December 7, 2024

 

The S&P 500 rose 1.0% this week. Gold fell 1.1%, while the Bloomberg Aggregate Bond Index and Bitcoin rose 0.5% and 4.7%, respectively.  

The BLS for November reported 227K new jobs, a slight upside surprise and an increase from the previous month’s disappointing figure. The December reading of Consumer Sentiment from the University of Michigan was up for the fifth consecutive month, reaching its highest level in eight months. The ISM Services report fell 3.9 percentage points in November, missing forecasts. Overall economic momentum remains favorable for now. 

 

 

 

America's Productivity Is Booming

 

 

Business is booming in the US. Claudia Sahn, chief economist at New Century Advisors, calls it a "productivity renaissance." 

Economic growth is predicated on the total number of workers in an economy and their labor productivity. Since demographics change slowly, labor productivity is the most important swing factor that drives the economy. Labor productivity has averaged 2.3% in the past two years, which is about half a percent faster than in the four years prior to the pandemic. The recent surge in US productivity has eclipsed most global counterparts, and is largely due to a notable increase in new business formations. Post-pandemic, the US economy has become more entrepreneurial. And when an economy becomes more entrepreneurial, it becomes more dynamic and productive. 

Another factor boosting the US economy is its dynamic labor market. During the "Great Resignation" of 2021-2022, many workers switched to new jobs that better matched their skills, which made them more productive.        

 

 

 

Health Care Is Growing Faster Than Tech 

 

 

As Big Tech's growth slows, investors should consider increasing their exposure to health care stocks. The Magnificent Seven tech giants are expected to see a combined earnings growth of 18% in 2025. That's a strong number that exceeds the S&P 500's expected earnings growth of 13% in 2025. But it would also mark a sharp decline from 34% growth projected for 2024. And if we exclude Nvidia, the rest of the Mag Seven anticipates a mere 3% profit increase. In contrast, health care stocks are expected to outpace Big Tech in earnings growth. Bloomberg Intelligence estimates the S&P 500 Health Care sector will grow earnings 20% in 2025. This sector's stability and consistent demand make it an attractive option for investors seeking reliable returns. Silverlight managed portfolios are overweight the health care sector.

 

 

 

Bitcoin ETF Flows Exceed Satoshi's Stash

 

 

Bitcoin recently surpassed $100,000 for the first time. The main factor driving Bitcoin to new highs is ETF flows.  

Blackrock's iShares Bitcoin Trust ETF (ticker: IBIT) is the most successful launch in ETF history. IBIT hit the $10 billion, $20 billion, $30 billion and $40 billion marks faster than any other ETF ever. Some are concerned that the ETFs' rise represents a centralization of what's supposed to be a decentralized asset. However, we don't see much of a difference between an exchange and an ETF. Both simply allow investors to outsource the ownership process. Silverlight managed portfolios are long IBIT. 

This week, spot Bitcoin ETFs surpassed 1.1 million in total BTC holdings. This level exceeds the stash of the original Bitcoin founder, Satoshi Nakamoto. As time goes on, ETFs will likely acquire a much bigger share of the Bitcoin market. “The US spot ETFs have just passed Satoshi in total bitcoin held, now hold more than 1.1m, more than anyone in the world, and they're not even a year old yet, literally babies still. Mind blowing,” said Bloomberg's Eric Balchunas.

 

 

 

David Rosenberg Capitulating Is A Bear Warning

 

 

David Rosenberg, a longtime stock market bear, recently reevaluated his pessimistic stance. In his piece titled "Lament of a Bear," Rosenberg admitted that high valuations might be justified by AI's potential to boost productivity. He acknowledged that his previous focus on traditional valuation metrics might not be suitable in the current tech-driven economy. Rosenberg hasn't completely abandoned his cautious approach, but he now recognizes the transformative impact of AI on market psychology and long-term earnings expectations.

Mr. Rosenberg isn't the only perma-bear capitulating lately. Mike Wilson at Morgan Stanley was a long-time bear who finally capitulated a few months ago. And Marko Kolanovic is now a former chief strategist at JPMorgan mainly because he stayed too bearish for too long. 

From a sentiment perspective, it's usually a contrarian signal when notable perma-bears start capitulating to the bullish side or getting fired from their jobs. It means there aren't many bears left, which means less potential buying power is available in the future. That doesn't mean a market top is right around the corner. But Rosenberg flipping bullish is something we see as an intermediate-term bearish signal. 

 

 

 

Notre Dame Reopens To The World

 

 

In the midst of major political turmoil and uncertainty, France has achieved a monumental feat that has brought a sense of national pride: the rapid restoration of the Notre Dame Cathedral. After the devastating fire in April 2019, which destroyed the iconic spire and caused extensive damage, the future of this historical treasure seemed bleak. Yet, against all odds, France rallied its resources, artisans, and global support to rebuild and restore the cathedral with remarkable speed and precision. While political factions may struggle to form a cohesive government, the successful restoration of Notre Dame stands as a testament to the French spirit of resilience and unity.

 

 

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This material is not intended to be relied upon as a forecast, research or investment advice. The opinions expressed are as of the date indicated and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and non-proprietary sources deemed by Silverlight Asset Management LLC to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Silverlight Asset Management LLC, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any of these views will come to pass. Reliance upon information in this post is at the sole discretion of the reader.​​