Picture supply: Getty Pictures
It’s protected to say world markets haven’t had the very best begin to the yr. The S&P 500 slipped 210 factors within the weeks following Christmas, reaching a two-month low on 10 January. The FTSE 100, DAX and Nikkei suffered related dips.
However information of rising US employment charges helped pause the S&P 500’s decline. Then, yesterday (15 January), client inflation knowledge revealed a slowdown in value will increase. After dashed hopes of rate of interest cuts and the specter of commerce tariffs, the market wanted some excellent news.
Following the index’s 1.7% leap, the Dow Jones Industrial Common rose 1.6% and the Nasdaq Composite soared 2.3%.
The US Shopper Worth Index (CPI) now reveals extra promise of reaching the Fed’s 2% inflation goal for December. The month-on-month slowdown in progress from 0.3% to 0.2% is the primary signal of deceleration since July 2024. Odds of an rate of interest lower in June are actually thought-about extra seemingly than not.
However don’t get too excited.
US fairness forecasts for 2025 are nonetheless underwhelming in comparison with final yr. So what does this all imply for traders?
Choosing the proper tech
An overarching theme I’m seeing extra often is uncertainty relating to the main tech shares. The so-called Magnificent 7 seem to have fallen out of favour. This can be partly because of Warren Buffet’s Berkshire Hathaway promoting two-thirds of its Apple inventory.
Some really feel the transfer was a mistake and Apple stays the highest-weighted inventory on the Nasdaq 100. Nevertheless it’s onerous to disregard one of many world’s most profitable traders. I’m no die-hard fan however I can’t assist however surprise: does he know one thing we don’t?
So to err on the aspect of warning, I’m steering clear of massive tech for now. Nevertheless, one main US tech inventory I maintain may buck the pattern, and I believe traders could wish to think about it.
On the sidelines
Axon Enterprise (NASDAQ: AXON) is a US tech firm that manufactures security gadgets resembling TASERs, body-worn cameras, and digital proof administration software program.
Its merchandise are utilized by police and navy throughout the US and have seen a surge in demand lately. Modern developments like its Draft One AI-enhanced reporting software program have helped increase gross sales.
In its third-quarter outcomes for 2024, it reported earnings of $1.45 per share and income of $544.3m, a year-on-year improve of 42% and 32%, respectively.
The fast progress meant it joined the Nasdaq 100 in December final yr, shifting to place 73 with a weighting of 0.28%.
Naturally, the hovering value has raised some considerations. With a price-to-earnings (P/E) ratio now nicely above 100, additional value progress appears onerous to think about. A light correction has already seen the worth fall 10% up to now month. If the subsequent earnings report falls beneath expectations, the worth may take a giant hit. It additionally faces the chance of budgetary cuts or regulatory modifications.
Nonetheless, I believe its long-term prospects are robust, pushed by its dominance in a distinct segment market. As competing semiconductor shares attempt topple one another, Axon could sidestep the motion and scoop up the spoils.
