A busy data and earnings week is upon us while the election looms large. The U.S. data highlights include GDP, PCE and Jobs.
Heading into the week we already had the Israeli retailiatory strikes against Iran, which fortunately has not lead to obvious escalations. The Japanese elections showed the ruling LDP party losing control, a blow to recently elected PM Ishiba, and the uncertainty may weigh on the Yen.
Despite the uncertainty the Nasdaq is at all-time highs. The Goldman equity team is calling for the S&P 500 to deliver only 3% returns over the next decade due largely to high vlauations and high concentration, as such they recommend "investors should consider allocating to other indices that benefit from the strength of the US economy, earnings growth, and innovation but without the concentration risk, such as the equal-weight S&P 500 (SPW) and the S&P 400 (MID)." It reminds me of something I wrote about mid last week, which is the broader debate around whether or not there are some companies and business models that have continually seen increasing returns to scale.
Wherever you stand on the concentration issue, don't worry Blackrock and the financial industry has got your back, or at least is reaching into your back pocket for a share of your wallet. Blackrock launched 3 new ETF's directly related to the concentration topic. Per reporting from Reuters: "The iShares Top 20 U.S. Stocks ETF will offer access to the 20 largest U.S. companies...The iShares Nasdaq Top 30 Stocks ETF (QTOP.O), will let investors hold the 30 biggest non-financial stocks, including mega-cap tech. It has secured backing from the University of California's investing arm. The third product, the iShares Nasdaq-100 ex Top 30 ETF (QNXT.O), will invest beyond the behemoths in the hopes of capturing the growth of relatively smaller tech firms."
With all the concentration discussion, it's interesting to think about the stat from Hendric Bessembinder's paper "Do Stocks Outperform Treasury Bills?" from this X/tweet from Liz Ann Sonders earlier this year: "Out of 28,114 publicly-listed U.S. companies analyzed over past century, 25 best stocks have created nearly 1/3 of all shareholder wealth; put another way, just 0.1% of stocks have added over $17.6 trillion to investors’ wallets". What's interesting is while concntration risk is often discussed, a major risk is not having exposure to those winners. 'Don't look for the needle in the haystack. Just buy the haystack! - John Bogle
On the week ahead:
Mon: 2Y & 5Y note auction
Tue: JOLTS, Home Prices, 7Y Note
Wed: GDP and Treasury Refunding Announcement
Thur: PCE, initial jobless claims,
Fri: Jobs Day in 'merica, ISM Mfg
XTOD: Six more strikeouts from Aaron Judge during the postseason and he’ll have more strikeouts in 50ish postseason games than Tony Gwynn had in 485 games to finish his career.
XTOD: The real risk to the global dominance of the dollar is not that surplus countries seek an alternative. It is that the US itself will tire of running huge trade deficits that represent its absorption of the obverse of industrial and trade policies implemented abroad, and so take steps to reduce or even eliminate these deficits.
XTOD: 75 years after it was first published, Benjamin Graham’s ‘The Intelligent Investor’ still has valuable advice on taking risks without being an idiot https://bloomberg.com/news/articles/2024-10-25/benjamin-graham-s-the-intelligent-investor-is-worth-reading-75-years-later? utm_source=website&utm_medium=share&utm_campaign=twitter via
@business
XTOD: The goal isn't money, it's to compound your knowledge, relationships, talents, mental clarity, toughness, it's to get closer to the most confident version of yourself as you get older. You will then sense what true wealth is about: freedom, peace of mind, love beyond yourself.
XTOD: “Money is multiplied in practical value depending on the number of W’s you control in your life: What you do, When you do it, Where you do it, and With whom you do it.” — Tim Ferriss
https://x.com/nut_history/status/1850510692949934407
https://x.com/michaelxpettis/status/1850049011090124827
https://x.com/jasonzweigwsj/status/1849828738508181617
https://x.com/orangebook_/status/1849617205329264849
https://x.com/MoneyWisdom_/status/1850497347551150090
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