
The Practical Islamic Finance Podcast
The Practical Islamic Finance Podcast
The Bull Case
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The Bull Case
In this episode, we will cover:
- Intro
- Market Trends Driving Optimism
- Interest Rates & Stock Performance
- High-Growth Sectors to Watch
- Key Risks to Keep in Mind
- Final Thoughts
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salam@practicalislamicfinance.com
ABOUT OUR PODCAST
Our podcast is about helping people ethically build wealth. We cover a broad range of topics, including stock and crypto investing, product reviews, and general financial well-being.
DISCLAIMER
Anything you hear in this video is an opinion. It is not personalized financial advice. Make sure you do your due diligence before making any investment decisions.
assalamu alaikum everyone I hope you are doing well my apologies for keeping you waiting today is thursday march twenty-seventh uh we are just three days away from haid uh haid is uh either sunday or I I did hear monday in some countries uh it will be celebrated but um An early Eid Mubarak to everyone. Congratulations on observing the month of Ramadan. I do want to go over a summary, just a succinct summary of the bookcase as I see it right now. This is not to say that we're going to have a V-shaped recovery. This is not to say that after April second, for example, things are necessarily going to change in a fundamental way. But if I had to make a bull case for the market in the near term, I would say, I would say what I'm going to say in this live. But before I start with that, let's just take account of where we are in terms of the major indices. The VIX is up slightly, up two percent. The dollar index, and we'll talk about this in a second and why it's really important. The dollar index is actually down point three seven percent. The Russell is down point four eight percent. The Dow Jones is down point three seven percent. The S&P is down point three three percent. Nasdaq is down point five nine percent. Now, if we look at the stocks that we often talk about on this channel, a lot of them are down. Bitcoin is at eighty seven thousand. I mentioned I would only confirm a an exit from a downward momentum if we were to break the ceiling of ninety two thousand. Solana is at one thirty eight and Doge is at nineteen. So let's talk about the bull case as I see it right now. Thanks, Niall. That's so nice of you. So this is a chart of the winners and losers today. And we can see that the name of the game was defensive stocks. They obviously did the best in this top right corner. That's where you see the most consistent green. Everything else is basically a red with small patches of small moves to the upside. But generally speaking, the investor was in defensive mode today. And perhaps no better indicator for the moods of investors than the price of gold. As sentiment worsens, the price of gold tends to go up. It tends to function as a risk-off asset. And now for the first time in history, gold surpassed thirty-one hundred for the first time. So if you bought some gold for your wife or a family member, your mom, your daughter or someone, you should be feeling good about that purchase. All right. So if we zoom out here, and this was my message to PIF members yesterday, if you zoom out, you can put the recent dip that we saw in the markets in perspective. And the fact of the matter is, yes, we did peak in around December time. If we look at the last year, at around a plus twenty two percent gain since the beginning of twenty twenty four. But if you look at the last year, we're still up eight percent versus where we were same time last year. So it's not like, you know, the sky fell down. We're still up on the year in terms of the Nasdaq, for example, and the S&P has similar numbers as well. Aside from that, when you look at the money market funds or the total amount of funds that are sitting on the sidelines that, and I should caveat this, it's not necessary that all of these funds are necessarily dry powder because some of them are used as collateral. So they can't actually move to create buying pressure. So it's not true that It is all of this money is money sitting on the sidelines. Some of it is kind of stuck. However, some of it isn't. And if I think it's a decent measure of how much dry powder there is out there. And if you look at the money market funds, we're now north of seven trillion. And so that tells us that there is a lot of money that could be deployed to the stock market if we just get some consistency there. out of the administration, if we understand the rules of the game, so to speak, and we're not surprised with a different headline every other day, then a lot of this money can gain confidence and move back to risk assets. So that's point number one, I would say. Point number two is that the dollar index is on track for the worst month since November of twenty twenty three. And you'll recall that the dollar index actually falling is good for risk assets. So the dollar index falling means that the dollar is becoming cheaper when measured by a basket of major currencies globally. And this has a number of impacts. First, international investors can buy US-based assets for cheaper because their local currency translates into more dollars. So they can actually benefit that way. And that typically drives the bid for assets in the United States. Additionally, a very large percentage of revenue if you look at the S&P, is made internationally, outside the United States. And so the conversion of that revenue looks better on the financial statements of companies. And so you get bigger growth rates and top line, bottom line, and so on, because you are generating more dollars abroad. And if you look at the relationship between the dollar index and Bitcoin, for example, now I'll point your attention to the fact that the dollar index is actually dipped below It's a two hundred day moving average. And this has happened a little more than forty times in the last ten years or so. And ninety eight percent of the time a Bitcoin is up in one year. And if you look at the percentage, it's up. It's up. you know on the low side close to twenty five percent on the high side close to a hundred and sixty percent so and this is according to ns squared value so sorry I'm I'm coughing I was kind of under the weather yesterday uh but so um The odds are in our favor, especially as it relates to Bitcoin. Obviously, a hundred and sixty percent increase for a Bitcoin from where it is right now, close to ninety thousand would put us above my two hundred thousand target for twenty twenty five. And yes, I still hold that target. And if you look at consumer sentiment, we now saw a spike in the percentage of consumers expecting lower stock prices that is in excess of ten percent in the last month. And typically, so the percentage of people who think that stocks are going to be lower has spiked ten percent in the last month. And typically, this has been a pretty good contraindicator. If you look, that is paradoxically. Even though it's it's saying sentiment is negative, it ends up that the stock market tends to be higher. This just goes to show how bad consumers are at predicting the stock market. But if you look at the last times it happened, that is a one month spike of a ten percentage points or more in consumers expecting lower stock prices. The last times these happened, the last times this happened, if you look at March, the first, in one year, the index was up fifty three percent I'm looking right here if you look when it happened in twenty eleven the index was up fourteen percent in one year in two thousand eight the index was up seven percent in one year uh in two thousand seven it was down but only by uh a little I was down three point five seven percent and the rest of the times thirty seven percent thirty eight percent fourteen percent twenty two percent so These are all positive numbers that the market ended up posting after we saw a similar spike in pessimism among consumers. And if you average out what the what the returns were when this happened, the returns were around twenty three point two five percent on the year. So that's very good. And if you want to look at the percentage that the that the market was ahead in one year, how many what percentage of times the market was ahead? That's actually plus eighty eight percent. So there's an eighty eight percent chance that we're green. If you look at the average, of the market performance after similar things happened in the past that averages close to twenty five percent, which is very, I think. Bullish. At least if history is to repeat itself and not only is consumer sentiment low, but if you look at hedge funds, this is the if you look at fundamental long and short hedge funds, they're now the least long U.S. stocks in at least five years. This is according to Goldman Sachs. So most of them are either short or on the sidelines. They are the least long that we've seen in five years. So pessimism is not just in retail, but in professional investors as well. And so if you wanted to summarize what I went over, there's a lot of dry powder on the sidelines. The dollar is falling. After April second, we should have alleviated a lot of the uncertainty about what is going to happen that is assuming you know nothing new happens uh trump doesn't have another great idea and we have the lowest consumer and fun sentiments which leave a lot of room for upside you know when things are going sentiment is great there's basically only one direction to go which is down but sentiment is so low that we're at a point where there's basically only one way to go, and that is up. I mean, things could get worse. Yes, this is true. In terms of sentiment, we're seeing very low levels, but things could get worse, yes. But I do think we're probably closer to the bottom than we are to the top in terms of sentiments. Certainly, history suggests this. And therefore, I really think that because of these reasons, you shouldn't be trying to time the market. I don't want to say after April second, there'll be some fundamental shift in the market because then people get disappointed if it doesn't happen. The fact of the matter is no one can predict these things. But if you look at history, history, because of the reasons that I showed you, seems to be on the side supporting buying in these times. And if you have patience and you're not investing money that you need in the short term, then I think the best strategy is simply to continue to try and find the best names out there and nibble on them at every chance that you get. there's a ninety percent chance as I showed you guys there's basically a ninety percent chance that the market is higher and therefore the prices that we see today in one year and therefore the prices that we see today will probably not be available in one year so make of that what you wish speaking of prices not being available for long that was an expert segment by the way uh pat on the back there's only five days left for the thirty five percent off PIF membership. So if you want to join our team of halal conscious investors who are looking out for one another and helping each other, especially during these times, navigate the often emotional ups and downs of markets. You also get to follow my portfolio move for move. And every time we have a deep dive and another addition to our watch list, you are privy to that first. So if you'd like those benefits, then do become a PIF member, link to do so is in the description. So with that being said, let's take some questions. Nat says, My Ramadan morning routine. Tahajjud. Great. Great way to start. Fajr. Quran. Dhuha. That's great. Yaqeen Institute video. Yeah. Omar Suleiman had a really nice series this Ramadan. Highly recommend watching. And Rakan's live. That's great. Thank you, Naal. I really appreciate that. That's awesome. Qasim says... Great. Thank you, Qasim. Rashad, Salam. Hope you're feeling better. Thank you, Rashad. I really appreciate that. Thanks, Niall, again. Have a consistent message to the market. Tariff, tariff, tariff. This is insane. Yeah, it is pretty insane. I do think that Trump, although he might be using this as a negotiation tactic, although sometimes I doubt he's even that smart. But I don't think he's immune to the markets dropping a lot on his watch. I think this is something that he definitely cares about. And therefore, if he sees the market is just not liking his messaging at all, I think he's going to change it. And essentially, what's good about this is that this is really the only thing that's keeping the markets back at this point. If you look at Europe, you look at China, the markets there are performing quite well. And so I think where we are in the liquidity cycle suggests that we should be continuing in our bull run, But because of the headlines out of the White House, we've been granted this opportunity to buy some assets at cheaper prices. Mohammed Shakia says, Assalamu alaikum, wa alaikum assalam brother. Is the reason for enabling now versus investing more that prices go lower? Is the idea that we nibble now and keep adding as prices go lower? Yeah, that's the idea exactly. So the idea is that we don't want to try to time the market. What we want to do is deal with the cards that were dealt, so to speak. So right now the market is, and if you look at our watch list on PIF, you'll see that we have like the highest percentage of names that are in the buy zone that we've had in a very long time. And therefore, you know, there are often times where the valuation just don't make sense and it's kind of hard to find something that you're really excited to buy. But now there are a lot of names and I would put, you know, something like a Bitdeer and a Tesla at the top of that. list there are a lot of names that are just that extremely attractive valuations and so I don't know if those prices will last that long and so what I want to do and I don't know where the bottom is you know precisely uh so what I want to do is take advantage but not necessarily back up the truck but take advantage so that I'm happy I took advantage if things go north and I'm happy that I didn't back up the truck if there's additional downside. That's awesome, as they say. Do you think iron will dip more? I think iron is pretty much I think it's probably forming a bottom. I don't want to jinx it, but I do think it's forming a bottom, as are all miners. Iris Energy is no exception to the miners' price action recently. As I mentioned, there's very good precedent to the US dollar index falling below its two hundred day moving average and what that means for the price of Bitcoin one year from now. And therefore, if the price of Bitcoin follows this historical trend, then we should be looking at a much higher price for Bitcoin. And this should cascade into higher prices for Bitcoin miners, of course. thoughts on hims and hers stock. It's a great company. To be honest, their messaging. I don't know if I'm alone in this or I'd be interested in your take as well. But their messaging kind of rainbow flag, kind of like do you get that? Do you get that feeling when you look at their marketing? That's kind of why I kind of felt like uncomfortable with them. And you know, some of their content on YouTube, their other likes, social media areas, or social media accounts tends to be like liberal doesn't really correspond well with our feelings uh and with uh with our principles and so that was one reason why I and I was kind of looking for a reason to sell but the kind of trigger was when I found out amazon was was getting into the business and I and we had already doubled our money so I figured okay amazon's getting into the business um We doubled our money. I'm not really comfortable with the messaging. So that's why I sold. And I did something that I don't usually do, which is I sold like entirely out. And that's a product of my comfort level not being a hundred percent. And so, you know, everyone is going to be asked about, you know, their decisions on the day of judgment. And so just make sure you have an argument for what you do. Allah Subh'anaHu Wa Ta-A'la is going to judge me based on what I know and what I feel about the situation. And so you may know different or feel differently about it. And therefore, you have to... So bad deeds are what don't sit well with you. And so if it's not sitting well, I wouldn't do it. And it wasn't sitting well with me, so I didn't. I mean, if they change their messaging, basically, I'd probably buy back into it. If they change the general theme of their messaging, then I would probably buy back into it. I kind of felt like it was Yeah, hard to describe. But I got the I got the feeling that there was some sort of like liberal agenda behind your messaging. Salam alaikum. in a tour. So I know I'm butchering that. Just able to catch the live today before I became a member last month. That's awesome. I'm so glad that you joined the family. Welcome on board. Simo says, how can we strike a balance between investing into large cap companies and small cap companies that are now undervalued in the current market situation? I actually think that Simo there are better deals in the small cap world than in the large cap world. I think the like Magnificent Seven, for example, with the exception to Tesla, if you have enough of a time horizon, like if you're okay with holding onto your Tesla shares for the next next forty eight, thirty six months or five years, if you're okay with that, then it's woefully undervalued. And I would say the same with Nvidia, but to a lesser degree, I think Nvidia has room to run. But if you look at Microsoft, Google, Apple, I think there's less meat left on the bones for those. And I think there's a lot more opportunity in small caps. And I will say this, when it comes to comfort levels from a halal perspective, that tends to skew small cap versus large cap, because large caps tend to have their hands in a bunch of different things. And this increases the probability that one of those large caps is one of those activities is something you're not comfortable with, whereas smaller cap stocks tends to tend to focus on one product, one area, one business that they're trying to perfect and grow. And therefore it's easier to find sort of pure plays there and therefore easier to come out with a comfortable feeling. Muhammad says, I took advantage of the Ramadan special and I became a member. I love all the insights you provide and also enjoy being a part of the community. JazakAllah khair for doing what you are doing. That's awesome, Muhammad. Thank you for sharing that and taking the time to write that out. That's amazing. What's a good way to think about profit taking? So the same logic that you use when you're nibbling on the way down is what you use when you're taking profits on the way up. And that is you want to take enough so that you're happy that you took profits in case things turn. And you're also happy that you didn't sell out entirely in case things continue to climb. And so, and you have to strike that balance. It really depends on you, but just try and see, okay, what is the percentage here that if I sell, this equation will hold? If you do that, I think you'll be good. All right, guys, leave a like if you enjoyed this live. Thank you, Rashad, as always for monitoring and sharing. and just being a great and helpful community member. Until next time, make sure to take care of yourself. As-salamu alaykum and peace be upon you all.