Weekly Research Briefing: The Other Office
You might not be in the office, but I know that you are keeping an eye on the markets. Lots of out of office replies today which is how it should be each August. While the macro news surrounding the war in the Middle East seems stuck in a Groundhog Day loop, the price and yield charts remain active. There are many interesting continued moves as well as some new changes in direction. Scan the charts below while you enjoy your time away from the desk.
On Friday, we saw an interesting set of jobs data. Most of us were expecting an 'over' number, but instead, we got three 'unders,' including the two revisions. While we want to blame the soft government/education jobs, private job growth was also soft. More surprising was the Treasury bond reaction. The soft numbers should have pulled yields lower, but today they are higher. So either investors are calling the bond market's bluff on Friday's data, or perhaps they are more worried about higher oil prices due to the war or the flood of issuance that is coming from the U.S. Treasury combined with the AI datacenter builders. Is the jump in Gold trying to make a comment?
Stocks moved to new, all-time highs in both the US and Europe. Credit spreads also continued to tighten with investors rediscovering publicly traded Business Development Corps (BDCs) which jumped 8% on the week as the group reported earnings. The Financial Sector is now working on its 11th weekly consecutive gain which has never happened before and signals strong underlying market stability. Energy prices remain a thorn for consumers and many economies, but they are a positive for those long companies that explore or process carbon molecules. Plenty of news last week suggested the Oval Office is out of options leading to a longer stalemate with Iran. Inside the stock market, AI remains the most watched theme with investors continuing to return to their favorite names after July's scare. Even software companies are finding some value buyers.
For this week's data we will see the CPI & PPI, Retail Sales, Existing Home Sales and the Univ of Michigan sentiment numbers. Earnings will lean toward the technology and SMID cap areas of the market. There won't be much Fed speak this week as members gear up for their end of month Jackson Hole symposium (August 27th-29th). Have a great week.
After Friday's weak nonfarm payroll number and the revisions, the three month trend is looking weak…
The market received a weak jobs report and the bond market didn't even care…
What could bond investors be worried about? Oil prices? Future issuance? The US Treasury's fight with the Japanese Yen shorts? Kevin Warsh and POTUS' daily phone calls?
StockCharts
Somebody is buying Gold again. What is their bet?
StockCharts
The S&P 500 is uber healthy right now…
@Barchart: More than 72% of S&P 500 stocks are now trading above their 200-day moving average, the strongest market breadth since December 2024.
And financial stocks are confirming the markets strong base…
There all-time new highs see no recession and few new credit risks. Banks also don't mind higher long rates that they can lend at while they borrow cheaply on the short end of the curve.
StockCharts
A big day for energy stocks suggests that higher oil prices are here to stay…
Global reserves continue to decline while barrels shipped remains constrained. And winter is coming.
StockCharts
US gasoline prices look to be staying higher for longer…
StockCharts
Semiconductor stocks in an interesting place…
Time to see if the pullback in valuations will be bought or dismissed.
@humblestudent.bsky.social
If there is one actual chart that I could have for the future, this could be the one…
AI hyperscaler free cash flows are expected to come back to life. Only Microsoft is free cash flow positive through this spending cycle. But if the others can get positive returns out of their AI spending then there will be many fans of the stocks.
Goldman Sachs
Speaking of AI, current data center builds are also making residential housing more expensive…
“What’s really happening is labor is becoming harder to get again because the electrician and the plumber are getting picked off to build the data center at 2x what they’re getting paid to build a house. So that applies to commercial real estate, too. All of the construction that’s needed to build all this stuff, they’re just stealing workers from other verticals in the economy and putting pressure on wages.” - Starwood Property Trust CEO Barry Sternlicht
The going rate for a rapidly growing, top tier AI company looks to be about 45x revenues…
The legal-AI startup is in talks to raise at least $500m at a $15.5bn valuation, including the new money, The Information reported. That is a 40% jump on the $11bn it set only five months ago, when it raised $200m. Lightspeed Venture Partners is keen to lead the round.
The raise follows a revenue surge. Harvey, founded four years ago, now makes more than $350m in annualised revenue, up over 80% from $190m in January. At $15.5bn, that values the company at roughly 44 times its current revenue run rate. It is a price that assumes the growth keeps coming.
Harvey is the poster child for vertical AI, software built for one profession rather than everyone. The bet is that a tool trained on contracts, filings and case law beats a general chatbot for legal work. Its numbers suggest lawyers agree, and rivals such as Legora are chasing the same market.
No one told Atlassian and Twilio that software was dead…
Solid earnings last week launched both stocks and gave another boost to the software index ETF.
StockCharts
Probably some other undervalued gems hiding out in the IT Services sector after its 60% valuation correction…
a16z
Investors woke up to the publicly traded private credit vehicles known as BDCs last week…
The good news in their multiple earnings releases were that new credit problems did not accelerate. The market rewarded the numbers with a three standard deviation move to the upside. Now let's see if the positive investor sentiment can carry over to private credit funds.
StockCharts
See the outlier…
The S&P 500 might have made a new high last week, but the gains in the Europe ETF look even better thanks to the falling US$...
I know what you did this summer…
US schools hit the tipping point this week for kids in versus out of a classroom…
Record high ocean temps now causing the wackiest of weather and extreme fire conditions today…
But just wait until the winter surf hits the western US coast shores. A surfers paradise but a coastal homeowners nightmare.
@hausfath:The rise in Niño 3.4 region sea surface temperatures over the past few weeks has been nothing short of astonishing. We are now hotter than any days during the 1997/1998 super El Niño event, and we are still many months from the peak.
Congrats if you are long Diageo…
The rest of the global beer industry is flailing while Guinness continues to crush it. This is such a good long read if you own the stock or just love the history of the drink. Cheers!
What is undisputed: for the past five years, at least since the middle of the Covid pandemic, Guinness has been the hot story in beer. In Ireland and the UK, where the resurgence has been most marked, but also in the U.S. and around the world, Guinness has seen an explosion in popularity, achieving double-digit growth for its owner, the multinational drinks company Diageo, consistently bucking trends and confounding statisticians.
A decade ago, few trendspotters would have selected Guinness for hip Millennial and Gen Z brand appeal. Pre-Covid, the notion that a dark Irish stout, centuries old, might become a social media sensation, then a global craze, would have seemed preposterous. Now that we’ve absorbed the idea, Guinness seems ready-made for the era of the clip, the meme, and the reel.
In June, at a famous Dublin pub known as The Gravediggers, I drank Guinness with Ciaran Kavanagh, whose family has been serving Guinness to working class locals since the nineteenth century. They still do that, but now they also serve it to Japanese TV news crews and Italian TikTok influencers and even—burp—English magazine journalists. I asked Kavanagh if he was surprised by this unlikely turn of events.
“Surprised?” he said. “I’m amazed by it.”
Learn more about the Hamilton Lane Strategies
DISCLOSURES
The author has current equity ownership in: Alphabet Inc.
The information presented here is for informational purposes only, and this document is not to be construed as an offer to sell, or the solicitation of an offer to buy, securities. Some investments are not suitable for all investors, and there can be no assurance that any investment strategy will be successful. The hyperlinks included in this message provide direct access to other Internet resources, including Web sites. While we believe this information to be from reliable sources, Hamilton Lane is not responsible for the accuracy or content of information contained in these sites. Although we make every effort to ensure these links are accurate, up to date and relevant, we cannot take responsibility for pages maintained by external providers. The views expressed by these external providers on their own Web pages or on external sites they link to are not necessarily those of Hamilton Lane.