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After Worst December comes Best January: What's next? Year of the Pig!

After stock markets had their Worst December since 1931 and Best January since 1988, one would wonder - what's next? As investors are always in dilemma, answering this question is important. Also while I don't believe in relation of market returns to Super Bowl winner or Chinese year, it's good to look at some of those predictors just for fun!
The Super Bowl week of earnings just got over and as expected most of the companies announced decent earnings and forecasts (Amazon was major exception). That produced sixth week of market gains. Given Nvidia's dis-appointing pre-announcement and Intel's not-so-inspiring earnings, AMD's earnings were outstanding and it got rewarded for that. Finally the hypothesis I laid out in my blog about "AMD new A in FANG" 5 months back is playing out. If AMD continues its market share gains in datacenter CPU/GPU segment and holds its ground in server/consumer/embedded section with 7nm technology advantage, 2H2019 could be very good for AMD. It should continue to reflect in AMD's share price reaching near $30-$32 during the year for 20-25% gain. Despite so much negative publicity, Facebook business seems to be on roll. All Facebook properties rocked in terms of  their reach and effectiveness of advertising. FB stock could go above $200 during year for a gain of close to 20%.
Now let's look at Year of the Pig. This is 12th year of 12-year cycle of Chinese Zodiac calendar. Happy New Year! Looking at some historical co-relation of year of the Pig and stock markets, S&P returns are above average during Year of the Pig. No wonder Pig is associated with wealth in Chinese culture. Year of the Dog (and 2018) was very bad for Chinese stocks due to various headwinds - mainly slower GDP growth, credit cycle and most importantly trade war with US. In the year of the Pig, these headwinds could become tailwinds starting with "Trade Truce" with President Trump. Watch out for three ETF related to Chinese market (FXI, MCHI, KWEB). Each of them are up by 9-15% and could go up by 20% during 2019 if tailwinds pan out.
In non-football terms, tomorrow's Super Bowl can be called:

  • Oldies vs Newbies
  • Experience vs Youth
  • Snow vs Beach
  • East Coast vs West Coast
  • Quarterback: Wolverine (UMich) vs Bear (Cal)
  • Generation X vs Millennial
It's Super Bowl between two generations. Will it be "End or continuation of Patriots and Tom Brady Legacy" which started in 2002 with matchup between same two teams!
As side note, Rams winning Super Bowl is better for stock markets (based on Super Bowl predictor)
Have a great Super Bowl Sunday!
/Shyam



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