Weekly Research Briefing: On Speed and On Spot

May 07, 2024

What a good look for the Federal Reserve in the last week. U.S. Treasury yields fall 20 basis points, crude oil is back below $80, the S&P 500 VIX has fallen to a 13-handle and the major U.S. equity indexes have reclaimed their 50-day moving averages. And most importantly, high yield credit spreads are challenging their 2021 lows and most companies can get financing right now. There were many catalysts to the improvement in the markets last week but seeing the Fed Chairman's confidence in the U.S. economy was the most important.

Meanwhile, corporate earnings continue to exceed expectations which is increasing investors' appetite for stocks. With 80% of the S&P 500 earnings reports in the door, it is time for the international and smaller cap U.S. reports to hit the news wires. Let's hope they can photocopy the high bar of the big caps. It will be a light week on the macro news side, but there will be plenty of Fed speak to look through recapping last week's FOMC meeting. Stock prices will get the added tailwind of all the companies emerging from their stock repo blackout periods led by Apple who just added $110 billion to their stack of 'BUY' tickets. Enjoy your week!

Economy first. Inflation second...

“Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. In recent months, there has been a lack of further progress toward the Committee's 2% inflation objective.“

Federal Reserve

The Fed Chairman is not concerned with 'Stag' or 'flation'...

Powell on stagflation worries: "I was around for stagflation. It was brutal. Ten percent unemployment. High single-digit inflation. And very slow growth. Right now, we have 3% growth. Which is pretty solid growth, I would say, by any measure. And we have inflation running under 3%. So, I don't really understand where concerns about stagflation are coming from.


The Federal Reserve might be conflicted, but they are in a good position right now...

Inside the central bank, one camp of officials has been worried about leaving rates too high for too long, especially if inflation and wage growth were decelerating.

Keeping rates at their current level, a two-decade high, for a longer period could cause more pain for regional banks, commercial real-estate investors and other industries that were particularly unprepared for the rapid increase in interest rates over the last two years.

Another camp has seen little need to cut rates this year because the economy is strong. They worried that inflation would get stuck at a level well above 2.5%, when the Fed targets 2%. They have wanted more evidence that the economy is slowing before entertaining rate cuts. The latest data have given more support to that latter group and raised the odds that officials wait to see more evidence of a slowdown—one that is frequently hard to reverse once it starts—before cutting rates.


Friday gave us a good set of job numbers with a cooling of jobs added and a pullback in wage growth...

Nonfarm payrolls rose 175k in April, 65k below consensus and a 6-month low. Job growth remained rapid in the healthcare industry but slowed sharply across leisure and government, raising the possibility that rehiring in those two sectors has mostly run its course. The household survey was soft, with the unemployment rate increasing 0.1pp to 3.9%, driven by a 25k increase in household employment. The underemployment rate also increased. Average hourly earnings rose 0.20% month-over-month, below expectations.

Goldman Sachs

This government payroll number does not seem sustainable...

The Daily Shot

Many cheers from the bond and stock markets for the slowing in the rate of average hourly earnings...


Two-year UST yields reversed strongly last week on the FOMC meeting and Friday's jobs report...

The Daily Shot

The markets have also slid from expecting one Fed Fund rate cut in 2024 to now reflecting two cuts...

CME Group

Buy in May seems to hold promise for Treasury investors suggesting yields could continue lower into the summer months...

@mark_ungewitter: Bond seasonals turn positive in mid-May, providing an additional tailwind.

The corporate credit markets continue to remain wide open...

The Daily Shot

The volatility of interest rates is low right now which is good for the equity markets...

@GunjanJS: DB: "The last 2 years have shown repeatedly that it is the vol of rates and not their level that has mattered for equities"

Another great chart showing that stocks do well when the market is void of macro-economic data...

@SamRo: "It's a relatively quiet macro week. Historically, quiet weeks have been the best weeks for stocks. No news is good news." - BofA

A glance at current sector valuations shows healthy forward P/E values and solid FCF yields...

Goldman Sachs

With the S&P 500 reporting now 80% complete, the reporting company composition shifts toward smaller U.S. companies as well as more international ones...

@WallStHorizon: Busiest week of the Q1 earnings season on the way with 3,500+ global companies set to report.

Looking at the S&P 500 reports, EPS beats for Q1 2024 are coming in better (72%) than the historical average of 59%...

BofA Global

Looking at the Mag-5 earnings shows Alphabet winning by a couple lengths this quarter...

@bespokeinvest: The five $1+ trillion market cap companies that have reported Q1 earnings so far posted sales of more than $412 billion combined during the quarter. All five beat both EPS and sales estimates.

But plenty of other good earnings reactions by companies outside of the largest market caps...

Just type this list of tickers into your news and stock charts to see how good the numbers and reactions were. Stocks from all industries and market caps represented: GLW ATI THC WWD LDOS EAT TT ST TKR LLY MMM POWL PINS GRMN CRS TRN DD UTHR CLH ADP AMZN CHRW CVNA HWM FORM SFM LNTH QCOM ITRI K WRK XYL BKNG MELI MSI ANET DLR

Looking across the call notes and earnings releases, these comments stood out...

  • "The demand for cruise vacations continues to be at an all-time high, as evidenced by record booking, record book decision, and record advanced ticket sales as the continued innovation and service delivery on board our ships lead to exceptional guest satisfaction scores." - Norwegian Cruise Line CEO Harry Sommer (The Transcript)
  • *WING (Wingstop) 1Q TOTAL DOMESTIC STORES COMP GROWTH +21.6%, EST. +11.8% (BBG)
  • “In the first quarter, we delivered our best results in company history, validating our long-held belief that Carvana’s online retail model can drive industry-leading profitability while delivering industry-leading customer experiences,” CEO Ernie Garcia said. (Barrons)
  • $CBRE (Commercial RE Services): "Leasing outperformed expectations, driven by office leasing growth globally that reflects a resilient economy and companies making progress on bringing their employees back to the office" (@knowledge_vital)

Multiple news wires and sources

Amazon's AWS business now runs at $100b/year with 37%+ margins...

@TheTranscript_: AWS is now a $100B Run Rate business: "we're seeing strong AWS demand in both generative AI and our non-generative AI workloads, with customers signing up for longer deals, making bigger commitments" - $AMZN CFO

Eaton makes backup power protection and distribution equipment for data centers...

"Last fall in our Q3 2023 earnings call we highlighted the data center market and shared our view that we expected the market to grow at a 16% compounded growth rate between 2022 and 2025. We wanted to provide an update as we have seen continued momentum in this market, driven by the rise of AI, big data, and certainly edge computing…as you know, we have a strong position in the data center market and the data center/IT channel accounted for 14% of our revenue last year." - Eaton CEO Craig Arnold

The Transcript


Data centers remain all the rage this quarter for the Utility industry's conference calls...

"For some context, historically, a single data center typically had a demand of 30 megawatts or greater. However, we're now receiving individual requests for demand of 60 to 90 megawatts or greater and it hasn't stopped there. We get regular requests to support larger data center campuses that include multiple buildings and require total capacity ranging from 300 megawatts to as many as several gigawatts." - Dominion Energy CEO Robert Blue

The Transcript

Speaking of jumping on the energy demand train, passive S&P 500 investors will be buying this $28b stock on May 8th, 2024...



If you need proof that the IPO market has recovered, here is a story that you don't find in weak markets...


Speaking of IPO's, a luxury cruise line prices IPO near high end of range and still sees a 15-20% higher trading price...

$1.3b in marketable securities are being distributed to private equity investors resulting in a sizable liquidity event.

Viking Holdings Ltd. priced its initial public offering near the top of a marketed range to raise $1.54 billion for the luxury cruise operator and two investors.

Viking is offering 11 million shares and the selling shareholders are offering about 53 million for $24 apiece, the company said in a statement, confirming an earlier report by Bloomberg News.

Best known for its art- and history-rich river tours of Europe, Viking had marketed the shares for $21 to $25 each. It increased the number of shares offered by private equity firm TPG Inc. and the Canada Pension Plan Investment Board at the time of the pricing, while the size of the potential over-allotment was also increased to 9.6 million shares.

At the IPO price, Viking will have a market value of $10.4 billion based on the outstanding shares listed in its filings with the US Securities and Exchange Commission.


Another high-profile global IPO trades higher from its top of range pricing...

Spanish beauty and fragrance group Puig Brands SA and its founding family raised €2.6 billion ($2.8 billion), pricing shares at the top end of the marketed range in Europe’s biggest listing so far this year.

The Barcelona-based firm and its shareholders sold 106.5 million shares at €24.50 apiece, according to a statement confirming an earlier report by Bloomberg News. The price compares with a previous range of €22 to €24.50.

At the IPO price, Puig has a market value of €13.9 billion, according to the statement. The listing drew orders for multiple times the number of shares available.


And in M&A news, a $1.6b market cap Russell 2000 component going private at a 58% premium...

Swedish private equity firm EQT AB (EQTAB.ST), opens new tab will acquire Perficient (PRFT.O), opens new tab in all-cash deal valued at about $3 billion that will take the U.S.-based digital consultancy firm private, the companies said on Sunday.

EQT will pay $76 for each Perficient share, the companies said in a statement, representing a nearly 58% premium to Perficient's last close on Friday. The deal has been unanimously approved by St. Louis-based Perficient's board and is expected to close by the end of 2024, according to the statement.


Infrastructure teams are spending a lot of time recently with utility companies...

Global Infrastructure Partners and Canada Pension Plan Investment Board agreed to acquire Allete Inc., a Minnesota-based utility owner, for about $3.9 billion.

The companies will acquire all the outstanding common shares of Allete for $67 a share in cash, a 19% premium to the utility owner’s closing share price before a media article reported the deal in December, according to a statement Monday. The tie-up is valued at $6.2 billion including the assumption of debt.

The acquisition comes as US electric utilities are facing the biggest demand jump in a generation. Booming interest in artificial intelligence is spurring development of data centers, while new factories and efforts to electrify more of the economy are all taxing the US power grid.


Serial acquirer, Roper Industries, sees an acceleration of deals as GPs look to return cash to LPs...

"...in the private equity world, it's all about DPI and getting money back to the LPs. The LP pressure is mounted to the point where they want the capital return. And so we're just going to compress 2.5 years’ worth of deals in one year, 1.5 years. And so there's going to be a lot of activity. Relative to the competition point, because of this, this is our belief, my belief for a window of time here that the asset class of private equity that we compete with is going to be a net seller of assets versus a net buyer here for a period of time." - Roper Technologies CEO Laurence Hunn

The Transcript

IPO's and M&A rising is music to the DJ at Goldman Sachs (which just ran through an all-time high)...


China continues to pull EM indexes to short term outperformance over the rest of the world...


Is it time for EM to go on another decade long run of outperformance?

@mark_ungewitter: EEM/SPY muti-decade symmetry. Significant?

Reshoring has been good for middle U.S. unemployment rates...

@carlquintanilla: PIPER, on “Middle America”: “.. Still Our Favorite [Emerging Market] .. continues to enjoy the many secular tailwinds of the Mfg and Energy Renaissances. .. helping keep its unemployment rates the lowest in the country.”

Want to walk nine miles a day and make a quarter of a million dollars a year? Walmart has your answer.

BELLMEAD, TEXAS—As night fades to day on a recent morning, Nichole Hart walks briskly into the Walmart store she manages here, just off the freeway a few miles north of Waco...

Hart is one of Walmart’s 4,700 U.S. store managers, an increasingly important linchpin in the retailing giant’s strategy. Walmart is changing how its stores are run by leaning on managers to use staff to fulfill online orders and technology to automate some work. Plus there are the classic retail responsibilities of managing hundreds of employees, keeping shelves stocked and customers happy, all while increasing sales and profits.

While the demand for hourly retail workers has cooled since the pandemic, finding a store manager that can run a big-box retailer is a challenge. Walmart is offering higher pay, bonuses and more stock options this year to retain and attract more. Some can now make more than $400,000 a year.

“They determine success or failure,” says Kieran Shanahan, chief operating officer for Walmart U.S. As Walmart shifts to automated systems, managing a store is becoming more complex, he says. “It’s hard. You are living in two worlds.”


A very eye-opening climate change piece in the WaPo this weekend...

Even if you do not live along the southern coast or eastern seaboard, the rise in sea levels is raising the prices of your landlocked auto and property insurance costs.

Galveston, Tex., has experienced an extraordinary rate of sea level rise — 8 inches in 14 years. Experts say it has been exacerbated by fast-sinking land. High-tide floods have struck at least 141 times since 2015, and scientists project their frequency will grow rapidly. Officials are planning to install several huge pump stations in coming years, largely funded through federal grants. The city manager expects each pump to cost more than $60 million — a figure that could eclipse the city’s annual tax revenue...

“The phenomenon is so new, we still don’t necessarily even have the vocabulary for it,” Christopher Piecuch, a sea level scientist at Woods Hole Oceanographic Institution, said of the unrelenting nature of flooding confronting more and more communities. “This is something that quite literally didn’t happen two decades ago.”

But it undoubtedly is happening now. The number of high-tide floods is rapidly increasing in the region, with incidents happening five times as often as they did in 1990, said William Sweet, an oceanographer for the National Oceanic and Atmospheric Administration.

“We’re seeing flooding in a way that we haven’t seen before,” said Sweet, who leads the agency’s high-tide flooding assessments. “That is just the statistics doing the talking.”

Projections suggest that the flooding of today will look modest compared with what lies ahead. High-tide floods in the region are expected to strike 15 times more frequently in 2050 than they did in 2020, Sweet said.

Washington Post

Osaka air travelers don't know how lucky they are...

OSAKA -- Kansai International Airport has been responsible for no lost luggage since it opened in September 1994, gaining international recognition for prompt and reliable baggage delivery.

This efficient performance behind the scenes supports a stress-free flow of passengers, and expectations are rising for the role the airport will play as a gateway for visitors to Expo 2025 in Osaka...

To save passengers from stress, CKTS has a goal of getting bags to the baggage claim area within 15 minutes after an aircraft arrives. Staffers place suitcases on conveyor belts so their handles will face toward passengers, easily picked up. They hand over damage-prone items like musical instruments, strollers and skis directly to passengers. Their careful treatment of baggage extends to things like wiping suitcases dry if they get wet in the rain.

Nikkei Asia

Finally, if you are looking for a new playlist to battle aliens or dial it up a few notches, this one is perfect...

Amazon Music

Learn more about the Hamilton Lane Strategies

Learn more


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.

Recent Content


Weekly Research Briefing: Summer Moves

Moving trucks are getting active in London, Paris and possibly Washington D.C. as political parties on both sides of the Atlantic confront major changes.

Read the Research Article

Weekly Research Briefing: The Halfway Point

Fifty percent of 2024 will be in the books by this weekend. As of now, the S&P 500 is up about 15% which is better than I (and many others) would have guessed six months ago. The economy has been stronger in this first half which has led to a reluctance by the Fed to cut the Fed Funds rate. Inflation has been sticker with core goods falling as expected, but housing has been sticky and insurance prices have been extreme like the weather that is influencing it.

Read the Research Article

Weekly Research Briefing: Cruising into Fed Week

The markets expect little action by the FOMC this week, especially given last week's strong job report. Investors will be sorting through Wednesday's meeting announcement and Fed Chair Powell's press conference, but all eyes are on the horizon for future Fed actions.

Read the Research Article

We use cookies to improve user experience, and analyze web traffic. For those reasons, we may share your site usage with our analytics partners.

Learn More