This commentary was issued recently by money managers, research firms, and market newsletter writers and has been edited by Barron's.
New Investment Era
The Sovereign E-Advisor Sovereign Asset Management sazdanoffsovereign@neo.rr.com April 11: Inflation is now firmly entrenched in the economic system because of unfettered, debt-fueled government spending. Unfortunately, the hard way out of this situation, which would be the best way out, isn't going to be forthcoming as there is no political or societal will to [take it]. The hard way would be to decrease government spending on defense and entitlements (Social Security/Medicare/Medicaid/Welfare/etc.); raise taxes; and decrease foreign aid in all forms.
Even if any or all of this were to occur, it would only be at the margin and not in any meaningful way. Instead, the government will continue to spend and create more inflation, which is what they must want. This is their way out of the debt problem as higher inflation makes paying back the debt cheaper over time. However, the risk of this strategy is that inflation could easily run out of control, creating an untenable situation for the vast majority of the public whose income has not kept pace with the rise in 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 past 40-plus years of falling interest rates and falling inflation is over. Investors must begin to adjust their thinking and approach to the market before this new reality completely takes hold.
Donald L. Sazdanoff
Savings Rate Slides
Special Commentary Wells Fargo April 11: Spending outpaced income growth in February as the personal saving rate slid to 3.6%, marking the lowest rate at which households saved in 14 months. The saving rate is off its postpandemic low, which broke below 3%, but still remains well below the average rate at which households were saving in the prepandemic era (6.1%).
To some extent, this is just the continuation of a long-term trend lower in the savings rate. From the mid-1970s to the 2008 recession, households consistently saved less in the aftermath of each recession than they did in the prior cycle.
On that basis, a structurally lower savings rate isn't surprising and is consistent with typical behavioral shifts in the wake of a recession. In fact, if there is a cycle that breaks the mold, it is the 2009-20 expansion. That was the first (and only) cycle in which households saved at an average rate above the prior cycle average in nearly 50 years. This points to the financial strain caused by the 2008 downturn and resulting shift in consumer behavior.
Shannon Seery Grein, Tim Quinlan, Jeremiah Kohl
Dr. Copper's Latest Message
Chart in Focus McClellan Financial Publications April 11: The latest posting for the consumer price index, out on April 10, caught many by surprise, but it reflects an upmove that already started in copper from its December 2023 low. The most recent jump to above $4/pound says that inflation isn't yet done rising.
There is room to question the legitimacy of that message, since part of the rise in copper prices may have come from speculative trading in China. The Shanghai Stock Exchange just recently imposed trading limits on futures contracts for both gold and copper, in an effort to tamp down on that trading. So if this spike disappears rapidly, then one may be able to disregard it.
For now, though, the message is that inflation is going to be rising for at least the next two months.
Tom McClellan
Semiconductor Outlook
UBS House View UBS April 9: The U.S. Commerce Department said this week it will grant $6.6 billion in subsidies and up to $5 billion in low-cost loans to Taiwan chip maker TSMC for the construction of cutting-edge semiconductor chip fabrication plants in Arizona. TSMC will reportedly raise its planned investments in Arizona by another $25 billion (to a total of $65 billion) and add a third chip plant by 2030. The Commerce Department, which granted $8.5 billion in subsidies and up to $11 billion in cheap loans to Intel last month, is expected to reveal new subsidies for Samsung Electronics next week.
Our view: Without taking views on single companies, we note that significant semiconductor subsidies aimed at reshoring production and strengthening supply chains may offer a multiyear boost to semiconductor capital expenditure in the coming years. We forecast global data-center capex of at least $300 billion in 2024 -- which includes both AI and general server-related spending -- or around 13% year-over-year growth. We maintain our view that global semiconductor revenue should grow by 25% year over year in 2024, and that the stage is set for another solid year for semiconductors in 2025.
Solita Marcelli and Team
Don't Forget Pets.com!
Commentary Centre Street Cambridge Corporation April 8: Increasing market optimism has produced some truly astounding statistics, notably in the more speculative regions. While the outsize influence of the so-called Magnificent Seven technology companies has waned somewhat due to declines in a few of its members, one of them, Nvidia, a company at the center of the current hype surrounding artificial intelligence, saw its market value rocket by $277 billion in one 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 equity market gains in the period. A tech company in the social media sphere rose to a $14 billion market valuation after going public, supported by $3 million in revenue.
The experience of Pets.com seems to be lost to history at this point.
Dennis Butler
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(END) Dow Jones Newswires
April 12, 2024 21:30 ET (01:30 GMT)
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