Watching the Olympics is exciting , and so can watching the current market volatility be. One of the biggest companies in the world, Nvidia, had the biggest one-day gain in history last week. It went up 12.8% or $330 billion in a single day. Just to put this into context, Naspers is worth $34 billion. But that is not all, the day before the rise, it went down 7% and the day after the gain, it went down 7% again. Nvidia is not the only company with wild daily swings, most of the bigger tech companies in the USA are also extremely volatile.
There can be many potential reasons for this volatility. One of the reasons might be the faltering of the AI drive, which caused most of the gains in big tech USA. Another reason might be the muted guidance these companies are giving for future earnings and another might be the opaque algorithm trading by machines happening in the shadows. Whatever it is, don’t watch these moves if you are a sensitive viewer. It is very normal for investors to get emotional when they see the impact of excessive volatility on their portfolios, but don’t act on short-term moves in the market.
We are getting very close to a lowering of interest rates in the USA and locally. We can see these expectations reflected in the bond prices coming down to below 4% in the 10-year US Government bond. Just to recap, if bond yields come down, you make a capital gain on your bond. The main driver of these lower yields is the lowering inflation figures. Unfortunately it also seems that the US economy is slowing, which will reverberate throughout the world, negatively impacting shares, especially resources shares.
As always we have geopolitical tensions making things interesting. A top leader of Hamas has been assassinated in Iran by Israel and a senior Hezbollah commander has been killed by an Israeli airstrike in Beirut. The US presidential race is back on with Kamala making a comeback for the Democrats and Donald’s ratings sliding in the polls. All of these things have an impact on our lives over the short term but they tend to fizzle out over the longer term, so just hang in there.
