Concerns about higher inflation and a weakening economy already led to a bear market in indices in 2022, but things started to look better last year. Many companies made efforts to cut costs and focus on their most profitable businesses, leading to a recovery in profits. E-commerce and cloud computing giant Amazon is a perfect example of this, and the stock is up nearly 70% in the past year.
And investors were generally more optimistic about the environment as there were signs that interest rates could fall this year – in a recent Reuters poll of 100 economists, half expect two rate cuts in 2024. However, rate cuts could come later than expected and Although the number of interest rates is lower than economists originally predicted, a stabilization or reduction in interest rates is a sign that the economy is moving in the right direction. And that is positive news for companies and investors.
As a result of all this, indices rose last year and have extended their gains this year, with the tech-heavy Nasdaq recently hitting a record high, confirming the existence of a bull market. These are exciting times, but with many tech stocks trending higher, you may be wondering whether it’s still a good idea to invest — or whether it’s better to wait for these trendsetters to become cheaper. Let’s talk about the best investment move you can make now.
Invest in AI
First, a quick note on the element – beyond economic factors – that is driving the momentum, and that is artificial intelligence (AI). Technology companies have invested heavily in this innovative area that promises to transform many industries and our daily lives. Some companies, like Nvidia And Intelare designing chips to power something that is crucial to the functioning of AI – training AI models so that they can then answer complex problems.
Other companies like Amazon sell AI platforms to customers through its Amazon Web Services (AWS) business. And others, such as biotechnology Modernuse technology to streamline their own operations and produce better products faster.
The AI market is expected to reach more than $1 trillion by 2030. Therefore, it makes sense that so many companies are doing everything they can to ultimately profit from it. And it’s no surprise that investors also want to benefit by investing in stocks of the eventual winners.
So right now, it’s clear that tech stocks, and especially those related to AI, are driving up the Nasdaq and the broader market.
The best thing you can do: keep investing, for the long term. Don’t get distracted by stocks that might show up in short-term news but don’t have a compelling long-term story. Instead, focus on and favor the strongest players – within the AI space and beyond, as it is always a good idea to diversify.
Alphabet’s first dividend
For example, alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) puts a lot of emphasis on AI and recently launched its most powerful model yet – Gemini – which it is rolling out across all of its products and services to make them better than ever. At the same time, the tech giant thrilled investors this week by announcing its first dividend and a massive share buyback plan. At 23 times earnings estimates, the stock price is reasonable even after recent earnings – especially from a long-term perspective.
To diversify beyond technology and AI, pharmaceutical giant Eli Lilly (NYSE:LLY) is a top buy thanks to its broad portfolio of blockbuster drugs, including two prescription weight loss drugs that could significantly increase sales in the coming years. Lilly is up 88% over the past year, but its strong earnings growth track record and future potential make the stock still a good buy for the long term.
These are just a few examples of rising stocks that still have room to run, but there are many others. And even in this bull market, you can still find quality stocks that haven’t benefited, offering you the opportunity to buy them at dirt-cheap valuations.
Time is on your side
It is also important to remember that time is on your side as an investor. If we look at the Nasdaq over time, as shown in the chart below, it eventually fell after periods of gains – but later rose again.
^IXIC data from YCharts
So even if the market dips or falls at a certain point, it is likely to follow historical patterns and return to an upward phase. And that means that if you stay invested in quality companies or even an index tracker for the long term, you are likely to make a profit.
Today, momentum is strong and market sentiment is positive, but that doesn’t necessarily mean every stock is too expensive and you should hold off on buying. Instead, continue to invest according to your investing style – cautious or aggressive.
And most importantly, choose companies that you want to hold on to for several years. This way you can benefit now during the bull market and in the long term.
Should you invest $1,000 in Alphabet now?
Before buying Alphabet shares, consider the following:
The Motley Fool Stock Advisor The analyst team has just identified what they think this is The 10 best stocks so investors can buy it now… and Alphabet wasn’t one of them. The ten stocks that made the cut could deliver huge returns in the years to come.
Think about when Nvidia created this list on April 15, 2005… if you have $1,000 invested at the time of our recommendation, You would have $537,557!*
Stock Advisor provides investors with an easy-to-follow roadmap to success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks per month. The Stock Advisor has service more than quadrupled the return of the S&P 500 since 2002*.
See the 10 stocks »
*Stock Advisor returns from April 22, 2024
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adria Cimino holds positions at Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon and Nvidia. The Motley Fool recommends Intel and Moderna and recommends the following options: long $45 January 2025 calls on Intel and short $47 May 2024 calls on Intel. The Motley Fool has a disclosure policy.
Nasdaq Bull Market: Here’s the Best Investing Move You Can Make Now was originally published by The Motley Fool