Stock Market Update

This week kicked off with a noticeable headline on the CNBC homepage: “Stock prices fall due to global stock market decline, Nasdaq falls more than 1% led by Micron.” Honestly, it was what I anticipated, and fairly representative of the situation. Observing price trends on Tuesday, it seems like significant names and sectors in the market are quite agitated. Context is crucial in the financial world, especially when we’re facing periods of high volatility.

In moments like this, I find it helpful to take a step back, breathe deeply, and examine the long-term market charts. For us as visual investors, focusing on overarching trends can provide clarity above the short-term noise—especially amid this AI-driven bull market. So, let’s dive into it. I’ll do my best to communicate clearly, despite any limitations in my writing.

First off, year-to-date data shows the S&P 500 up nearly 8% while the Invesco QQQ ETF has surged by 16%. But it gets even more intriguing. Taiwan’s market has exploded by 66% in 2026, semiconductors are up 72%, and the iShares MSCI Korea ETF (EWY) has nearly doubled, even accounting for Tuesday’s downturn. That’s quite a rise. However, recent drops in Asian stocks have pushed the Asia-heavy iShares MSCI Emerging Markets ETF (EEM) toward its first breakout in two decades. The weight distribution of the top five EEM countries is as follows: Taiwan at 26.41%, South Korea at 23.81%, China at 18.93%, India at 10.83%, and Brazil at 3.59%.

Examining the EEM chart reveals significant developments over the last two decades. The last occasion when emerging markets outperformed the U.S. was during the global financial crisis. We’ve been looking at multiple new client portfolios from our previous asset management firm, many of which were invested abroad in what was meant to be ‘diversification.’ However, that “diversification” hasn’t been performing well over the last fifteen years and seems more like a missed opportunity now. We think it’s not so much about opportunity cost anymore but truly an opportunity.

We’ve discussed these developments multiple times since February, and the EEM/SPY ratio has shifted upwards, signaling potential for better performance as the EEM chart has broken past the $55-$60 resistance level. Notably, I’ve previously written about the memory sector of artificial intelligence that’s getting increased attention. Companies like SanDisk, Micron, and Korean powerhouses Samsung and SK Hynix have all experienced substantial gains this year. The demand for memory in AI applications has resulted in exponential growth, making pullbacks quite normal—just a way for the market to take a breath after such strong rallies.

One likely trigger for this market behavior is the anticipated hawkish turn from new Fed Chairman Kevin Warsh, as the Federal Reserve drops forward guidance and signals potential rate hikes as early as this fall. Personally, I have my doubts about such a rapid change, especially with rising Treasury yields and ongoing inflation concerns. Traditionally, these factors haven’t favored emerging market trading. Yet, I believe we might be witnessing a shift away from typical global macro trends, hinting that the AI revolution isn’t just here but is fundamentally changing the market structure.

As we look ahead, Nvidia and Micron are expected to report their earnings this Wednesday. Remarkably, Micron shares have climbed by 267% since the year’s start. Taking profits ahead of earnings reports seems quite reasonable, especially as this quarter’s expectations appear to be ambitious. For instance, Micron’s projected revenue for the quarter is $35.25 billion, a staggering increase from $9.3 billion last year. They expect net income to leap from $2.1 billion to $23.9 billion, representing an eye-popping growth rate of 996%.

Now, one might wonder if such growth rates are sustainable or just a one-time spike. In examining next year’s projections, revenues are anticipated to rise further, with figures hitting $37.3 billion in fiscal 2025 and possibly reaching $196.6 billion by 2027. Micron’s anticipated earnings per share for upcoming years illustrate similar explosive growth. However, the real question will be how investors react following the upcoming earnings report.

There are a few critical data points to keep in mind. First, Micron’s ramp-up of high-bandwidth memory (HBM4) is essential to their long-term success, especially in partnership with Nvidia. There are also expectations surrounding their gross margin, which could hit a record high this quarter if all goes well. If, however, management guides Q4 revenues or margins below expectations, it could narrow the gap between Micron’s stock and the general industry trends.

As for price stability in high-bandwidth memory, there’s growing concern about potential downward pressure if competition increases. Ahead of the report, our flagship growth portfolio holds a significant 4.5% stake in Micron, alongside a new position in the Round Hill Memory ETF. After initially adding Micron to my portfolio back in February at a 3% allocation and increasing it to 4.5% in June, I’ve seen that position grow considerably since then.

Returning to context—if Micron falters on any key points and shares drop, we’ll take a measured approach, evaluating incoming data before making decisions. However, with the recent significant rally in Micron, memory, and emerging markets overall, concerns over Fed rate hikes could lead to a pullback—possibly setting the stage for new highs. Embrace those long-term charts to keep perspective, rise above the chaos, and continue engaging in this remarkable AI evolution.