Weekly Good Reads: 5-1-1
US Jobs, EU and Canada Rate Cuts, Election Surprises, Social Fitness, Andrew Ng on AI
Welcome to Weekly Good Reads 5-1-1! It’s Marianne here, a 25-year investment practitioner writing about investing, economy, wellness, and something new I learned in AI/productivity.
Each week I share insightful/essential readings, charts, and one term, incorporating some of my market observations. You can find the weekly changes of the major indices or indicators in the Weekly Change charts at the end of the first section. But I look beyond data and share something enlightening about life, health, technology, and the world around us 🌍!
Here’s the quote of the week:
One can only forget about time by making use of it. ~ Charles Baudelaire
I archived my Weeklies here and the index of charts and terms here. Check out my conversations with Female Investors and more, which I hope will inspire more females into finance and investment careers 🙌. Easily subscribe to my newsletter by clicking below.
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Market and Data Comments
The S&P 500 touched a record high on Friday after earlier on Wednesday, Nvidia, now 6% of the S&P500 in market cap and 34% of the S&P 500 YTD total return (12.81%), became the third company in the world to join the $3 trillion market value club, behind Apple and Microsoft (No. 1 market cap in the world).
This led to the term “Jensanity” when NVDA’s CEO, Jensen Huang acquired rockstar status at Computex in Taiwan. However, what Nvidia can offer depends on one thing - hundreds of companies that make AI possible - many of those based in Taiwan (see Econ/Invest. # 3)
Canada was the first G7 country to cut interest rates (from 5% to 4.75%), followed by the ECB, cutting interest rates from 4% to 3.75% to spur economic recovery. Central bankers still sound cautious and take one rate cut at a time, citing wage pressures, the Euro exchange rate differential vs. the Dollar (ECB), and the need to be inflation data-driven (Bank of Canada).
The US Fed this Wednesday is seen to hold the interest rate. Bloomberg surveyed 43 economists recently and noted that 60% of those surveyed saw three months of positive core inflation reports as the key to prompt a US rate cut, followed by softer labour report. Economists largely see the Fed update its quarterly SEP (projections of key economic variables) to two rate cuts in 2024 (see Econ/Invest. #1).
The stronger-than-expected May US Jobs report of +272,000 in non-farm payroll gains and a 0.4% monthly rise in average hourly earnings (from payroll/business and wage survey) was offset by the much weaker household survey showing the unemployment rate rising to 4% from 3.9% prior and household employment falling over 400,000 (full-time employment falling much more than part-time jobs being added.)
On the worldwide election front, Bloomberg reported on two major election surprises: India’s Prime Minister Modi was elected for a third term but his BJP Party lost its majority in the lower house of parliament with citizens criticizing the unequal distribution of economic success while in Mexico, Claudia Sheinhaum (Mexico’s first female president) won a landslide victory, but the polls did not expect her ruling party’s expanding majority, which could mean more concentration of power. The next major election to watch is the UK’s on July 4th, which the Labour Party is favoured to win.
This coming week has lots of economic events — we will monitor the EU parliament election results on Sunday, the US May CPI and the FOMC rate decision, the June SEP, Press Conference on Wednesday, and US May PPI on Thursday, China’s PPI and CPI on Wednesday, and the Bank of Japan rate decision this Friday.
Economy and Investments (Links):
Fed Seen Curbing Rate-Cutting Plans With Inflation Staying High (Bloomberg or via Archive)
Americans Have More Investment Income Than Ever Before (WSJ or via Archive)
The economy’s charge through higher interest rates is putting unprecedented sums into consumers’ pockets, pushing U.S. asset values to records and helping many high earners avoid the withering effects of inflation.
Americans in the first quarter earned about $3.7 trillion from interest and dividends at a seasonally adjusted annual rate, according to the Commerce Department, up roughly $770 billion from four years earlier. In the last quarter of 2023, wealth held in stocks, real estate and other assets such as pensions reached the highest level ever observed by the Federal Reserve. ~ WSJ
Nvidia Jugglenaut Upends Markets (FT or via Archive)
+ The Humbling of Narendra Modi (FT.com or via Archive)
Finance/Wealth (Link):
Excerpt (Introduction) from the book “Clear Thinking” (Shane Parrish, Founder of Farnam Street)
People who master their defaults get the best real-world results. It’s not that they don’t have a temper or an ego, they just know how to control both rather than be controlled by them. With the ability to think clearly in ordinary moments today, they consistently put themselves in a good position for tomorrow.
No one would refute having the ability to think clearly is a life skill and is very important in making financial decisions. Thinking clearly before investing involves removing many investment emotions and biases such as loss aversion, regrets, overconfidence, herding, etc.
+ Ultra Wealthy Are Putting Money Behind Bets on San Francisco’s Comeback (Bloomberg or via Archive)
Wellness/Idea (Link)
The Importance of Developing and Maintaining Your Social Fitness (Art of Manliness)
Maintaining physical and social fitness requires endless monotonous exercise, but when you need it, you’ll be glad you have it. ~ Art of Manliness
+ Six Non-Fiction Books You Can Read in a Day (The Economist or via Archive)
One Chart You Should Not Miss: AI Rate of Change
Morgan Stanley showed in their latest AI Mapping Report the total return since the end of 2022 of ~ 3,700 global stocks with AI exposure and AI’s importance to these companies.
The Enable/Adopter group has outperformed, followed by the Enablers (as AI becomes important in investment themes), and then the AI Adopters. Morgan Stanley pointed out those AI Adopters with strong pricing power will be the winners over those with weaker pricing power as AI is deflationary to the end consumers.
One Term to Know: “Boomerang” Kid
Boomerang kids or children refer to those adult children who move back with their parents after living independently for a while, often due to economic reasons. It is seen more as a US/UK phenomenon, as many nations have inter generations living together.
According to Pew Research based on the US Census data, since 1981, the rate of adult children living with parents has risen steadily, even before the 2020 economic crisis.
From Thrivent's 2024 Boomerang Kids Survey, 46% of the parents surveyed (a big jump from 35% last year) have had their adult children "boomerang" back home to live with them at some point with 50% of them blaming the rising cost of rent and housing.
[🌻] One Thing I Learn About AI:
In last week’s Snowflake conference, I listened to Dr. Andrew Ng, a world-renowned AI leader and the founder of Coursera, who mentioned three key points about AI:
The most important trend in AI is AI Agents, defined by Bill Gates as a system, software or application that applies artificial intelligence in such a capacity that it can act autonomously to help us humans do the things we want.
AI is a technology, so good and bad things are bound to come out of it; but we should not make AI a villain. He is particularly positive about AI research agent right now, which help researchers to summarize, write research documents and to go into deeper research much faster. I am exploring NotebookLM.Google now - looks promising!
Dr. Ng is very concerned about the latest California proposed bill SB-1047 (anti-innovation) about AI safety being passed into law especially when California is the home of many innovations. He said regulators should regulate applications, not the technology itself, which could kill the entire AI ecosystem. Safety should be a property of the application and not the technology (or model).
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Great thoughts and charts! I was a boomerang kid from 24-27 but I’ve never heard that term before haha! I’m 33 now. Those years really set me up right but I made good use of every second and every free dollar I earned 🙏🏼
That was a fun read. Think the EU and Canada will keep it going or have some pauses along the way? Mostly asking on behalf of my variable rate Canadian mortgage lol