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U.S. Stocks Brush Off Moody's, Echo Past Tech Booms
In poker, a "tell" is a player's subtle character or demeanor change that can unknowingly tip off an opponent and provide crucial information about how strong a hand they may have. The best and most powerful market tell on Wall Street is price action versus news. When the market gets hit with bad news, how fast it rebounds can be a tell for savvy investors.
Friday, after the market closed, the Nasdaq and other major US indices fell more than 1% after Moody's credit rating agency downgraded US debt based on the rising US budget deficit. Though stocks suffered a knee-jerk reaction Friday evening, cooler heads prevailed Monday, and stocks shook off the bad news. Such action is a hallmark of a bull market. Savvy investors should ask themselves, "If bad news can't bring down stocks, what is likely to occur when there is no news?"
Late 90s Internet Precedents Mimics Present
BeSpoke Investment Group (@bespokeinvest) posted a fascinating chart recently that compared the releases of Netscape versus ChatGPT. The precedent, which tracks the tech-heavy Nasdaq, is very similar and provides a strong precedent. After all, the release of the Netscape web browser jump-started the internet boom in the late 1990s, while the ChatGPT chatbot release brought large language models (LLMs) to the masses and started the AI revolution.
The overlayed chart shows the current Nasdaq tracking the late 1990s precedent very closely, rising 74.18% through 617 days, while the 90s example tracked 93.42% through the same time. Beyond the price action in the Nasdaq, the performance in individual AI names like Broadcom, Microsoft and CoreWeave shows that the party may just be getting started.
S&P 500 Index Explodes to the Upside, Likely Not Finished
If there's anything baseball's steroid era taught, it's that power and distance are correlated. Muscular hitters like Barry Bonds and Sammy Sosa smashed records and often hit baseballs out of the stadium. The same metaphor holds for stocks. The S&P 500 Index screamed higher by more than 19% in just 27 days following a warming of trade tensions between the US and China.
Considering that S&P 500 returns are historically ~10%, most amateur investors may assume that the market is done moving higher for the year. However, historical data from Ryan Detrick (@ryandetrick) of Carson Investment Research shows us that the exact opposite is true. In fact, since 1950, the S&P 500 Index has been higher one year later 100% of the time when it gains more than 19% in 27 trading days.
Bottom Line
On Wall Street, just like in poker, observing the subtle tells can be incredibly insightful. The market's resilient reaction to the Moody's downgrade, coupled with the historical precedent of the late 1990s, signals a bullish market ahead.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: Moody's, Broadcom, Microsoft and CoreWeave
For Immediate Release
Chicago, IL – May 20, 2025– Today, Zacks Investment Ideas feature highlights Moody's (MCO - Free Report) , Broadcom (AVGO - Free Report) , Microsoft (MSFT - Free Report) and CoreWeave (CRWV - Free Report) .
U.S. Stocks Brush Off Moody's, Echo Past Tech Booms
In poker, a "tell" is a player's subtle character or demeanor change that can unknowingly tip off an opponent and provide crucial information about how strong a hand they may have. The best and most powerful market tell on Wall Street is price action versus news. When the market gets hit with bad news, how fast it rebounds can be a tell for savvy investors.
Friday, after the market closed, the Nasdaq and other major US indices fell more than 1% after Moody's credit rating agency downgraded US debt based on the rising US budget deficit. Though stocks suffered a knee-jerk reaction Friday evening, cooler heads prevailed Monday, and stocks shook off the bad news. Such action is a hallmark of a bull market. Savvy investors should ask themselves, "If bad news can't bring down stocks, what is likely to occur when there is no news?"
Late 90s Internet Precedents Mimics Present
BeSpoke Investment Group (@bespokeinvest) posted a fascinating chart recently that compared the releases of Netscape versus ChatGPT. The precedent, which tracks the tech-heavy Nasdaq, is very similar and provides a strong precedent. After all, the release of the Netscape web browser jump-started the internet boom in the late 1990s, while the ChatGPT chatbot release brought large language models (LLMs) to the masses and started the AI revolution.
The overlayed chart shows the current Nasdaq tracking the late 1990s precedent very closely, rising 74.18% through 617 days, while the 90s example tracked 93.42% through the same time. Beyond the price action in the Nasdaq, the performance in individual AI names like Broadcom, Microsoft and CoreWeave shows that the party may just be getting started.
S&P 500 Index Explodes to the Upside, Likely Not Finished
If there's anything baseball's steroid era taught, it's that power and distance are correlated. Muscular hitters like Barry Bonds and Sammy Sosa smashed records and often hit baseballs out of the stadium. The same metaphor holds for stocks. The S&P 500 Index screamed higher by more than 19% in just 27 days following a warming of trade tensions between the US and China.
Considering that S&P 500 returns are historically ~10%, most amateur investors may assume that the market is done moving higher for the year. However, historical data from Ryan Detrick (@ryandetrick) of Carson Investment Research shows us that the exact opposite is true. In fact, since 1950, the S&P 500 Index has been higher one year later 100% of the time when it gains more than 19% in 27 trading days.
Bottom Line
On Wall Street, just like in poker, observing the subtle tells can be incredibly insightful. The market's resilient reaction to the Moody's downgrade, coupled with the historical precedent of the late 1990s, signals a bullish market ahead.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.