Before the bell: Why it’s good that investors fear a correction

OpenAI keeps lifting chip and cloud stocks. Diversification also works with less popular shares.

Europe has introduced a 50% import tariff on steel — including imports from the United States. It will be interesting to see how Trump reacts. The order for six gigawatts of graphic chips for OpenAI’s data centers pushed AMD up 24%, helping both the Nasdaq (+0.8%) and the S&P 500 (+0.4%) close at fresh record highs. As so often, data center technology was the engine driving the rally. But right at the close, Wall Street lost some momentum. After such a long bull run, everyone is asking the same question: is this finally the start of the correction? That question has been asked for months—years, even. Those who sold too early and never bought back have ground their teeth down to the gums. Of course, the longer a rally lasts, the closer we get to a pullback. But as long as there’s fear, corrections tend to stay mild—unless everyone is both scared and fully invested. That’s certainly not the case for construction, industrial, or chemical stocks. Umicore has already rebounded 50% this year—no coincidence, since gold is also up 50%. And who predicted the rally in bank stocks? KBC is up 36% year to date. The same for Proximus (+46%). After its best week in two years, the Bel20 “corrected” 0.4% yesterday.

In Tokyo (+0.1%), stocks are holding on to Monday’s big gains. The Chinese exchanges remain closed for National Day. This week still feels like the calm before the storm—the earnings season begins next week. For now, investors are watching for early profit warnings, which often appear just before official results.

Money to bridge the Trump period

The Danish wind farm developer and operator Ørsted succeeded yesterday in raising 8 billion euro. As is well known, the Danes were obstructed by Donald Trump. Ørsted will, despite the initial ban, be able to complete its large offshore wind project. The problem is that the company won’t be able to sell part of it. Ørsted’s business model depends on operating part of each wind farm and selling another part immediately to fund new projects. That’s currently impossible, since investors are demanding an enormous risk premium under Trump’s presidency. So Ørsted chose to plug the hole with a massive capital increase. Major existing shareholders, representing 60% of capital, subscribed fully. Yesterday, the stock rose 3% — perhaps a sign that, trading 78% below its level five years ago, the worst may now be over. For those who believe in wind energy and have some patience, this could be an opportunity. Earnings per share are expected to fall 53% this year, but rise 7% next year.

Will gold miners become golden again?

The gold price is now about 50% higher than at the start of the year and is nearing 4,000 dollar per ounce. Naturally, this brings out analysts predicting even higher prices — and others warning of a pullback. But according to gold-mining analyst James Luke of Schroders, gold mining shares could offer an alternative. Granted, these stocks carry high risk, especially individually. But Luke argues that despite the recent rally, gold miners still don’t reflect the substantial improvement in their earnings. Even if the gold price were to ease, valuations remain attractive, he says. That’s because miners have long underperformed, weighed down by years of rising costs. As a result, many investors simply gave up on them. The most sensible approach is to invest gradually and diversify through a fund or ETF. Examples include VanEck Gold Miners, iShares Gold Producers, or L&G Gold Mining.

Did you know…

that trade balance data for the U.S. is supposed to be released today — or perhaps not. Because of the government shutdown, last Friday’s planned jobs report was never published either.

This article was translated from Dutch and was originally published on Spaarvarkens.be.