The Weekly Brief

We are now well past the 12-month mark on this bear market cycle and so it makes sense to re-assess the stage of the cycle we’re in and how investors should be thinking about being positioned through the remainder of 2023.

Investors are right to be growing weary of the investment climate today.  But despite the steady drum-beat of bad news, we must avoid focussing too much on the short-term and missing out on the long-term opportunity that lays before us.

The past week has seen high profile banks in the United States and Europe, most notably SVB and Credit Suisse, come under major selling pressure and require central bank bail-outs.  Many other banks have seen considerable declines in share prices as questions have been raised about the strength of their balance sheets too.   What's going on?

We are now well into this cycle of rising interest rates, which should tighten financial conditions enough to reduce inflation.  But it is unclear when we will reach the level of tightening that will finally bring inflation under control and set us up for the next business cycle.   The question for today's episode is, quite simply:  are we there yet?

Change in any system creates risks and opportunities. Risks for those that were beneficiaries of the system before the change, opportunities for others.  When it comes to modern technology investing, the risks and opportunities are magnified by the rapid rate of change and the scale of the market opportunity for the winners.

The latest iterations of artificial intelligence (AI) technologies are truly game-changing and will shape the future.  Large technology companies and major governments are investing ever rising sums in an attempt to come out on top in AI tech.  How should investors be thinking about this trend?

The outlook for many sectors in the economy is highly uncertain over the next 6-12 months.  Similarly, making a call on the macro economy is tough, given the information we have.  But there are some sectors where we can make more confident short-term predictions!

As investors who focus our energy on long-term structural trends, we spend a lot of time thinking about the future. Sometimes we find that important trends and developments are missed, often drowned out by the noise of the news cycle and short-term current affairs. This week, we’ll be discussing what we think is a widely misunderstood and underappreciated technology which could save humanity from catastrophic climate change: nuclear power.

Prices of financial assets discount the future, this means they look forward and are a guide to what markets think will happen in the future. Given the recent sharp moves in asset prices, what is the current implied vision of the future that markets are pricing in?

Nasdaq hit a new low for this bear market cycle last month in December, the S&P 500 index in October. Since then, we have seen a strong short-term rally in stock prices, S&P 500 is up +13%, Nasdaq Index +12.2% from recent lows. As with last August's short-term rally, this now again begs the question, is the recent rally in stocks the opening act of a new bull market recovery, or is this yet another bear market rally?