](... Taiwan is a global player in one of the most important industries in the world: high-end silicon microchips. Today, chips run everything... your refrigerator, car, phone, and the Internet. So for you – and for your portfolio – a war between the U.S. and China involving Taiwan could be a disaster. Dave also wrote in that edition about individual chip companies and how they would likely fare should conflict break out in the South China Sea. He sized up the risk of more than a dozen chip businesses and shared a "black flag" list, topped by this company... The worst-hit firm will likely be TSM... It's based in Taiwan. Whether China's war with Taiwan starts with a naval blockade or a missile salvo, this chipmaker (best known as TSMC) is at ground zero. Even in a bloodless war, the Taiwanese stock exchange would simply end. TSMC shares could go to zero. Warren Buffett concluded that Taiwan Semiconductor [faces multiple unsurvivable threats]( so he sold every share of his TSMC investment. Today, shares of TSM dropped more than 7% given a fresh round of uncertainty. Nvidia shares fell more than 6%. If anyone needed an excuse to "rotate" out of these popular chip stocks, they found it today. Is it time to panic about AI?... Good question. Our friends over at our corporate affiliate Altimetry have a few urgent thoughts on the matter that they're about to share with the public. At 1 p.m. Eastern time tomorrow, Altimetry founder Joel Litman is going live with what he's calling the "AI Panic Summit." Joel is going to share everything he thinks you need to know about the AI sector right now and what you should pay careful attention to moving ahead. [You can register for the event for free here](. On this week's Stansberry Investor Hour, Dan and I were joined by David Tice, partner at Moran Tice Capital Management and a noted short seller. David spoke with us about his award-winning documentary, Grid Down, Power Up, which centers on what would happen if the U.S. power grid went down... explains why it could happen... and offers tips for surviving this overlooked societal risk... David also shares his market outlook right now, including the sector he's bullish on, the area of the economy he thinks is set up for a huge decline, and how he and his team who run the AdvisorShares Ranger Equity Bear Fund (HDGE) go about identifying "bad" businesses to bet against. [Click here to watch the interview now](... and to hear the full audio version of this week's Stansberry Investor Hour, visit [InvestorHour.com]( or find the show wherever you listen to your podcasts. --------------------------------------------------------------- Recommended Links: [TOMORROW: Major AI Announcement]( With uncertainty on our readers' minds, we're now giving our full attention to an extremely time-sensitive update from renowned analyst Joel Litman. He called everything from Facebook's 1,300% rise... to 2008's devastating crash. Tomorrow, he'll reveal what you can expect NEXT from AI... and exactly what you should be doing with your money to prepare. [Click here for this important AI announcement](. --------------------------------------------------------------- [Urgent Alert: 'This Could Be Worth 20 Times More Than Nvidia']( Whitney Tilson has nailed many of the most famous stocks of the last 25 years – including Netflix, Amazon, and Apple. Now he's pounding the table on a new technology rolling out across America, which early estimates say could create more wealth than AI, the personal computer, and the smartphone combined. [Click here to see how it could become the No. 1 investment of the next decade](. --------------------------------------------------------------- New 52-week highs (as of 7/16/24): Apple (AAPL), ABB (ABBNY), Agnico Eagle Mines (AEM), Alamos Gold (AGI), A.O. 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In today's mailbag, feedback for Ten Stock Trader editor Greg Diamond... Don't forget, you can get a taste of Greg's work in his weekly, free Diamond's Edge videos here in the Digest each Monday, in [the "media" section of StansberryResearch.com]( or on [our YouTube page](... As always, send your comments and questions to feedback@stansberryresearch.com. "Dear Greg: I am continually fascinated by your analyses. Not only am I constantly learning from you but I am amazed at the courage you have to publish your analyses to us, your subscribers. Your latest analysis, 'Time and Price Likely Marked "A" Top on Friday' is a prime example. "I consider that my subscription to Stansberry Research would be all worth it if it was only to receive your work and insights. However, with Stansberry I get so much more for my subscription. Thank you very much and, please, keep it up." – Subscriber Franz P. All the best, Corey McLaughlin Baltimore, Maryland July 17, 2024 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open stock positions across all Stansberry Research portfolios. Returns represent the total return from the initial recommendation. Investment Buy Date Return Publication Analyst MSFT Microsoft 02/10/12 1,432.8% Stansberry's Investment Advisory Porter MSFT Microsoft 11/11/10 1,428.2% Retirement Millionaire Doc ADP Automatic Data Processing 10/09/08 896.8% Extreme Value Ferris WRB W.R. Berkley 03/16/12 750.8% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 678.2% Retirement Millionaire Doc HSY Hershey 12/07/07 469.6% Stansberry's Investment Advisory Porter TT Trane Technologies 04/12/18 453.2% Retirement Millionaire Doc AFG American Financial 10/12/12 451.3% Stansberry's Investment Advisory Porter NVO Novo Nordisk 12/05/19 408.2% Stansberry's Investment Advisory Gula TTD The Trade Desk 10/17/19 382.7% Stansberry Innovations Report Engel Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 5 Stansberry's Investment Advisory Porter/Gula 3 Retirement Millionaire Doc 1 Extreme Value Ferris 1 Stansberry Innovations Report Engel --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Investment Buy Date Return Publication Analyst wstETH Wrapped Staked Ethereum 12/07/18 2,291.8% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 1,633.8% Crypto Capital Wade ONE/USD Harmony 12/16/19 1,160.9% Crypto Capital Wade MATIC/USD Polygon 02/25/21 765.6% Crypto Capital Wade AGI/USD Delysium AI 01/16/24 331.8% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Microsoft^ MSFT 12.74 years 1,185% Retirement Millionaire Doc Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams PNC Warrants PNC-WS 6.16 years 706% True Wealth Systems Sjuggerud Maxar Technologies^ MAXR 1.90 years 691% Venture Tech. Lashmet Silvergate Capital SI 1.95 years 681% Amer. Moonshots Root ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. --------------------------------------------------------------- Stansberry Research Crypto Hall of Fame Top 5 highest-returning closed positions in the Crypto Capital model portfolio Investment Symbol Duration Gain Publication Analyst Band Protocol BAND/USD 0.31 years 1,169% Crypto Capital Wade Terra LUNA/USD 0.41 years 1,166% Crypto Capital Wade Polymesh POLYX/USD 3.84 years 1,157% Crypto Capital Wade Frontier FRONT/USD 0.09 years 979% Crypto Capital Wade Binance Coin BNB/USD 1.78 years 963% Crypto Capital Wade You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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