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...But Yield Curve Inversion

Every recession has been preceded by a yield curve inversion, but not every yield curve inversion has led to a recession. That is a key point to remember. A lot of people seem to get this confused. Of course, we know correlation is not causation, and if we look at the data going back to 1940 we can see that there have been 10 examples of yield curve inversion. Of which, 7 resulted in a recession within 2 years.  The recessions that were preceded by yield curve inversions were: 1960-1961 1969-1970 1973-1975 1980 1981-1982 1990-1991 2000-2001 2007-2009 2020 The 3 yield curve inversions that did not result in a recession were: 1949 1955 1989 This is only a 70% probability which is far from a guarantee. Clearly yield curve inversion is not a perfect predictor of recessions. However, it has been a fairly reliable indicator in the past. So, while it is not possible to say for sure whether a recession will occur from the recent inversion of 2022, the yield curve is a sign that the economy...
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What does the Upcoming Rebalancing of the NASDAQ Mean

The July 24th rebalancing of the NASDAQ 100 means that the weightings of the five largest companies in the NASDAQ 100 index will be reduced from 46.7% to 38.5%. The 5 largest companies that comprise the NASDAQ 100 are MSFT, AMZN, TSLA, NVDA, and AAPL. This is being done to curb the dominance of these companies, which have seen their market capitalizations soar in recent years. The rebalancing will likely lead to some short-term volatility in the share prices of these companies, as investors adjust their portfolios. However, in the long term, it is likely to have a positive impact on the index, as it will make it more representative of the broader technology sector. To learn more about our top ideas for smaller cap NASDAQ 100 companies visit our related post here.
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NASDAQ Special Re-Balancing 2023

Nasdaq has announced the details of its special rebalancing of the Nasdaq-100 Index, which will take place before the market open on Monday, July 24. The rebalancing is being conducted to address over-concentration in the index by redistributing the weights of the largest stocks. The 5 largest stocks that account for 48.72% of the index are MSFT, APPL, NVDA, AMZN, and TSLA. The following are the changes that will be made to each of these holdings in the Nasdaq-100 Index: Microsoft: The weight of Microsoft will be reduced from 12.91% to 11.94%. Apple: The weight of Apple will be reduced from 12.47% to 11.5%. Nvidia: The weight of Nvidia will be reduced from 7.04% to 6.17%. Amazon: The weight of Amazon will be reduced from 6.89% to 6.02%. Tesla: The weight of Tesla will be reduced from 4.50% to 3.63%. These changes will result in the aggregate weight of the largest five stocks in the Nasdaq-100 Index being reduced from 48.72% to 44.27%. This will bring the index more in line wit...
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