Disclaimer: this is intended for educational purposes only and is not investment advice. Please do your own due diligence.

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GM. You might have come across this paper a few months ago, which showed that ChatGPT is better than traditional sentiment analysis tools at picking stocks based on news headlines (backtested performance was +500% return over 16 months).

In order to provide similar value to readers, I’ve built a sentiment analysis tool for this newsletter. It scrapes news headlines for the “magnificent 7” stocks (Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta Platforms) and uses the same prompt as the aforementioned paper to decide if the headline is bullish (1), neutral (0) or bearish (-1). The average value across all headlines is calculated and then shown in the last section of this newsletter.

At the moment I am just showing the aggregated sentiment for all 7 stocks but I will add the breakdown shortly.

Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta Platforms make up over half of the Nasdaq 100 market cap and about a quarter of the S&P 500, so the sentiment around these names is a main driver of stock market movement.

— Reuben

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💸 In Today’s Newsletter

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📰 Market Movers

Stocks

• Asian shares aim for a strong month-end with China's blue chips index CSI 300 up 0.6% today increase bringing July's gains to 4.5%.

• The S&P 500 has increased by 19% this year due to an optimistic economic outlook known as the Goldilocks scenario, characterized by strong growth and decreasing inflation rates.

• Tech stocks, especially those in AI, have driven the Nasdaq 100 up by 44%, but investors are becoming cautious due to high valuations in the tech sector.

• S&P 500 futures dipped slightly but maintained a 2.9% increase for July. Earnings have been generally positive (30% of companies have announced), contributing to a 10% rally since June.

• SoFI is announcing earnings before the US open today and Pfizer, AMD, Uber, BP, EA & HSBC are among the companies announcing earnings tomorrow.

Bonds

• Japanese 10-year yields increased to 0.6%, putting upward pressure on Treasury yields, with the 10-year rising 3 basis points to 3.99%.

• The UK BoE meets this Thursday when they are expected to raise rates by 25bps to 5.25%.

FX

• The yen initially rallied following the BOJ decision to tighten monetary policy last week but reversed course as investors maintained carry trades.

• Dollar strengthened against the yen, reaching 141.87 yen, a significant increase from Friday's low of 138.05.

• Euro also recovered from an initial drop, steadying against the dollar at $1.1010.

Commodities

• Gold prices marginally decreased to $1,955 an ounce, though it is up 1.8% for the month.

• Brent crude was slightly down at $84.40 a barrel, while U.S. crude eased to $80.27. Goldman Sachs has revised up its global oil demand forecast for the year, maintaining its Brent price projection of $93 per barrel.

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🤿 Deep Dive

Instead of a chart, I thought I’d use this section to share an interesting article I read over the weekend, Citrini’s take on US Q2 GDP.

If you’re short on time, here’s a TL;DR:

• Q2 2023 saw an annualized GDP growth of 2.4%, outperforming expected growth of 1.8%. Inflation rates fell more than anticipated, hinting at an economic cooling.

• A disparity between business optimism and household caution is evident. Businesses are investing strategically despite a slowing in personal consumption, likely a result of supportive fiscal policies and tax incentives.

• The US has experienced a substantial increase in real manufacturing construction spending since the end of 2021, primarily driven by computer/electronics manufacturing, likely to continue due to policies such as the CHIPS Act, the IIJA and the IRA.

• Current economic trends suggest a balance between fiscal and monetary policy, allowing growth and inflation to maintain at moderate rates. This delicate equilibrium avoids severe economic downturn or uncontrolled inflation but its future remains uncertain due to various factors like the resumption of student debt repayments.

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🧠 Sentiment Analysis

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