This week's interesting finds

This week in charts

Historical market corrections

U.S. vs. global stocks

European vs. U.S. equities

Fund flows to European equities

Value vs. growth indexes

G7 gross domestic product (GDP) by country

Small businesses

Manufacturing production and employment

European defense spending

Investors avoiding the dip

S&P 500 Index returns vs. analyst projections

Investors should be wary of analyst ratings

Analyst ratings on stocks are a regular feature in financial news coverage. Upgrades, downgrades and price target changes can often create volatile one-day price movements and attract investor attention. 

However, investors should be wary of these headline-grabbing stock reports from experts at large firms. The long-term investment implications might not be what they expect. In fact, following sell-side analyst advice may lose you money.

My firm analysed the investable information to be gleaned from analyst ratings, changes in ratings and price targets. Is there much value in these? The short answer is — there is not.

The S&P Capital IQ analyst rating summary score for the sell-side analyst recommendations is between one and five and measures how loved or hated a stock is by the sell-side community. We found that the best-performing stocks over the past 25 years are those in the lowest quintile.

In addition, over the past 24 years, if you bought the stocks rated most highly by the sell-side analysts and shorted the stocks with the lowest number of buy ratings, you would have lost money — about 30 per cent cumulatively, with meaningful volatility.

What about change in a data point, not the level of it? That is often more important in equity analysis. A fair follow-up question could be: what if analysts change their minds?

If something is shifting enough to induce a change to an analyst’s rating, that outlook might matter. Hence, we studied the month-over-month change in analyst ratings and found that this metric was not an effective predictor of subsequent return. Over the past 20 years, stocks recently upgraded by analysts did not outperform those with recent downgrades.

In addition to using the S&P Capital IQ score, we used another common institutional investor approach, looking at the buy, hold and sell ratings on Bloomberg. We defined “buy percentage” as the number of analysts with a “buy” recommendation on a stock divided by the total number of analysts covering a stock. We then looked for stocks newly in favour and those “incrementally loved”, as indicated by an increased number of buy ratings, and compared their subsequent stock performance with those with the most month-over-month downgrades.

These “incrementally loved” stocks did beat the incrementally disfavoured ones from 2001 through 2013 but have generated no additional return over the past dozen years. Recently upgraded stocks do not outperform recently downgraded stocks, so looking for changes in rating is also not a fruitful investment discipline.

As for price targets, there is a notion that if the analysts see tremendous upside to a stock, they set price targets way above where a stock is trading as a signal of their confidence that the security will appreciate. Should investors forget about ratings and changes in them, instead of just looking for stocks forecast to have big gains?

That is also not a good strategy. Stocks with lots of “upside” from the current price to the median price target might be perceived as ones where analysts are bullish. But they are often stocks that analysts had been previously too bullish as indicated by bad price momentum.

The outlook for a stock that has been down recently can be meaningfully different for one trading at highs, even if they both have lofty price targets set by analysts. Stocks with high price targets performed best from 2009 to 2016, but the signal has diminished over the past decade.

We did find modest value in the volatility of the price targets for an individual stock. Companies with the lowest standard deviation around their analyst price targets have tended to outperform those with high variability in targets. However, the metric peaked in its efficacy in September of 2022 and has not been of much use since.

But overall, relying on analyst ratings and rating changes has not been a good strategy historically — and is not today. Sell-side analysts, of course, offer insightful original industry research and quantitative analysis that is valuable to investors. But we would suggest looking beyond the eye-catching ratings and price targets.

This week’s fun finds

Turn on the water works: why emotion fuels creative brilliance

The spark of an idea is often celebrated as the ultimate defining moment for creativity. It’s the spark from which the artwork takes shape – whether it’s a painting, building or 30-second spot. But actually, the ‘spark’ is the culmination of a much deeper, more emotional process that begins long before. Creativity stems from emotions: the desire to create ‘something’, the exhilaration of possibility and the anticipation of bringing it to life.

In today’s creative climate, where commercial demands often take precedence, emotional connections can be overlooked. In the battle for attention, the process of creativity has become increasingly corporate. Business strategies and KPIs are rooted in clinical reasoning – an idea is deemed viable if supported by data and analysis. By design, creativity should consider audiences closely, investing in research and insights, but also consider emotion’s role in this process. A truly great, memorable, successful project, lies in audience connection. It’s the universal truth our industry is built upon. Lately, we’ve let the heart lose out to the head.

This week's interesting finds

 This week in charts

EV charging connectors by region

EV charging installations by region

Stock price for EV charging companies

U.S. vs. Germany 10-year yield

Value of Canada and Mexico exports plus imports

Volatility Index

S&P 500 – total put volume

S&P 500 momentum crowding

Magnificent 7

Multiple jobholders as share of U.S. employment

The Humanoid Robot

Nasdaq joins in race to offer 24-hour equity trading

The US bourse, best known as the home of many large technology companies, on Friday revealed it planned to apply for regulatory permission to extend its hours through the night. The New York Stock Exchange and Chicago-based Cboe Global Markets, the third big player among US exchanges, have already made similar applications.

At present, US equities are available for trading between 4am and 8pm Eastern time. Pre-market and post-market sessions already stretch the day beyond its core hours between 9.30am and 4pm. 

In recent years, however, online retail brokers such as Robinhood and Interactive Brokers have begun offering overnight dealing to their clients. Those operations are supported by the Blue Ocean trading platform, whose business is now being looked at by its bigger rivals.

In an article posted on LinkedIn, Nasdaq president Tal Cohen gave several reasons for the decision, including the rise of retail trading, as well as the growth of international holdings of US stocks. Both groups are more likely to want to trade outside normal US business hours.

The Nasdaq boss warned that many problems needed to be ironed out before 24-hour trading could become a reality — something that its rivals have previously acknowledged.

Issues to be addressed included the need to extend the operation of the “tape” — the record of transactions done on exchanges — to cover the extra hours. It would also be necessary to find commonly agreed ways of handling so-called “corporate actions” — for example when a company undertakes price-changing moves such as shrinking or expanding its share count or announcing dividends. 

Cohen acknowledged concerns among the companies whose shares would be traded.

This week’s fun find

Finding the Future of Packaging, in Finland

As a journalist, sometimes your curiosity gets the best of you.

… Which is how I find myself in a chilly remote forest in Finland, on a press trip to see how the company Metsä makes its fresh fiber paper products. Which, in theory, might sound ultimately boring, were it not for what I’d heard about Metsä over the years: that they take sustainable production to innovative and elaborate, if not intense, heights. That they oversee a homegrown regenerative forestry program focused on native trees and biodiversity. That they produce the most coated white kraftliners globally using 90% fossil-free energy—with a goal to achieve zero CO₂ in all their mills by the end of 2030, not unlike their massive future-forward complex in the town of Äänekoski, which produces 2.4 times as much energy as it consumes, and is entirely free of fossil fuels. That this is all being done in the private sector.

Collectively, it’s a remarkable operation on its own. But the real reason I’m here today is because I want to find out why.

This week's interesting finds

This week in charts

Post U.S. election stock market performance

Asian markets – weekly trading flows

Market cap – BATX vs. Magnificent 7

S&P 500 free cash flow yield decline

OpenAI revenue model

OpenAI negative free cash flow projections

Gold inflows vs. crypto outflows

Global Sector fund flows

YTD equity returns

Value vs. growth price performance

China puts brakes on US stock listings for homegrown companies

The rate of China-approved applications for US initial public offerings has slowed noticeably in the past year, falling from 22 in the first half of 2024 to 11 since June. Four people close to the China Securities Regulatory Commission said it intended to impose “tighter control” this year over US IPOs of Chinese companies with small capitalisation and weak fundamentals, viewing them as prone to market manipulation.

China has tightened regulations on offshore capital raising since 2021, following the introduction of new rules on cross-border cyber security and data security, which have also complicated the application process for companies seeking offshore listings.

A record number of Chinese companies went public on US stock exchanges last year, attended by increasing allegations of pump-and-dump schemes and warnings from US regulators to tread cautiously with the investments.

Analysts said the crackdown is Beijing’s latest effort to reduce financial ties with the US amid geopolitical tensions and underscores concerns over excessive speculation on New York-listed Chinese stocks.

The US listing boom of Chinese stocks came as many of them, especially small ones, had in recent years reported wild price swings that sparked concerns over manipulation.

According to a study released in January by Hindenburg Research, a now-shuttered investment research company, 128 Chinese companies have reported irregular price activity not explained by corporate fundamentals shortly after their New York IPOs since 2022.

US regulators, led by the Securities and Exchange Commission, have in recent years issued multiple warnings about pump and dump schemes involving small Chinese companies listed in New York.

In a report last month, the Financial Industry Regulatory Authority said such scams began to happen not only during the IPO but also weeks or even months afterwards.

China’s stock regulator was aware of the problem and sought to resolve it by raising the bar for local companies’ US listings. The CSRC is spending at least twice as much time as it did a year ago reviewing US listing requests from Chinese companies, led by those with plans to raise $10mn or less, according to bankers and lawyers.

The CSRC’s increased scrutiny has included more questions for IPO applicants ranging from whether stock option programmes may create insider trading to how user data will be protected.

IPO lawyers and bankers said it could take up to a year for clients to get CSRC approval to list in the US. That compared with less than two months a year ago.

Meanwhile, Chinese authorities are pushing more large-cap mainland-listed companies to pursue secondary listings in Hong Kong this year.

The shift could lead to a revival in listings worth $20bn in Hong Kong, led by the world’s largest battery maker CATL, marking a possible sharp pick-up in fundraising activities of the city in 2025.

The regulatory tightening looks set to continue this year.

This week’s fun finds

Jenna, from the Relationship Management Team, treated her fellow EdgePointers to the ultimate comfort food, chicken and waffles! Word on the street was that the sauces served alongside brought it to the next level.

Paper or Porcelain? Saori Matsushita Folds Delicate Ceramic into Playful Objects

It might be tempting to throw one of Saori Matsushita’s paper airplanes across the room, but we promise you the landing would be less than graceful.

From her Seattle studio, Matsushita transforms delicate sheets of porcelain into vases, mugs, and sculptures that appear as if they were folded from paper. Punctured with binder holes and the fringed edge of a torn-out sheet, the functional objects bear the iconic blue lines of a school notebook. Other works are similarly deceptive, like the cloth sack or collared-shirt vessels that capture the folds, bends, and bulges of fabric in ceramic.

To create these pieces, Matsushita utilizes nerikomi, a Japanese pottery technique that involves layering colored bodies of clay together and then cutting them to reveal a patterned section. Stripes of blue and pink appear through stacking slabs rather than the glazing process, and the artist builds most works by hand.

This week's interesting finds

This week in charts

Asset class returns by year (including 2025 YTD)

Europe-focused equity fund outflows

Foreign holdings of U.S. Treasuries

Median age of homebuyers increasing

S&P 500 Index profit margins

Equity market capitalization

Homebuilders vs. S&P 500 Index

S&P 500 Index Q4 2024 earnings

Trump’s Tariffs

European outperformance

European stocks outpace Wall Street since Donald Trump took office

European stocks have outpaced the US in the month since President Donald Trump’s inauguration, as hopes rise that the region might escape a worst-case scenario trade war.

The benchmark Stoxx Europe 600 index has gained 5.2 per cent since January 17, the last trading day before Trump re-entered the White House, while on Wall Street the S&P 500 has risen 2.5 per cent and the tech-heavy Nasdaq Composite has advanced 1.7 per cent.

The unexpectedly strong performance of European indices has been driven by Trump’s decision not to impose immediate tariffs on the EU, as well as the prospect of peace talks in Ukraine, said analysts.

The gains come after a prolonged period of Europe underperforming the US, as a huge rally in Big Tech stocks lifted Wall Street in recent years. Trump’s election was the most recent catalyst, pushing European equities to lag the US by the widest margin on record, amid expectations of a bruising trade war.

Europe’s recent strong performance comes despite signs of stagnation in the continent’s major economies and worries over the region’s longer-term security as the US threatens to pull back military support.

The rally has been helped by European fund managers increasing their allocations since the start of the year, with a survey this week showing that the proportion saying the region’s stocks were undervalued was at a six-year high.

Analysts at UBS last week upgraded their allocation to continental Europe to overweight, citing the tailwind of lower energy prices in the event of an end to the Russian full-scale invasion of Ukraine, looser fiscal policy and stronger corporate earnings.

Hong Kong has been the best-performing major index since Trump’s inauguration, with the Hang Seng index rising 15 per cent since January 20, led by a rally in Chinese technology stocks listed in the territory following the DeepSeek shock.

China’s mainland CSI 300, however, has advanced just 3 per cent. The rest of Asia has been more flat, with Japan’s broad Topix up 2 per cent and India’s Nifty 50 down 1 per cent.

However, some analysts expressed doubt over whether Europe’s performance could last through the year, especially if US tariffs were simply delayed rather than diluted.

Trump has warned that imports from Europe may be next in line after the US moved to impose 25 per cent tariffs on Canadian and Mexican imports and an additional 10 per cent levy against Chinese goods. 

This week’s fun find

On a Mission to Heal Gila Monsters

By any measure, the diabetes drug Ozempic has been a blockbuster, racking up billions of dollars in annual sales. In the United States alone, pharmacies fill millions of prescriptions for Ozempic and related drugs, which have become popular for their weight-loss effects, every month. 

But in the beginning, before the celebrity endorsements and the think pieces and the global supply crunch, there was just a strange, venomous lizard with a flair for intermittent fasting. The Gila monster, which is native to the deserts of North America, can survive on just a few meals a year, thanks to a digestion-slowing hormone in its venom.

The discovery of this hormone paved the way for Ozempic, making the Gila monster an enormously profitable gift to modern medicine. And last summer one particular Gila monster, a former pet named Pebbles, needed medicine in return.

This week's interesting finds

Notice of minimum investment amount increase for the EdgePoint Canadian Portfolio

EdgePoint Investment Group, Inc. has announced today that it is changing the minimum amount of an initial investment in the EdgePoint Canadian Portfolio (the “Fund”) from $20,000 (the “Previous Minimum”) to $100,000 (the “New Minimum”).

Click here to learn more.

This week in charts

Bitcoin and gold ETFs cumulative flows

Asset returns and volatility

60/40 portfolio

Valuations vs. return on equity

European equity fund flows

Equity issuance by type

Magnificent 7 annual capital expenditure

Inflation discussions

U.S. trade partners

U.S. household debt

Variable mortgage rates

China’s tech stocks enter bull market after DeepSeek breakthrough

A benchmark for Chinese technology stocks has risen more than 20 per cent in the past month, entering a bull market as investors pile into the country’s internet companies following DeepSeek’s artificial intelligence breakthrough. 

The Hang Seng Tech index, which tracks the 30 largest tech groups listed in Hong Kong, is up 25 per cent from its 2025 low on January 13. It has outpaced the Nasdaq 100’s 4.4 per cent increase and a 0.5 per cent decline for the “Magnificent Seven” US tech stocks over the past month. 

The positive movement is a boon to China’s markets, which have been buffeted by concerns over US President Donald Trump’s tariffs, a mainland property slump and deflationary pressures in the Chinese economy. Mainland China’s broader CSI 300 index is up just 4 per cent in the past month. 

DeepSeek stunned Silicon Valley in late January when it released a large language model (LLM) that it said was built on a bootstrapped budget, raising questions about the need for huge investment in AI. 

The news led US tech stocks to a sharp drop on January 27. Nvidia set a record for the biggest one-day loss in market capitalisation, with $589bn wiped from its market value.

Conversely, Chinese tech shares boomed. Cloud computing and tech hardware companies that stand to benefit from AI innovations have led the recent rally. 

They include Alibaba, consumer electronics group Xiaomi, search engine developer Baidu and electric-car maker BYD, which are up 43 per cent, 34 per cent, 13 per cent and 40 per cent, respectively, in the past month. 

E-commerce platforms JD.com and Meituan have also advanced 24 per cent and 11 per cent, boosted by relatively strong consumption data from the lunar new year holiday and growing expectations of large-scale fiscal stimulus from Beijing this year.

The broader Hang Seng index is up 15 per cent in the same period. Data from the Stock Connect programme, which allows mainland traders to buy Hong Kong stocks, indicates heightened interest among Chinese investors, with average daily turnover in February up two-thirds from January and three times higher than February 2024. 

Analysts said investors were boosted by the belief that Chinese development of LLMs was advancing and consumer-facing companies would rapidly adopt them.

This week’s fun find

100 Small Acts of Love

Sometimes love needs a grand gesture: a bouquet of roses or a big night out. But strong relationships also need regular care and attention, so we asked New York Times readers to tell us how they show their affection day-in and day-out, all year long.