This commentary was recently published by financial managers, research firms and authors of market newsletters and was edited by Barron’s.
The Sovereign Electronic Advisor
Government asset management
[email protected]
April 11: Inflation is now firmly entrenched in the economic system due to unlimited debt-fueled government spending. Unfortunately, the difficult way out of this situation, which would be the best way out, will not be found, as there is no political or public will to [take it]. The hard way would be to cut government spending on defense and entitlements (Social Security/Medicare/Medicaid/Welfare/etc); raise taxes; and reducing foreign aid in all forms.
Even if any or all of this happens, it will only be on the fringes and not in any meaningful way. Instead, the government will continue to spend and create more inflation, which is what they should want. This is their way out of the debt problem, as higher inflation makes paying off the debt cheaper over time. However, the risk of this strategy is that inflation can easily spiral out of control, creating an untenable situation for the vast majority of society whose incomes do not keep pace with rising prices.
This trend of rising inflation is in its infancy as governments around the world cannot/will not stop spending. This means that the investment environment of the last 40-plus years of falling interest rates and falling inflation is over. Investors need to start adjusting their thinking and approach to the market before this new reality takes hold.
Donald L. Sazdanov
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Savings percentage slides
Special comment
Wells Fargo
April 11: Spending outpaced income growth in February as the personal savings rate fell to 3.6%, marking the lowest rate at which households saved in 14 months. The savings rate is above its post-pandemic low, falling below 3%, but still well below the average level at which households saved in the pre-pandemic era (~6.1%).
To some extent, this is just a continuation of a long-term trend of lower savings. From the mid-1970s until the 2008 recession, households consistently saved less after each recession than in the previous cycle.
On this basis, the structurally lower savings rate is not surprising and is consistent with typical post-recession behavioral changes. In fact, if there’s a cycle that breaks the mold, it’s the 2009-20 expansion. It was the first (and only) cycle in which households saved at an average rate above the average of the previous cycle in almost 50 years. This points to the financial strain caused by the 2008 recession and the resulting change in consumer behavior.
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Shannon Seary Grain, Tim Quinlan, Jeremiah Cole
Dr. Copper’s final message
Focus diagram
McClellan Financial Publications
April 11: The latest CPI release, released on April 10, surprised many, but reflects an uptick that has already begun in copper from its lows in December 2023. The latest jump to over $4/pound shows that inflation is not yet is done growing.
There is room to question the legitimacy of this announcement, as some of the rise in copper prices may have come from speculative trading in China. The Shanghai Stock Exchange recently imposed trading restrictions on gold and copper futures contracts in an attempt to reduce this trading. So if this spike goes away quickly, then one may be able to ignore it.
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For now, however, the message is that inflation will rise for at least the next two months.
Tom McClellan
Semiconductor Outlook
View of the UBS House
UBS
April 9: The U.S. Commerce Department said this week it will provide $6.6 billion in grants and up to $5 billion in soft loans to Taiwanese chipmaker TSMC to build state-of-the-art semiconductor chip manufacturing plants in Arizona. TSMC will reportedly increase its planned investment in Arizona by another $25 billion (to a total of $65 billion) and add a third chip plant by 2030. The Commerce Department, which provided $8.5 billion in subsidies and up to 11 billion dollars cheap loans to Intel last month, is expected to unveil new subsidies to Samsung Electronics next week.
Our view: Without being specific to individual companies, we note that significant semiconductor subsidies aimed at restoring manufacturing and strengthening supply chains could offer a multi-year boost to semiconductor capex in the coming years. We forecast global data center capital spending of at least $300 billion in 2024 — which includes both AI and general server-related spending — or about 13% year-over-year growth. We maintain our view that global semiconductor revenue should grow by 25% annually in 2024 and that the stage is set for another solid year for semiconductors in 2025.
Usual Marcelli and team
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Don’t forget Pets.com!
Comment
Center Street Cambridge Corporation
April 8: The growing market optimism has led to some truly astonishing statistics, especially in the more speculative regions. Although the enormous influence of the so-called Magnificent Seven tech companies has waned somewhat due to declines in some of its members, one of them, Nvidia
,
a company at the center of the current buzz around artificial intelligence saw its market value jump by $277 billion in a single day in January, an amount equal to the entire market value of the Philippine stock market.
In the first quarter, the company’s value rose by $1 trillion, or 20% of total global stock market gains for the period. A social media technology company has soared to a $14 billion market valuation after going public, backed by $3 million in revenue.
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The Pets.com experience seems to have been lost to history at this point.
Dennis Butler
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