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It’s protected to say international markets haven’t had the very best begin to the yr. The S&P 500 slipped 210 factors within the weeks following Christmas, reaching a two-month low on 10 January. The FTSE 100, DAX and Nikkei suffered related dips.
However information of rising US employment charges helped pause the S&P 500’s decline. Then, yesterday (15 January), client inflation information revealed a slowdown in worth will increase. After dashed hopes of rate of interest cuts and the specter of commerce tariffs, the market wanted some excellent news.
Following the index’s 1.7% leap, the Dow Jones Industrial Common rose 1.6% and the Nasdaq Composite soared 2.3%.
The US Client Value Index (CPI) now exhibits extra promise of reaching the Fed’s 2% inflation goal for December. The month-on-month slowdown in development from 0.3% to 0.2% is the primary signal of deceleration since July 2024. Odds of an rate of interest minimize in June are actually thought-about extra probably than not.
However don’t get too excited.
US fairness forecasts for 2025 are nonetheless underwhelming in comparison with final yr. So what does this all imply for traders?
Selecting the best tech
An overarching theme I’m seeing extra incessantly is uncertainty concerning the main tech shares. The so-called Magnificent 7 seem to have fallen out of favour. This can be partly on account of Warren Buffet’s Berkshire Hathaway promoting two-thirds of its Apple inventory.
Some really feel the transfer was a mistake and Apple stays the highest-weighted inventory on the Nasdaq 100. However it’s laborious to disregard one of many world’s most profitable traders. I’m no die-hard fan however I can’t assist however surprise: does he know one thing we don’t?
So to err on the facet of warning, I’m steering clear of massive tech for now. Nevertheless, one main US tech inventory I maintain might buck the pattern, and I feel traders might need to contemplate it.
On the sidelines
Axon Enterprise (NASDAQ: AXON) is a US tech firm that manufactures security gadgets similar to TASERs, body-worn cameras, and digital proof administration software program.
Its merchandise are utilized by police and army throughout the US and have seen a surge in demand not too long ago. Revolutionary developments like its Draft One AI-enhanced reporting software program have helped enhance gross sales.
In its third-quarter outcomes for 2024, it reported earnings of $1.45 per share and income of $544.3m, a year-on-year improve of 42% and 32%, respectively.
The fast development meant it joined the Nasdaq 100 in December final yr, transferring to place 73 with a weighting of 0.28%.
Naturally, the hovering worth has raised some issues. With a price-to-earnings (P/E) ratio now nicely above 100, additional worth development appears laborious to think about. A light correction has already seen the worth fall 10% previously month. If the following earnings report falls under expectations, the worth might take an enormous hit. It additionally faces the chance of budgetary cuts or regulatory modifications.
Nonetheless, I feel its long-term prospects are robust, pushed by its dominance in a distinct segment market. As competing semiconductor shares attempt topple one another, Axon might sidestep the motion and scoop up the spoils.
