Daily Brief - A Surge or a Bubble?

TLDR: The S&P 500's record-breaking performance, with 16 record highs contributing to a significant portion of the year's trading days, is igniting discussions reminiscent of previous boom-and-bust cycles.

Despite the parallels drawn to the dot-com bubble, especially in the fervent accumulation of shares from major tech firms, recent divergences among these companies suggest a reduction in speculative excess.

Apple, Tesla, and Alphabet have seen varied fortunes, indicating a shift in investor sentiment and priorities. This evolving dynamic is further evidenced by the broadening of market gains beyond technology, as seen in the record performance of the S&P 500 Equal Weight Index and the increased share of stocks hitting all-time highs.

Moreover, the cooling IPO market of 2024 contrasts sharply with the euphoria of 1999, suggesting a more tempered investor enthusiasm. Only one IPO - CG Oncology - has matched the 50% first-day price jumps that were common in the late 90s.

While still on the higher side, current valuations of the Magnificent Seven and the largest S&P 500 stocks are notably lower than the inflated multiples of the early 2000s tech giants. This moderation is observed across tech sectors, including AI and robotics, where price-to-sales multiples remain within or below their five-year averages.

In sum, while the rapid ascent of US stocks in 2024 has stirred memories of past financial exuberances, a closer examination reveals a market characterized by selective investment, broadening participation, and relatively grounded valuations.

Market Movers: When the S&P Equal Weight Index is overbought:

Here are the historically best and worst performing sectors when the S&P Equal Weight Index's RSI is above 70:

The top 3 performing sectors:

1. Information Technology, with an average 6-month return of 7.74%.
2. Energy, with an average 6-month return of 5.92%.
3. Health Care, with an average 6-month return of 5.90%.

The bottom 3 performing sectors:

1. Communication Services, with an average 6-month return of 3.06%.
2. Utilities, with an average 6-month return of 3.03%.
3. Materials, with an average 6-month return of 1.81%.

Asset Spotlight: Palantir at a high

In the last 6 occasions where Palantir's stock was at a high, Toggle's analysis showed a median downward movement in the stock over the subsequent 3 months.

The recent surge in Palantir's stock price is primarily due to its AI advancements exceeding expectations, a successful bootcamp strategy that boosted revenue and customer count in its Commercial division, and strong financial results highlighting its shift to a free cash flow powerhouse.

Earnings Update: Casey's General Stores reports tonight

Expectations for Casey's General Stores' earnings tonight are framed by its 2023 performance, where revenue was $15.09 billion, marking a 16.54% increase from the previous year. The company's earnings also grew by 31.46% to $446.69 million.

Analysts rate the stock as a "Buy" with a 12-month forecast of $301.89, a slight decrease from the current price.

Discover how other companies could react post earnings with the help of TOGGLE's WhatIF Earnings tool.