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But tell that to the AI doomers…
The S&P 500 bounced back strongly after dipping into correction territory, but I expect more volatility ahead.
We’re approaching September, the worst month for stocks over the past decade. The S&P 500 has fallen in 7/10 of the last Septembers.
And remember, stocks are usually weak ahead of US presential elections.
My market “script” for the next few months: Stocks trade sideways to down heading into November, then rip higher once the election is done and dusted.
Keep some cash dry and use any potential weakness to scale into great businesses in long-term megatrends.
Quality disruptors will power ahead, no matter what markets do in the short term.
1. Most stocks suck.
Sorry for the crude language, but it’s the truth.
Economist Hendrik Bessembinder produces some of my favorite market research. His new paper titled “Which U.S. Stocks Generated the Highest Long-Term Returns?” is a must-read.
Hendrik analyzed almost 30,000 US stocks going back to 1926. He found just 4% of companies accounted for all the market’s gains.
Even more shocking is that over half of all companies left investors high and dry, producing negative returns. Most stocks suck.
This is why picking individual stocks isn’t for everyone. Many folks are better off owning a broad basket of US stocks or buying indexes. By simply owning the SPDR S&P 500 ETF Trust (SPY), you would have been up over 400% over the past 20 years.
That’s a good, stress-free option.
But investors who really want to accelerate their wealth creation must go on the hunt for the “elite” 4% of stocks that produce all the market gains.
There’s no surefire way to pick these megawinners. But our research shows most of them share one key trait: They’re profiting from fast-growing megatrends.
Nvidia (NVDA)… Apple (AAPL)… and Netflix (NFLX) were the three best-performing S&P 500 stocks over the past 20 years.
Nvidia’s chips are powering artificial intelligence (AI)…
Apple’s iPhone put a supercomputer in our pockets…
Netflix pioneered video streaming…
I first recommended Nvidia six years ago, and readers of my flagship newsletter Disruption Investor made a lot of money on its stock. We took profits (again) earlier this year and are now hunting for the next elite stocks.
Upgrade to Disruption Investor here.
2. Will ChatGPT steal your job?
One recent headline from popular UK newspaper The Guardian reads, “AI apocalypse could take away almost 8m jobs in UK.”
Sounds scary! I’m seeing a lot of folks talk about how AI is going to steal our jobs and turn us into domesticated animals.
Did you know people have been predicting machines will soon take over for 100 years?
Here are three stories from The New York Times in the 1920s warning robots would soon put the masses out of work:
Source: Pessimist’s Archive
I could show you a dozen more predictions just like these from every decade. And yet today, almost every American who wants a job has one.
The doomsayers don’t understand jobs are made up of multiple tasks. Automating some tasks doesn’t mean you’ll be out of a job.
Power tools didn't kill carpentry; they just made carpenters more efficient. Spreadsheets didn't put accountants out to pasture; they just helped them crunch numbers faster.
My “mental model” for thinking about AI and jobs is ATMs and bank tellers.
When ATMs were introduced in the 1970s, bank tellers worried they’d be out of a job. But ATMs made it cheaper to operate a branch… leading to more branches… and ultimately more tellers, as this chart shows:
Source: James Bessen
ATMs did take the job of dispensing cash… which only freed up tellers to spend more time attracting new customers to open that shiny new savings account.
The same will likely happen with doctors, teachers, lawyers, and all the other jobs AI is supposedly coming for. AI oddly makes us more human.
Long AI; short doom and gloom.
3. Today’s dose of optimism…
The Egyptians built the pyramids. Las Vegas built the Sphere.
The first wonder of the digital age—Las Vegas’s Sphere—represents everything that’s “right” with America. A big, bold, ambitious project.
This giant orb, plonked in the middle of the Nevada desert, symbolizes why our future will be better than you can possibly imagine.
And it’s not just a vanity project—it’s a money-making machine.
Owner Sphere Entertainment Co. (SPHR) reported record earnings earlier this month. It raked in over $1 billion in revenue over the past year.
Its stock jumped on the news and is threatening to break out to new all-time highs:
SPHR is a way to bet on Vegas without blowing your money on the slot machines. Put this in the “fun money trade” bucket.
PS: To learn about more ways AI will improve our lives—and the best ways to profit from this historic megatrend—sign up for my free M/W/F investing letter The Jolt today.