To Balance AI-Heavy Portfolios Smart Money Quietly Shifting Into Foreign Markets – Tech Stocks Underperform

Smart Money Shifting

Please click here for an enlarged chart of Invesco QQQ Trust Series 1 (NASDAQ:QQQ) compared to Ishares Msci South Korea ETF (NYSE:EWY), Ishares Msci Brazil ETF (NYSE:EWZ), iShares MSCI Mexico ETF (NYSE:EWW), iShares MSCI Japan ETF (NYSE:EWJ), Ishares Msci Thailand Etf (NYSE:THD), and State Street SPDR EURO STOXX 50 ETF (NYSE:FEZ).

Note the following:

• The U.S. is dominating AI.  Just like our portfolios, smart money portfolios are also heavily weighted in AI.
• Heavy weighting in AI makes portfolios U.S. centric.  Everyday now the stock market in the U.S. sees jitters about one sector or another being disrupted by AI.  Nvidia (NVDA), the most prominent AI stock, is range bound.  Prudent investors should note that to balance the risk of AI smart money is quietly shifting into foreign markets.  
• The chart shows South Korea ETF (EWY) has outperformed QQQ by 27.48%.  South Korea is benefiting for two reasons:
  • Two of the three major memory makers, Samsung Electronics Co Ltd (OTC:SSNLF) and SK Hynix (HXSCL), are in South Korea.  Memory is in short supply due to high AI demand.  At this time, investors perceive the risk in memory makers to be lower compared to other AI stocks even though memory makers, including Micron (MU) and SanDisk Corp (NASDAQ:SNDK) have gone parabolic.
  • South Korea is a big exporter of industrial goods.  Industrial activity is picking up across the globe.
• Brazil ETF (EWZ) has outperformed QQQ by 21.33%.  Brazil is a big producer of commodities.  The demand for commodities is increasing as industrial activity across the globe picks up, including AI data center construction.
• Mexico ETF (EWW) has outperformed QQQ by 15.57%.  Mexico is benefiting from tariffs on China.
• Thailand ETF (THD) has outperformed QQQ by 15.44%.  Stocks in Thailand are moving up on hopes that after the recent election there will be political stability.
• Japan ETF (EWJ) has outperformed QQQ by 15.26%.  The Japanese market is moving up for two reasons:
  • Prime Minister Takaichi is turning out to be a rockstar leader taking Japan in a new direction.
  • Positive structural shifts in how Japanese corporations operate.
• Euro Stoxx 50 ETF (FEZ) is outperforming QQQ by 4.36%. Stocks in Europe are outperforming QQQ because Europe has a heavier concentration of materials, industrials, and financials.
• The foregoing shows that popular tech stocks in the U.S. are underperforming many international markets. The momo crowd is oblivious as usual, but smart money is already making the move. 
• As full disclosure, EWJ, EWY, EWZ, EWW, THD are in our portfolios.
• Prudent investors should also note how gold acted yesterday after the very strong jobs report.  For details of the jobs report, please see yesterday's Morning Capsule.  Based on history, gold should have fallen 3% – 5% yesterday.  Immediately after the jobs report was released, gold experienced major selling, but then buyers came in moving gold back up.  In our analysis, this indicates that there is a segment of investors who are concerned about the high level of the U.S. stock market and are shifting more money into gold.  
• Initial jobless claims came at 227K vs. 230K consensus.
• Consumer Price Index (CPI) will be released tomorrow at 8:30am ET.

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks.  For this reason, it is important to pay attention to early money flows in the Mag 7 stocks on a daily basis. 

In the early trade, money flows are positive in Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are negative in Apple Inc (NASDAQ:AAPL).

In the early trade, money flows are positive in SPDR S&P 500 ETF Trust (NYSE:SPY) and Nasdaq 100 ETF (QQQ).

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (NYSE:GLD).  The most popular ETF for silver is iShares Silver Trust (NYSE:SLV).  The most popular ETF for oil is United States Oil ETF (NYSE:USO).

Gold

The momo crowd is like a yoyo in gold in the early trade.  This is reflected in moves in gold ETF (GLD), silver ETF (SLV), VanEck Gold Miners ETF (NYSE:GDX), and Global X Silver Miners ETF (NYSE:SIL).  Smart money is inactive in the early trade.

Bitcoin

Bitcoin (CRYPTO: BTC) is range bound.

What To Do Now

Consider continuing to hold good, very long term, existing positions and add tactical positions based on signals.  Consider staying within the Arora Protection Band as this provides a great way to particpate on the upside and protect yourself from the downside.

The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.