
The Case For Diversification
NEWS
The Case For Diversification

Source: Tenor.com
It was a relatively muted day in the market, as investors took some gains off the table and positioned for a busy next week of earnings. Six of the “Magnificent Seven” stocks are set to report, with the Federal Reserve’s commentary going to be a major focus on Wednesday. Notably, Chinese stocks continue to catch a bid, suggesting some think Trump’s eventual actions may not match his “tough talk.” 👀
Today’s issue covers Morgan Stanley’s contrarian call, The Weekend Rip’s blockchain/smart contracts discussion, and other notable pops & drops. 📰
Here’s the S&P 500 heatmap. 6 of 11 sectors closed green, with utilities (+1.02%) leading and technology (-1.04%) lagging.

Source: Finviz.com
And here are the closing prices:
S&P 500 |
6,101 |
-0.29% |
Nasdaq |
19,954 |
-0.50% |
Russell 2000 |
2,308 |
-0.30% |
Dow Jones |
44,424 |
-0.32% |
STOCKS
Morgan Stanley Makes A Contrarian Call 🤔
With U.S. stocks continuing to outperform to start off 2025, one Wall Street bank is diverging from the pack by encouraging its clients to diversify.
Morgan Stanley’s Global Investment Committee has repeatedly urged investors to seek maximum portfolio diversification in 2025, suggesting it could deliver better risk-adjusted returns than a “buy-and-hold” strategy. ⚠️
Here are the five main concerns the bank raised in its note:
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High valuation and S&P 500 concentration: 22x forward earnings places it in the 95th percentile of historical valuations over the last 35 years. The ten largest stocks account for nearly 40% of the total market cap.
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Optimistic earnings expectations: Wall Street analysts’ estimates may be too optimistic, expecting 13% earnings growth in 2026 and 1% in 2026. This relies heavily on the “Magnificent 7” continuing to grow rapidly.
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Better opportunities beyond passive U.S. equity exposure: Other regions, sectors, and asset classes offer opportunities that may outpace the S&P 500’s expected 7% return in 2025.
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Positive stock-bond correlation: Recent trends have shown these assets moving in tandem, underscoring the importance of diversifying beyond traditional asset classes to mitigate risk.
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Policy uncertainty: Markets are not fully appreciating the considerable uncertainty around the new U.S. presidential administration’s policy decisions.
The bank doesn’t disclose all its recommendations for diversifying but alluded to a variety of options, including foreign equity positions in Japan, emerging markets (EM), and global European brands. 🧺
With meme coins flying and the major U.S. indexes sitting near all-time highs, it appears that Morgan Stanley’s warnings may go unheeded. But nonetheless, there one of the few banks raising doubts about the path of risk assets.
Still, it’s important to note that despite their caution, they’re not calling for a decline in U.S. stocks. Their year-end price S&P 500 price target of 6,500 implies roughly 8% growth, but they clearly believe the path to that return may be bumpy and that other assets could provide a better nominal or risk-adjusted return. 🤷
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“The Weekend Rip” With Ben & Emil 👀
Hosts Ben and Emil are back for another Weekend Rip, discussing President Trump’s first week of actions, including the $500 billion Stargate AI initiative. They also cover Nancy Pelosi’s latest trade, Davey Day Trader’s meme coin conundrum, and which stocks are catching their attention right now.
Plus, they spoke with Adeniyi Abiodun, co-founder and chief product officer of Mysten Labs (developer of Sui), about the applications of blockchain and smart contracts. 📝
STOCKS
Other Noteworthy Pops & Drops 📋️
GE Vernova ($GEV -4%): Guggenheim downgraded the stock to “Neutral” from “Buy,” offsetting several analysts’ positive comments and price target raises.
Rivian ($RIVN +2%): Reuters reported its JV with Volkswagen is attracting interest from multiple automakers eager to adopt its software and electrical infrastructure.
SMX (Security Matters) Plc. ($SMMX +10%): A Frost & Sullivan report highlighted its proprietary technology to protect artificial intelligence (AI) hardware.
Twilio ($TWLO +20%): Its preliminary fourth-quarter results beat analyst estimates, sparking multiple price target hikes by Wall Street firms like TD Cowen, Mizuho, etc.
Oklo Inc. ($OKLO +8%): Analysts at Wedbush raised their price target for the stock amid ramping up of artificial intelligence (AI) data center buildout.
Intuitive Machines ($LUNR +5%): NASA awarded a $2.5 million study contract under the agency’s Next Space Technologies for Exploration Partnership (NextSTEP) Appendix R.
Semler Scientific ($SMLR -9%): The healthcare company announced it had increased the size of its convertible senior note offering to $85 million, up $75 million.
NextEra Energy ($NEE +5%): Fourth-quarter earnings met estimates, while revenues missed by a wide margin. It reaffirmed its profit forecast for fiscal year 2025.
Novo Nordisk ($NVO +8%): Announced promising topline results from an early-stage trial of amycretin, a new weight-loss drug candidate.
Texas Instruments ($TXN -7%): The chipmaker’s fourth-quarter earnings beat expectations, but it issued weak first-quarter profit guidance.
CSX Corp. ($CSX -3%): The railroad operator’s revenues fell 4% YoY, and earnings fell 16.9% YoY during the fourth quarter.
Ericsson ($ERIC -14%): The telecom equipment maker missed fourth-quarter profit estimates, citing weakness in its India market. Shares dropped the most in a year.
HCA Healthcare ($HCA -4%): The hospital operator’s full-year revenue guidance fell short of expectations, even as fourth-quarter results beat analyst estimates.
Trump Coin ($TRUMP.X -10%): Declined alongside Melania Coin after Ethereum co-founder Vitalik Buterin criticized the rise of political meme coins.
COMMUNITY VIBES
One Tweet To Sum Up The Week 😵💫
$MELANIA is now down over -80% from its all-time high on January 19th
$1.8 billion of market cap ($360 million per day) has been erased since its peak $TRUMP
— Stocktwits (@Stocktwits)
7:51 PM • Jan 24, 2025
COMMUNITY VIBES
Share Your Best Idea For The Week Ahead 🤑
It’s the weekend…and for us market junkies, that means we’re set to analyze, research, and prepare for the trading week ahead.
We want to hear your cooking, so click the post below and share your idea. We’ll highlight some of our favorite ideas all weekend and provide Stocktwits Edge to those picked. So go drop your idea and score yourself an upgrade. 🤩
These threads are a great opportunity to find underfollowed Stocktwits users and ideas to follow. For example, @TurkeyTom highlighted a small-cap specialty finance company we hadn’t seen mentioned before, sharing his thesis on why it has further upside despite its recent fun. Shout out; they’ll receive ST Edge shortly. 👏
Links That Don’t Suck 🌐
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🏘️ Housing market rewind: Home sales drop in 2024 to level not seen since the ’90s
🪙 SEC revokes unpopular banking rule that blocked Wall Street banks from adopting crypto
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