This Week’s Takeaways:
- Inflation is in-check, tariffs should have only a transitional impact, GDP is healthy, the jobs market is okay when adjusted for demographics, and we’re going to have two more rate cuts this year which should benefit stocks and maybe small cap stocks disproportionately according to Jeremy Siegel.
- Prior market shutdowns were short and mostly non-events for investors. A longer shutdown could damage the US economy and hurt stocks given the already high valuations.
- The high cost of homes as well as more competition for those homes given tighter inventory have resulted in the lowest profit-margins for home flipping since 2008.
- Developed international stocks provide investors a broader opportunity to participate in global growth, sector diversification from the US, cheaper valuations, and the currency risks can be hedged away.
- One growth manager thinks the AI driven tech-stock bubble we’re in is going to end badly and compares the current market with the dot com era to make its case.
- Boston Corner with how the shutdown could impact us and Things to Do This Weekend in Boston.
- Plus my latest book recommendation.
Inflation Steady as Q4 Becomes Tariff Test by Professor Jeremy Siegel
Professor Siegel paints a rosy economic picture, with inflation in-check, GDP healthy, the jobs market being okay adjusted for demographics, tariffs having a transitional impact, and two more rate cuts to come this year.
Traders’ Guide to Markets as US Government Shuts Down by Bloomberg
The market’s had a muted reaction to the government shutdown based on how quickly prior shutdowns were resolved. There could be more to worry about this time as it sounds like the sides are digging in for a protracted shutdown, the Trump administration is promising to carry out mass firings versus furloughs, stock market valuations are quite high so sellers could look use it as an excuse, and a lack of data could lead to more volatility.
Profit margin on flipping a home is at a 17-year low due to high prices by AP
The high cost of homes as well as more competition for those homes given tighter inventory have resulted in the lowest profit-margins for home flipping since 2008.
Developed ex-US equities by Meketa
Developed international stocks provide an opportunity for investors to take advantage of global growth and innovation beyond U.S. markets. Despite increased correlation with US equities, they offer diversification benefits, particularly as correlations tend to weaken during market disruptions, and they offer increased exposure to sectors underrepresented in the US market, like Industrials and Financials. There are time periods where developed international stocks outperform the US, and the currency risk can be mitigated through hedging.
Dotcom on Steroids by GQG Partners
A growth manager is sounding the alarm on valuations in the tech sector, comparing them to the dot com era, and saying the ride could end (and reverse) soon. More specific concerns are: revenue growth decelerating, increasing competition, AI potentially disrupting the big tech disruptors, and that investors mistakenly believe that tech companies today are cheaper than during the 2000 tech bubble.
Book Recommendation
The Secret of Secrets: A Novel (Robert Langdon) by Dan Brown
The latest Dan Brown thriller is better than his last few books and a good read.
Robert Langdon, esteemed professor of symbology, travels to Prague to attend a groundbreaking lecture by Katherine Solomon—a prominent noetic scientist with whom he has recently begun a relationship. Katherine is on the verge of publishing an explosive book that contains startling discoveries about the nature of human consciousness and threatens to disrupt centuries of established belief. But a brutal murder catapults the trip into chaos, and Katherine suddenly disappears along with her manuscript. Langdon finds himself targeted by a powerful organization and hunted by a chilling assailant sprung from Prague’s most ancient mythology. As the plot expands into London and New York, Langdon desperately searches for Katherine . . . and for answers. In a thrilling race through the dual worlds of futuristic science and mystical lore, he uncovers a shocking truth about a secret project that will forever change the way we think about the human mind.
Boston Corner
Mass. federal workers stranded during shutdown
