Heading 1: Americans Unite for the Super Bowl Amidst a Divided Nation
In these times of deep divisions, one thing Americans can agree on is the Super Bowl. It has become our secular version of Carnival or Fat Tuesday, an opportunity to indulge in food, drink, and conviviality during dreary, dark winter, but without a Lenten fast ahead of us. Pleasure without pain has become as much a part of the American ethos as life, liberty, and the pursuit of happiness.
Heading 2: Super Bowl’s Home in Las Vegas Reflects Integral Role of Gambling
And, almost as an afterthought, there will be a football game. This year’s matchup between the Kansas City Chiefs and the San Francisco 49ers takes place in Las Vegas, which is especially apt, given that gambling is an integral part of the game, as it is for so many competitive events. The wagers supposedly extend even to what some pop star whose boyfriend is playing in the game might do, not just what might be called on a fourth-down-and-short-yardage situation.
Heading 3: Legal Gambling Drives Stock Market Investments
Indeed, the expansion of legal gambling has been a boon to stock market investors, notably those who have ridden shares of DraftKings. The Almost Daily Grant’s note this past week, from the invaluable advisory headed by Barron’s alum Jim Grant, pointed out that DraftKings’ shares were up some 283% from late 2022. That raised the company’s valuation to near $20 billion despite it having posted negative adjusted Ebitda (earnings before interest, taxes, depreciation, and amortization, a measure of cash flow) in each quarter going back to the start of 2019. DraftKings management sold $145.2 million of stock in the past three months, more than all but five of the 152 U.S.-listed consumer cyclical firms tracked by Bloomberg—proving again that the winners in gambling aren’t the punters but the bookies.
Heading 4: S&P 500 Surpasses 5000 Amidst Optimism and Influence of Tech Stocks
The heads-I-win, tails-you-lose notion also underlies most investors’ mind-set as the S&P 500 index topped the 5000 mark for the first time this past week. The Federal Reserve is certain to lower interest rates in the coming year even as the oft-predicted recession keeps getting pushed further out. So: If the economy stumbles, the central bank comes to the rescue; if not, corporate earnings remain on the upswing, justifying stock valuations.
Heading 5: Megacap Tech Stocks Dominate the Market
It’s far from an original observation that the ascent of the S&P 500 and other broad-market measures owes much to a few technology stocks of mammoth size, whose outsize influence has lifted capitalization-weighted benchmarks to records. And to some extent, these megacap tech titans’ superior earnings have justified their ascent above the crowd of other stocks.
Heading 6: The Market’s Progression and the Ongoing Role of the Federal Reserve
Bull markets, John Templeton observed, “are born on pessimism, grow on skepticism, mature on optimism, and die of euphoria.” It would appear that this market has progressed through the second stage of skepticism after 2022’s declines and has progressed to optimism based on continued growth that will be backstopped by Fed rate cuts. As for euphoria, Société Générale strategist Albert Edwards observes that the U.S. tech sector is worth a third of the total U.S. equity market, topping the previous peak seen in July 2000 at the height of the dot-com bubble, something he thought he’d never see again.
Analyst comment
1. Positive news: Americans Unite for the Super Bowl Amidst a Divided Nation
Market impact: The Super Bowl brings a sense of unity and enjoyment to Americans, providing a temporary break from societal divisions. This may have a positive impact on sectors related to entertainment, food, and beverage.
2. Neutral news: Super Bowl’s Home in Las Vegas Reflects Integral Role of Gambling
Market impact: The location of the Super Bowl in Las Vegas highlights the connection between the game and gambling. It may boost tourism and increase revenue for the hospitality sector in Las Vegas, but the overall impact on the broader market is likely neutral.
3. Positive news: Legal Gambling Drives Stock Market Investments
Market impact: The expansion of legal gambling has benefited stock market investors, particularly in companies like DraftKings. This positive trend may continue to drive investments in the gambling industry and related sectors.
4. Positive news: S&P 500 Surpasses 5000 Amidst Optimism and Influence of Tech Stocks
Market impact: The S&P 500 reaching a record high reflects the optimism of investors and the strong performance of technology stocks. It may lead to increased confidence and potentially attract more investment in the market.
5. Positive news: Megacap Tech Stocks Dominate the Market
Market impact: The dominance of technology giants in the market, with their superior earnings, has contributed to the overall growth of capitalization-weighted benchmarks. This may enhance the performance of technology-focused funds and attract investors interested in this sector.
6. Neutral to negative news: The Market’s Progression and the Ongoing Role of the Federal Reserve
Market impact: The market’s progression from pessimism to optimism and the Federal Reserve’s commitment to rate cuts have fueled investor confidence. However, the observation of the U.S. tech sector’s worth being a third of the total equity market raises concerns about a potential bubble and market vulnerability in the future.