A man who works at the New York Stock Exchange says Nvidia and Broadcom will tell you where the S&P 500 goes next. This is his job. He gets paid to say this out loud to reporters.
The strategy here is breathtaking in its simplicity. Watch two stocks that are already in the index. Then predict where the index goes. It's like watching your left foot and your right foot to figure out which direction you're walking.
Woods holds the title of chief market strategist at Freedom Capital Markets. That means when Nvidia goes up and the S&P goes up, he gets to call that a signal. When Nvidia goes down and the S&P goes down, he also gets to call that a signal. Both outcomes confirm his thesis. He cannot lose.
Semiconductor stocks represent a significant portion of the S&P 500's market cap. Nvidia alone has moved the index by entire percentage points on a single day. Saying these chips stocks will signal where the market goes is like saying the engine will signal where your car goes. Congratulations on discovering that large things affect the total when you add them up.
Retail traders will read this headline and think they've received actionable intelligence. They'll open their Robinhood apps. They'll buy three shares of Nvidia at the top. Then they'll watch Freedom Capital Markets' chief market strategist go on television next month to explain why the signals changed.
The S&P 500 is market-cap weighted. The biggest stocks move it the most. This is not a prediction. This is the definition of an index. Woods has translated basic arithmetic into a market outlook, and somewhere a journalist wrote it down like it meant something.
You could replace this entire analysis with a script that checks if big number goes up, then reports that total of all numbers might go up. The script would be cheaper and just as accurate.
Photo by Joshua Tsu on Unsplash
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