⚠️😬 Allocation of Risky Assets is PEAKING
Happy Sunday,
It’s the final day of The Masters today, and it’s pretty tight at the top. Definitely rooting for Max Homa or Ludvig Aberg. There are about four golfers within close striking distance of taking the tournament, and by the time you’re reading this newsletter, the winner has likely already been decided. I also did a nice 7 mile run along the water this morning and was able to snag this photo at the “Wave Organ” in SF.
We’ve had some great viewership on the YouTube as of late, and we’re excited to continue pumping out content for the rest of the year! If you missed our latest video, it’ll be linked at the bottom of the newsletter!
Enjoy this week’s Sunday Primer!
- Humphrey, Tim, & Rickie
Market Report
Global Manufacturing Rebounds Thanks to the US and China
Global manufacturing is experiencing a strong rebound due to stronger performances in China and the United States. The JPMorgan/S&P Global manufacturing index reached its highest level since July 2022.
This recovery is supported by increases in factory output and new orders in countries around the world. For instance, Germany has reported a rise in industrial production, and Asian nations are expected to see growth in exports.
The World Trade Organization is projecting a moderate rebound in global merchandise trade for 2024.
Allocations to Stocks and Corporate Bonds Reaches Highest in a Decade
Recent geopolitical tensions between Israel and Iran as well as fewer rate cuts expected in 2024 have led to a challenging environment for money managers, who currently hold the largest exposure to stocks and corporate bonds in a decade.
According to JP Morgan, allocations to cash by investors are hovering near the lowest level in the past decade.
Energy-Draining AI Could Also Be the Future of Energy Savings
The increasing energy demands of AI data centers could consume up to 25% of America's power by 2030, from today’s 4% according to CEO of chip-design company ARM.
According to the IEA, a ChatGPT request uses nearly 10 times more electricity than a regular Google search.
This surge in energy consumption by data centers is driven by the power-intensive nature of training AI models. Ironically, AI also presents a solution to the energy crisis, particularly in buildings.
According to the IEA, buildings account for 30% of global energy use, with a significant portion wasted due to inefficient systems. AI's ability to optimize building operations—such as heating, cooling, and lighting based on real-time data—could significantly reduce this wastage.
Companies Reconsider Research Spending With Tax Deal Held Up in Senate
Large U.S. companies are pressing lawmakers to reinstate expired tax breaks for research and development spending. The current law requires research costs to be capitalized over multiple years rather than immediately, which significantly raises tax bills for companies.
With the Senate stalling on a bill that would temporarily restore immediate R&D deductions, companies are voicing concerns about reduced future spending on research, considering relocation of R&D activities abroad, and reevaluating investment in other business areas.
According to the U.S. Bureau of Economic Analysis, R&D spending declined last year after growing 6.6% on average over the previous five years.