This commentary was recently published by wealth managers, research firms, and market newsletter authors, and was edited by Barron’s.
macro strategy
Ross MKM
September 29th: The 10-year Treasury yield rose to a new cyclical high of 4.6% (about 130 basis points). [1.3 percentage points] This exceeded the level of this spring. This rally has been tracked almost “step by step” by a rise in the implied yield on 36-month federal funds futures, which has jumped more than 150 basis points since the spring. In other words, the market is pricing in a “prolonged high” scenario.
Is this inflation? A breakdown of yield components shows that real interest rates accounted for more than 90% of the rise in 10-year Treasury yields since the spring, while inflation compensation rose a net 11 basis points over the same period. This is noteworthy given the parallel rise in oil prices. It has risen from just over $80 per barrel to $94.2 per barrel as of yesterday’s close.
With copper prices down more than 9% since the spring, the CRB Metals Index is down nearly 7% and the dollar has surged nearly 5%. The rise in oil prices appears to be an adverse supply-side shock. Central banks committed to “long-term upside” in the face of negative supply-side shocks are likely to keep rates fixed at peak levels long after the cycle peaks. Thus, the “recession” phase of the boom-bust cycle emerges.
michael dalda
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AI payday is coming
UBS House View
UBS
September 28th: Tech stocks remained under pressure in September, with rising yields and mixed earnings weighing on results.of
Nasdaq 100
The index is trading about 8% below its July peak. Recent weaknesses present a good opportunity to increase exposure to leaders in artificial intelligence.
Among recent product announcements, software and application providers are rapidly deploying new CoPilots. CoPilot is an AI companion tool integrated into office workflow software that increases employee productivity and performs tasks ranging from finding information to creating content. You can charge an additional monthly fee for the CoPilot add-on, giving you room for quick and scalable monetization.
Based on previous forecasts, we expected the AI applications and models market to grow from $2.2 billion in 2022 to reach $170 billion in 2027. This is an average annual growth rate of 139%. However, given recent significant advances in the co-pilot field, our estimates may prove to be conservative. Conservatively, he expects AI to contribute around one-fifth of the global technology sector’s estimated profit growth next year, in the mid-teens.
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Sorita Marcelli and team
real estate bargains
Q4 | Outlook for 2023
Nuveen
September 28th: We remain positive on public real estate, especially given its poor performance against a backdrop of rising interest rates and its relatively attractive valuations. Real estate fundamentals remain strong across most sectors, with a particularly positive outlook for gaming REITs, senior housing, shopping centers, and data centers. Not very constructive regarding the office sector.
Private infrastructure continues to benefit from solid fundamentals and supportive government policies. We prioritize assets with growth profiles that withstand discount rate changes and re-pricing. Of particular interest are clean energy generation and storage, transportation sector infrastructure services, and certain digital infrastructure assets.
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Agricultural land is also an area of focus. We particularly favor crops that support biofuels.
Justin Urso, Jay Rosenberg
gold conference chat
Adrian Day Global Analyst
September 25th: September is a big month for the gold mining sector, with Colorado hosting its second consecutive industry conference. First, climb the majestic mountains of Beaver Creek for juniors and exploration companies, then head to the beautiful Broadmoor in Colorado Springs for major producers.
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One of the themes discussed by many investors at both conferences was the widening gap between gold prices, which have risen 6% since the beginning of the year, and gold stocks, which have fallen 4%.a handful [exceptions]everyone thinks that as gold stocks, which are currently undervalued, rise, the gap will close.
However, a decline in gold could narrow the gap. In a global environment where interest rates are rising rapidly due to continued monetary tightening and a deteriorating economic environment, gold prices are “supposed” to fall, and have actually held up well. At last year’s conference, the price of gold was just over $1,600, so that’s a pretty good one-year return. For non-US currencies, performance is even better.
But demand is highly concentrated, especially among central banks, which have purchased record amounts of bullion. Gold ETFs have seen net outflows for most of the past year. Therefore, there is a very real possibility that gold prices will fall in the coming months if central banks suspend purchases, even for a short period of time. As stubborn inflation continues heading into next year, [and] When the economy declines, gold’s prospects rise.
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Adrian Day
S&P 500 target: 4825
informed investor
piper sandler
September 19th: The story of a seasonally weak September is unfolding as expected. Despite once again facing macro headwinds, we view most 5-15% pullbacks within the uptrend from October 2022 and year-to-date lows as buying opportunities.
Next year marks the fourth year of the U.S. presidential cycle, and history shows that a downturn in an election year is also a rare occurrence. It only happened four times in his life (1932, 1940, 2000, 2008). Negative returns are even rarer in election years or recessions. It has only happened twice (1932 and 2008).
The weight of the technical evidence supports our positive outlook on the stock over the medium term, and we reiterate our year-end S&P 500 price target of 4,825.
Craig W. Johnson, Scott K. Smith
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