This commentary was posted recently by fund managers, research companies and market newsletter writers and was edited by Barron’s.
May 14: GLD [SPDR Gold Shares] and IAU [
iShares Gold Trust
] are the two most important of the exchange traded notes (ETN) in gold bullion. Unsurprisingly, investors like to inject money into it and withdraw money as gold prices go up and down. The real fun comes when investors don’t follow this model.
Gold prices returned to above $ 1,800 an ounce after falling below $ 1,700. But the combined total assets invested in GLD and the AIU have barely budged from recent lows. This is a bullish move for gold prices as it means that “the crowd” has yet to participate in the rebound. They don’t believe it yet. They should pile in to chase the gold rally, and they are still in the background.
And that implies that there is still a long way to go for the gold price rally. Once we reach the point at which the assets of these two ETNs are increasing rapidly with the price of gold, we can say that the “crowd” is finally starting to join us. And if we saw gold prices stabilize but GLD and AIU assets continue to rise, that would be a sign that the uptrend has lasted too long and that a reversal is coming.
The future of work
BofA Global Research
May 12: The future of work is not a zero sum between humanity and technology. We believe that humans can collaborate and work alongside robots, rather than being moved by them, and that technology can create more jobs than it destroys. By 2025 alone, the WEF [World Economic Forum] believes automation will add 12 million net new jobs, with robots eliminating 85 million jobs but creating 97 million new ones. Other reasons for optimism are: (1) 65% of children who start school today will work in jobs that have not yet been invented; (2) “new” collar jobs will be generated from well-placed thematic sectors such as health, renewable energies, new mobility or even moonshot technologies; and (3) we could actually be more productive and have more free time if robots can relieve us of more mundane and repetitive daily tasks. We’ve identified $ 14 trillion in market capitalization as catalysts for the future of work. Technology, industries and medical technologies are some of the main beneficiaries. We also see opportunities in the education and retraining / retraining of workers by companies. Conversely, commercial real estate / offices and heritage transport are among the sectors facing headwinds …
So what are some truly futuristic professions that could be invented? Data privacy managers, nanomedicine surgeons, lab meat scientists, blockchain strategists, space travel guides, freelance biohackers, AI avatar designers, 3D food printer leaders, hobby planners , ethical algorithm programmers and brain simulation specialists, to name but a few.
—Felix Tran, Haim Israel, Martyn Briggs, Lauma Kalns-Timans
Distorted economic cycle
Weekly Market Commentary
Winthrop capital management
May 10: The combination of pandemic closures and a flood of fiscal stimulus has distorted the traditional business cycle. Much of the economy remains closed, eight million people are out of work, and supply chain disruptions are pushing up commodity prices. However, there appears to be a disconnect in investment markets as equity assets reach all-time highs and interest rates remain relatively low.
Our views on the integration of economic activity and capital markets have evolved since the financial crisis of 2008. In order to minimize the impact of the financial crisis on the economy, the Federal Reserve has taken drastic measures to stimulate the economy, notably by reducing short-term interest rates to almost zero percent. The main driver of asset price appreciation has been the large amount of stimulus money injected into the system.
In response to the global spread of the pandemic in early 2020, the Federal Reserve has once again taken dramatic steps to provide monetary stimulus to markets. At the same time, the US government has provided tax support to businesses and households, including direct checks to qualified individuals to help support consumer spending and trade. According to the Committee for a Responsible Federal Budget (CRFB), the US government has allocated $ 4.1 trillion in response to Covid-19. The total cost of the financial rescue resulting from the financial crisis was estimated at $ 498 billion by Deborah J. Lucas, MIT Sloan Distinguished Professor of Finance and Director of the MIT Golub Center for Finance and Policy. While the economic costs are closer to $ 2 trillion, the real cost is only a fraction of the expenses incurred to fight the pandemic.
– Grégory J. Hahn, Adam Coons
Attractiveness of dividend producers
Insights & Comments
Washington Crossing Advisors
May 10: Buy quality stocks that steadily increase dividends. This simple strategy takes a long-term view of investing and focuses on the dividend, not the stock price. The passive income generated by dividend growth has two main advantages. First, it focuses your investment strategy on growing, cash-generating businesses. Second, it tends to lead to quality businesses that are neither too young nor too old.
Why is this so? Almost by definition, a business that generates dividends tends to cover its expenses with increasing cash flow. And what companies do they tend to be? They are generally profitable companies that are well established in the middle of their life cycle. In contrast, start-ups tend to burn cash, constantly need capital, and face a higher risk of failure. These young companies tend not to pay dividends at all because they are consumed by growth. On the other hand, older companies often funnel most or all of the cash to investors as dividends because viable investments can no longer be found. These companies are often in decline and offer little growth, often reflected in high current performance.
—Kevin R. Caron and his team
Infrastructure spending in the United States
May 3: In a previous report released in August 2020, we looked at global trends in R&D spending and found that the US federal commitment to R&D was at its lowest level in over 60 years. Between 1965 and 2020, federal R&D spending as a percentage of total spending fell from 11.7% to 2.9%, while as a percentage of GDP, it declined from 2.0% to 0.6%. A similar trend can be seen in infrastructure investments. During the same period, federal infrastructure spending fell from 5.8% to 2.5% of total spending …
Since 1998, the American Society of Civil Engineers (ASCE) has assessed the condition of American infrastructure by category and attempted to estimate the cost of necessary repairs and upgrades. In its 2021 infrastructure bulletin, ASCE gave US infrastructure a “C-” rating. Of the 17 categories assessed, there were eleven “D”, four “C” and two “B” [rail and ports]. No category has ever received an “A” rating. Compared to the previous newsletter of 2017, five categories of infrastructure received rating upgrades, including aviation, drinking water, inland waterways, ports and energy. Bridges were the only category to receive a downward revision.
– Michael Hao Wu, Abby Joseph Cohen