Peace is great; memory chip stocks are even better
Traders are happy about potential peace. But they’re even more happy that Micron exists.
That’s the best way to describe the price action on Tuesday.
President Donald Trump’s comments this weekend that a deal with Iran has been “largely negotiated,” along with reports that the US Navy has restarted shepherding vessels through the Strait of Hormuz, have contributed to a worldwide rally in stocks and sell-off in crude oil.
Some normal things you’d expect to see are happening:
Within US markets, the SPDR S&P Retail ETF is up; the Consumer Staples Select Sector SPDR Fund is selling off. A world in which high gasoline prices are placing less pressure on household budgets is positive for more discretionary spending versus necessities. Checks out.
Europe is typically much more adversely impacted by energy price shocks than the US. Accordingly, the iShares MSCI Eurozone ETF is outperforming the SPDR S&P 500 ETF. Checks out.
Zooming out, the iShares MSCI ACWI ex-US ETF is crushing SPY by over 1%. Checks out — that’s what was happening before the war was on anyone’s radar.
But... there’s also some weird stuff beneath the hood.
When global stocks outperform the US by a ton, it’s generally because tech is out of favor. After all, the US market is heavily weighted toward megacap tech giants. However, a big reason why ACWX is trouncing the US is because of how insanely well the iShares MSCI South Korea ETF and iShares MSCI Taiwan ETF are doing! Those countries, of course, are even more heavily levered to AI hardware than the US market. The new Street-high view on Micron in particular is fueling gains for Korean stocks, where fellow memory chip giants SK Hynix and Samsung are the biggest components.
The tech-heavy Invesco QQQ Trust is putting in a bigger gain than European stocks, as of 11 a.m. ET.
It’s extremely rare for Europe, a major portion of global equities, to be lagging US tech when ACWX is leaving SPY in the dust.
The combination of global equities outperforming by at least 1% while the Nasdaq 100 bests EZU hasn’t happened since December 16, 2022. If that holds, it would be only the sixth time this has happened in the past 15 years.
(My kingdom for an MSCI ACWI ex-US ex-Korea ETF... bonus points if you can throw in an ex-Taiwan, too!)
The lesson seems to be: peace is great; the small pieces that help the brains of the AI boom access information are even better.
