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Profitable Investing Tips has been a member since April 20th 2008, and has created 201 posts from scratch.

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Stock Market Response to Election Uncertainty

The presidential election promises to be close again this year. What will be the stock market response to election uncertainty? Traditional thinking is that Republicans are pro-business and that Democrats are not. Thus, you might think that the stock market would fear a Biden presidency, welcome four more years of Trump, and move accordingly as polls indicate. But, our sister site, Profitable Trading Tips noted, in an article about how the market will respond to a Biden presidency, that the market is more likely to go after a Democratic victory than a Republican one. But, what happens when the election is going to be close?

Stock Market Response to Election Uncertainty

Market Watch wrote recently about what happens in close versus predictable presidential elections.

In our call of the day, Deutsche Bank global chief strategist Binky Chadha said in a close election U.S. stocks typically rally after the result, regardless of the winner.

In the 10 postwar “close elections,” which include all of the last five – defined as elections where the polls were consistently tight or fluctuating widely, making the result unpredictable – the result has been followed by an average 5% rally to year-end, the bank’s strategists said.

“While predictable elections were nonevents, close elections historically have seen equities begin to go sideways starting in July; then rally strongly after on a clear win, independent of who won,” Bandha said in a note.

The rationale that explains is this. The market loves certainty and hates uncertainty. Investors can make money with either a Republican or Democratic administration but the strategies may be different. Knowing what approach to take removes the uncertainty which is why there is typically a rally from Election Day until the end of the year after uncertain elections.

In the meantime, history tells us that during the approach to a close election, the market is relatively flat. This reflects the uncertainty that investors hate which is followed by the certainty that they like.

Stock Market Response to Election Uncertainty: Biden vs Trump
How Will This Close Election Affect Your Investing?

What Will the Election Mean to Your Investing Strategy?

Depending on who wins the presidential election and if they take Congress as well, things may not change very much or there could be a wholesale overhaul of how the country operates. As the big tech FAANG companies become more and more dominant, the odds of the next “trust buster” taking them apart goes up. Tax laws that favor the preservation of multigenerational wealth may be weakened as well. On the other hand, long-overdue investments in American infrastructure could result in a big increase in middle class jobs and a long-overdue equalization of wealth across America. Investors who pay attention will be able to develop new strategies accordingly. As noted in the San Diego Union-Tribune, Biden wants to strengthen US manufacturing, beef up infrastructure, and invest in both education and research.

Democratic presidential candidate Joe Biden released his $700 billion economic plan last week that is largely aimed at boosting U.S. manufacturing.

Under his plan, the federal government would spend $400 billion in government purchasing of U.S.-based goods and services over four years and $300 billion in research and development for new technologies and clean-energy initiatives.

Paying for it is a little up in the air with Biden’s campaign directing The Wall Street Journal to Biden’s previous tax plan that would raise taxes on corporations and the wealthiest Americans.

Higher corporate taxes may not sound like such a great idea for many investors but a wholesale revitalization of American industry and its R&D should help many focus where their investments will go over the next years.

Companies Under Nasdaq

If you want to find stocks in the tech sector and especially growing companies, look for companies under Nasdaq. Nasdaq ranks just behind the New York Stock Exchange in daily value of shares traded. It was founded in 1971 was the first electronic stock market in the world. Nevertheless, it functioned as a quote system initially. Because it lowered the bid to ask price difference for trades, it was popular with traders but not with brokers. Today Nasdaq is where you can trade the world’s largest tech companies

Difference Between NYSE and Nasdaq Exchange

Nasdaq is one of the two major US stock exchanges. Unlike the older New York Stock Exchange which is an auction market, the Nasdaq is a dealer market. While the NYSE matches the highest bid with the lowest asking price, the Nasdaq buying and selling happens electronically and virtually instantaneously.  While the NYSE and one designated market maker for each stock, the Nasdaq has fourteen on the average. While investors see the NYSE as the home for long term, stable stocks, investors go to the Nasdaq to find growth stocks, mostly in the tech sector.

Dow and Nasdaq Charts

In trading stocks for companies under Nasdaq traders use charts the same way as they do for NYSE companies, the Dow Jones Industrial Average, and others.

Companies under nasdaq: dow vs nasdaq charts

Example from Kitco

Dow and Nasdaq charts are both useful by themselves but can also be used side by side for comparisons and to help decide where to trade. Otherwise, Dow and Nasdaq charts work pretty much the same in terms of timing trades, using important moving averages, and for other purposes.

Dow Jones SP 500 Nasdaq

Although many choose to only invest in or trade companies under Nasdaq, most investors pick and choose among Dow Jones, SP500, Nasdaq and even foreign stocks based on their assessment of intrinsic stock value and tools like a stochastic trend. Investors who want to invest in ETFs that track these sectors will choose the Dow if they want blue chip companies, the S&P 500 if they want a broad cross section of the market, and Nasdaq if they want to track tech stocks, especially the FAANG stocks that have been leading the market.

Compare Dow Jones Nasdaq S&P

New traders and investors often want to know how to compare Dow Jones, Nasdaq and S&P. The three indexes track closely as the underlying companies are all affected by the business cycle and factors that drive the economy. Also, stocks like Apple are included in all three indices. When you compare Dow Jones, Nasdaq, and S&P it is useful to know how each is calculated. In each case total market capitalization is divided by a number that takes into account things like stock splits over the years.

Current Dow Jones Nasdaq

Companies under Nasdaq

Although the stocks in the Dow Jones and companies under Nasdaq are both subject to market forces, they may react differently. For example, the Dow contains ExxonMobil, General Electric, and Boeing. Each of these has been hit hard by the covid-19 pandemic and other factors. However, tech stocks like Microsoft have benefitted from the movement to business online and other factors related to social distancing.

Cheapest Nasdaq Index Fund

Many investors gave up trying to pick their own stocks years ago. They also gave up on having someone else manage their investments. Rather, they use a dollar cost averaging approach to put money into the cheapest Nasdaq index fund they could find. Three low cost index funds suggest by Nasdaq include the Schwab US Broad Market (NYSEMKT: SCHB), iShares Core S&P Total U.S. Stock Market (NYSEMKT: ITOT), and Vanguard Total Stock Market (NYSEMKT: VTI).

Define Nasdaq Index

How do you define a Nasdaq index? According to Investopedia, the Nasdaq composite index is

the market capitalization-weighted index of over 2,500 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities.

This is the best measure of the overall performance of companies under Nasdaq.

MSFT Stock Nasdaq

Those who invested early in the MSFT stock Nasdaq listed more than thirty years ago are rich. But, even today Microsoft is one of the best tech investments. Anyone who purchased a few share of this stock when it went public in the late 1980s has seen their investment grow about more than 1,000-fold with stock splits and an increasing share price. The current quarterly dividend of Microsoft is $0.51. This is more than twenty times the original share price and will be paid out four times a year! Tech stocks have driven the stock market since the Financial Crisis and have proved to be somewhat immune to the effects of the covid-19 crisis. In fact, they may be propelled by the move online as social distancing becomes the norm. Here are some useful bits of information if you want to invest in MSFT.

Nasdaq MSFT Price Target

If you are considering an investment in Microsoft stock today, you want to know what it will be worth going forward. This is the Nasdaq MSFT price target. According to CNN Money, the MSFT price targets of twenty-eight analysts range from a low of $205 to a high of $260 with a median price target of $230. Now, at the end of July 2020 the stock sells for $201 a share. The stock started the year at $160, dipped to $135 at the start of the pandemic and has added 50% to its lowest price of the year. In general, analysts expect Microsoft to continue to grow at it has moved into lots of online services in addition to its dominant software business.

Nasdaq MSFT Dividend

The first Nasdaq MSFT dividend was in 2003. The stock price took a big hit during the dot com crash and the dividend was to reward investors for staying with a mature company that did not appear to have as strong a prospect of growth as previously. Now, the company has been growing nicely and still pays a dividend which has steadily increased over the years. Today’s dividend comes to $2.04 per share per year which currently is 1%. Although this dividend percentage is not as much as one sees with a utility stock, coupled with steady growth and dominance of its part of the tech sector makes Microsoft very attractive.

MSFT Stock Nasdaq Logo

Next MSFT Dividend Pay Date

Microsoft pays quarterly dividends. The next MSFT dividend pay date is September 10, 2020. The record date is August 20, 2020. And, the ex-dividend date is August 19, 2020. The ex-dividend date is the last date that the stock trades without the coming dividend being considered. The record date, which is the next day, is the date for which holders of the stock will receive the dividend. Thus, the price of the stock will jump up on the record date to account for the coming dividend payment. Because the amount of the coming dividend is known, there is generally no surprise regarding how much the price will jump up.

Nasdaq MSFT After Hours

Microsoft trades after hours as well as during the trading day. You can see Nasdaq MSFT after hours quotes on the Nasdaq site. A typical number of shares being trading after hours is about 600,000 as compared to about 3,000,000 during the trading day. The trading range is usually not that great during off hours unless some sort of news that affects the stock price becomes apparent at the end of the trading day. After hours trading is done on electronic communications networks that match buyers and sellers and do not use a stock exchange.

Sell MSFT Stock

Microsoft as well as many of the tech stocks that have led the market over the last decade have gone up considerably. Is it time to sell MSFT stock? You would only do so if you need the money or if you believe that the current situation with the covid-19 pandemic will get terribly worse and drive down prices for MSFT and other tech stocks. The covid-19 pandemic has driven down many stocks as social distancing has closed or reduced many businesses. However, the same conditions have driven businesses and entertainment online which has greatly benefitted Microsoft and other tech stocks.

MSFT Stock Split Prediction

Many companies split their stock when it rises to a certain price range. This is typically because they want shares to remain affordable to average investors. Microsoft stock has split 9 times over the years.

  • 9/21/1987: two for one
  • 4/16/1990: two for one
  • 6/27/1991: three for two
  • 6/15/1992: three for two
  • 5/23/1994: two for one
  • 12/09/1996: two for one
  • 2/23/1998: two for one
  • 3/29/1999: two for one
  • 2/18/2003: two for one

Although MSFT has not split for well more than a decade, the board of directors always has that as an option.

MSFT Stock Nasdaq - cloud computing

MSFT Stock Recommendation

The vast majority of stock analysts today recommend buying Microsoft stock. With an average price target 15% above its current price, a company with a huge cash reserve, huge presence in cloud computing, and a high cost of entry business, this stock is a buy in almost anyone’s book. However, the best way to approach this stock, as always, is to use intrinsic stock value analysis. Understand what the company does to make money and how that approach will continue to work into the distant future. In the case of MSFT, this reasoning will make the stock a good long term investment prospect.

Slideshare Version

MSFT Stock Nasdaq – DOC

MSFT Stock Nasdaq – PDF

Will AI Replace Investment Bankers?

According to Wells Fargo, as many as 200,000 banking jobs will be replaced by artificial intelligence in the coming years. While this generally means a move to online banking instead of branch banks, no part of banking will be secure. This includes much of the work done by investment bankers. But, will AI replace investment bankers? That is not likely to happen. Investment bankers act in an advisory capacity to government and corporations in financial markets. They do not deal with individual investors where AI is most likely to replace jobs. What is likely to happen is that investment bankers will adopt many AI tools to assist in their work.

AI and Investment Banking

In the banking industry, it has become clear that artificial intelligence will level out the playing field between large and small operations. Much like the advent of personal computing brought advanced computational tools to everyone, AI will give small investment banking operations the tools former just available to the giants of the industry. AI is likely to make investment banking for precise, more efficient, and more profitable. Because AI systems learn as they go, there is less need to continually upgrade to smarter and more advanced products.

Will AI replace investment bankers?
Will AI Replace Investment Bankers?

AI Return on Investment

The degree to which AI benefits any business operation will depend on how deeply the company invests in artificial intelligence. And, it will depend on how well the AI system is designed to address business issues, fix them, and learn from the experience. According to Forbes, not every business currently sees benefits from adding AI to their operations.

Among the 90% of companies that have made some investment in AI, fewer than 2 out of 5 report business gains from AI in the past three years. This number improves to 3 out of 5 when we include companies that have made significant investments in AI.

(Return On Artificial Intelligence: The Challenge And The Opportunity: Forbes)

The point is that when investment bankers or anyone wants to use AI to improve business operations, they need to adapt the AI to deal with the specific needs of their business and follow through with the necessary changes.

The Best AI Stocks to Invest In

If you want to benefit from artificial intelligence in the coming years, there are more options than employing AI in your business. The best AI stocks to invest in provide you with the opportunity to invest and increase your wealth without having to understand and deal with AI directly. US News provides a nice list of the best AI stocks to invest in.

  • Nvidia Corp.
  • Alphabet (formerly Google)
  • Salesforce
  • Alteryx
  • Microsoft
  • Twilio
  • IBM
  • Facebook
  • Tencent

Some of these produce AI products to help businesses, some employ AI in their own businesses, and some do both. Choosing the right ones for you will depend on your specific needs.

Best AI Startups to Invest In

If your goal is to maximize your profits when investing in AI stocks, the best bet is to find promising startups. Picking several AI startups will reduce your odds of investing in a stock that fizzles out and will increase your odds of picking a winner. There is a short list of the best AI startups to invest in.

  • Metromile
  • Conversica
  • DataVisor
  • IdentityMind
  • Numerify
  • Cruise

(Built in SF)
Tech history is full of promising companies that did not make the cut and apparent also-rans that moved on to dominate the industry. Picking a basket of these stocks might be the best way to profit from AI investment.

AI Stocks to Invest in Now

Companies that do well in AI or any sector hit the business news when their profits go up which is also when their share prices will soar. When you invest in a successful company you are betting that they will continue to do well and grow in multiples year after year. But, how do you pick AI stocks to invest in now before their share prices go up? An approach suggested by The Motley Fool is to pick established companies in high cost of entry business. Choose companies that are developing and integrating AI successfully into their businesses. Examples noted by The Fool include Nvidia, Apple, and Baidu.

(Three Top Artificial Intelligence Stocks to Buy Right Now: The Motley Fool)

How to Invest in AI and Robotics

If you want to profit from investing in any stock or sector, you will do best if you understand what they do and how that will lead to long term profits. This is the standard intrinsic stock value approach to investing in stocks. If you believe in the AI sector and expect to see growth over the years, there are ETFs that you can invest in and not have to worry about deciding if an individual investment is a good idea. And if you want to choose an individual AI or robotics stock, you need to find out what they are making and how much money they will gain. Some applications of AI can be applied to businesses with huge profit margins and others to businesses that don’t make much money. Your job is to decide who will dominate a profitable sector for AI applications.

Will AI replace investment bankers - computer chip
AI Computer Chip – Will AI Replace Investment Bankers?

The No 1 AI Stock to Invest in Right Now

If you would like to avoid a lot of time and effort finding the best AI stock for today, is there a best choice? The No 1 AI stock to invest in right now according to multiple sources is Nvidia. This company makes the chips that lie at the heart of most AI applications. As their chips improve, so does AI. They are in a high cost of entry business and a modern version of selling picks and shovels when everyone else is digging for gold.

Will AI Replace Investment Bankers?

Will AI Replace Investment Bankers? – DOC

Will AI Replace Investment Bankers? – PDF

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