Morning Toast April 13th

Bitcoin hits 3 stacks | Economists in a spin on US economy.


Depending on who you ask, the U.S. economy is doing just fine…or it’s about to slow down dramatically. Treasury Secretary Janet Yellen said yesterday that “the U.S. economy is obviously performing exceptionally well”. But that’s not obvious at all to the IMF, which predicted weak global growth this year and gave its gloomiest five-year economic forecast since 1990. It's getting harder and harder to plot where the people in the know sit, between crisis and opportunity, and all in vs all out...that in itself should be a warning sign....or time to go all in? 

Investors waited for the high-stakes inflation report to drop yesterday, keeping things relatively pedestrian. 

Here's how FactSet data predict things to shake out:

  • CPI climbed 0.3% in March, versus 0.4% in February

  • CPI year-over-year climbed 5.2%, versus 6.0% in February

Morningstar chief economist Preston Caldwell said he'd be watching "super core inflation," or core services excluding housing, for clues to the Fed's next move.

Strategists are starting to feel that the Fed's likely done or close to done raising interest rates, and a pause could be the next phase, given the fallout from last month's financial turmoil that started with Silicon Valley Bank collapsing. Economists polled by Bloomberg expect one more 25-basis-point hike in May, and then a mild recession to unfold in the second half of the year.

Major cryptocurrencies have emerged as the biggest winners of 2023 so far, and Bitcoin topped $30,000 for the first time in 10 months.

Stock Spotlight

Technology stocks have crushed the market and all expectations so far in 2023. Here are three reasons why tech stocks could continue to push higher.

One - As the year progresses, investors may gravitate toward the tech sector because it's filled with high-quality companies that will benefit from stronger-than-expected sales and lower interest rates.

Two - early indications are that revenue will be more resilient than anticipated in the upcoming Q1 earnings season. For example, enterprise spending on cloud software and cybersecurity hasn't slowed despite concerns about a weaker banking system and economy.

Three - tech stocks would be among the biggest beneficiaries of lower interest rates since that would improve their valuations and allow for more deal-making in the space. While the Federal Reserve hasn't yet indicated that it will pivot, it’s believed that the smart money has already priced in rate cuts.

Sustainability News

Apple to Invest $200 Million in Carbon Removal Fund Managed by Climate Asset Management.

Apple announced a major expansion of its Restore Fund, doubling the company’s total commitment to advancing high-quality, nature-based carbon removal projects. First launched in 2021, with an up to $200 million commitment with Conservation International and Goldman Sachs, the Restore Fund is now set to grow with an additional fund, including new investment from Apple, and a new portfolio of carbon removal projects. 

Apple created the Restore Fund to encourage global investment to protect and restore critical ecosystems and scale natural carbon removal solutions. This approach also helps address residual emissions businesses cannot yet avoid or reduce with existing technology.

As part of the expansion, Apple will invest up to an additional $200 million in the new fund, which Climate Asset Management — a joint venture of HSBC Asset Management and Pollination — will manage. The new portfolio also aims to remove 1 million metric tons of carbon dioxide per year at its peak while generating a financial return for investors. For Apple suppliers that become partners in the fund, it will also offer a new way for them to incorporate high-impact carbon removal projects as they decarbonize.

Quote of the Day

Treasury Secretary Janet Yellen said yesterday that “the U.S. economy is obviously performing exceptionally well.”

Douugh, did you know?

The S&P 500 (Standard & Poor's 500) is a stock market index that comprises 500 large-cap stocks listed on the NYSE (New York Stock Exchange) and NASDAQ. These stocks are chosen for market size (over $8.2+ billion), liquidity, and industry group representation, among other criteria; if they slip, they can be removed. The S&P 500 is considered a leading indicator of the overall performance of the U.S. equity market and is often used as a benchmark for the performance of actively managed portfolios.

But how does it work, and why is it important?

Companies are weighted by their market cap, specifically their float-adjusted market cap (which only counts shares that are theoretically available for retail investors to buy). That means the S&P skews toward larger cap companies, and tech stocks now account for over a quarter of the index's total value.

With 500 stocks covering a broad range of industries, the S&P is widely considered the best indicator of large-cap stocks in the U.S. While the S&P's weighting-by-market-cap method is more common than the Dow's weighting by share price, it does introduce some risk that overvalued stocks will inflate the overall index.

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