Ingenious Buddy
Once the Federal Reserve declares “all clear” on its strategy to curb inflation, initial public offerings (or IPOs) will start coming into the market, said TD Cowen President Jeff Solomon.
During a CNBC interview, Solomon said that the Fed’s activity has had a chilling effect on capital markets, especially on equities, which have rallied, but in a very narrow way. Because of that, “we haven’t seen much of IPOs this year.”
The “Magma” stocks have been driving most of the returns, he added.
“It’s great to have the Nasdaq (COMP.IND) up 36% or so for the year, but it hasn’t really translated for the vast majority of stocks, certainly the mid-cap stocks, the small-cap stocks,” he said, “and generally speaking, that’s where IPOs are coming from. When the Fed ultimately declares a pivot [in its inflation strategy], there will be a bunch of companies trying to access the markets at that point.”
Solomon also said that the sectors that will see the most returns next year include tech stocks that are benefiting from passive flows, healthcare services large-caps, big biotech and pharma stocks, staples with growing top lines, industrial growth sectors, and commodities with strong cash flows.
Nvidia (NASDAQ:NVDA), as an example, is a “bellwether stock,” he said. “We’ve had bellwether stocks before. I think about the transformation that’s occurring in our economy, and this is the most exciting thing we’ve seen, maybe since 2008, with the advent of the iPhone.”
Nvidia’s stock performance, he explained, is a “knock-on effect for everything that’s happening in terms of investment in AI.”