THE WEEK ON WALL STREET
Last week's stock performance was mixed, following investors' reaction to the Fed's May meeting minutes, while a handful of mega-cap tech companies created a buzz with their news.
FACT OF THE WEEK
Following approval of statehood by the territory’s citizens, Wisconsin enters the Union as the 30th state.
In 1634, French explorer Jean Nicolet landed at Green Bay, becoming the first European to visit the lake-heavy northern region that would later become Wisconsin. In 1763, at the conclusion of the French and Indian Wars, the region, a major center of the American fur trade, passed into British control.
Two decades later, at the end of the American Revolution, the region came under U.S. rule and was governed as part of the Northwest Territory. However, British fur traders continued to dominate Wisconsin from across the Canadian border, and it was not until the end of the War of 1812 that the region fell firmly under American control.
In the first decades of the 19th century, settlers began arriving via the Erie Canal and the Great Lakes to exploit Wisconsin’s agricultural potential, and in 1832, the Black Hawk War ended Native American resistance to white settlement. In 1836, after several decades of governance as part of other territories, Wisconsin was made a separate entity. Madison, located midway between Milwaukee and the western centers of population, was named the territorial capital.
By 1840, the population in Wisconsin had risen above 130,000, but the people voted against statehood four times, fearing the higher taxes that would come with a stronger central government. Finally, in 1848, Wisconsin citizens, envious of the prosperity that federal programs brought to neighboring Midwestern states, voted to approve statehood. Wisconsin entered the Union the next May.
MARKET MINUTE
Market Splits
Stocks began trading in a narrow band last week. Still, mega-cap tech names rallied in anticipation of the Q1 corporate report from a key company that makes semiconductors for artificial intelligence (AI). The enthusiasm lifted the Nasdaq to fresh records.
Federal Reserve news mid-week unsettled investors, who reacted to Federal Open Market Committee meeting notes that stated some Fed officials worried over the lack of progress on inflation. Technology was the sole winning group for the whole week, with all other S&P 500 industry sectors ending in the red.
Bucking The Trend?
One of the handful of companies bucking the trend last week was Nvidia.
The semiconductor maker—the fifth largest company in the S&P 500 by market capitalization, thanks to its prominent role in AI—reported that its Q1 sales tripled from a year ago. The company also announced a 10-to-1 stock split, which pushed its market cap to over $2 trillion.
The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. To some on Wall Street, Nvidia is the bellwether for the AI industry. By one estimate, the entire AI market is nearly $300 billion this year—more than three times the market’s size of $95 billion just three years ago. By 2030, that estimate may reach $1.8 trillion.
Remember that forecasts rely on assumptions and may undergo revisions over time. Financial, economic, political, and regulatory issues may cause the actual results to differ from the expectations expressed in the forecast.
FINANCIAL STRATEGY OF THE WEEK
Risk Perspective
Risk is a factor in any investment decision that you make. Your tolerance for risk is something that you will want to consider when you make decisions alongside your trusted financial professional. Your risk tolerance is balanced against your time horizon, meaning the time between now and when you anticipate needing your money.
But is it possible to avoid a loss? No, not completely, but you can take steps to manage that risk when investing. This is where conversations about your risk tolerance are critical.
What would you rather have, $500 right now or a 50% chance at $2,000? Many people go for the $2,000 and rightfully so. Since you have a 50/50 chance, a decision tree shows the $2,000 answer carries a potential value of $1,000.
But let’s add a few zeros and see if that changes your perspective.
What would you rather have, $50,000 right now or a 50% chance at $200,000? The decision tree says the opportunity to win $200,000 has the highest potential value. But in reality, many people second-guess that decision because $50,000 is a lot of money.
Remember, there is no correct answer to these questions. They simply help you better understand the concept of risk.
Investment risk can be managed, but it can’t be eliminated entirely. All investments carry some level of risk. In general, the greater the risk an investment carries, the higher its potential return.
Risk happens, but don’t let it get in the way of your dreams. Ultimately, these concerns should only serve to inform you and the questions that you ask the financial professional you are working with. The conversation should include your questions about the risks for each strategy presented as well as questions from your professional about the investment goals you want and the aspirations you hope to realize.