# 664 – 💚 Lookin’ good in green – The Average Joe
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    # 664 – 💚 Lookin’ good in green

    victorlei

    April 2, 2024

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    Good morning. Fitness center. Rooftop terrace. Graffiti? While graffitied walls were once considered unattractive, developers have realized that people like the urban character “street art” gives a building — so they’re paying artists to spray all over them. Now, street art is seen as an amenity, drawing attention to previously overlooked parts of cities — and raising rents in the process.

    Unfortunately, this spike in property values is pricing out some residents, prompting artists to wonder if previously “rebellious” urban art has become just another commodity.


    MARKET OUTLOOK

    US Stocks Have Never Been Better — But Analysts Are Starting To Worry

    S&P 500, you look stunning in green, and we’re sure the rest of the world would agree with us. The US stock market notched its best start to the year since 2019, driven by robust earnings and AI momentum, propelling the S&P 500 to 5,255 — a strong 10.2% jump.

    Better than ever: The benchmark index set 22 record highs in the first quarter and has risen for five consecutive months, handily surpassing Wall Street’s year-end median forecast of 5,100 set just three months ago.

    • Per NYT, 40% of S&P 500 stocks are trading higher than a year ago — with 10 out of 11 of the index’s sectors in the green.

    • However, despite Apple ($AAPL) and Tesla ($TSLA) tanking, the Magnificent Seven still drove the majority of the gains, accounting for 40% of the S&P 500’s headways this year.

    Forecast fatigue

    Based on FactSet data, the S&P 500’s price target is 5,614 over the next 12 months — a 7.1% premium to Monday’s price. However, with the index trading almost 3% above its year-end target, analysts are scrambling to update their own forecasts, which are growing further apart. Goldman Sachs suggests the S&P could rally to 6K or dip to 4.5K, while JPMorgan Chase warns stocks could “crack at any time.” But what do our readers think?

    • Our recent bear or bull survey reveals that 65.6% of readers feel bullish for April 2024 — virtually unchanged from March but above the past 12-month average.

    • Meanwhile, Bank of America’s Fund Manager Survey shows investors are turning away from US tech and consumer discretionary stocks in favor of cheaper overseas options.

    Only earnings season can tell: While analysts remain bullish on stocks, the S&P 500’s trailing and forward 12-month price-to-earnings ratio is now almost 20% higher than its average level over the past decade. Whether stocks live up to these higher valuations will ultimately hinge on the results of the coming earnings season, which kicks off next week. There’s a lot at stake with US stocks near all-time highs — and the next market direction will depend on earnings performance.


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    LARGECAP RECAP

    🧠 The brains of the AI rally are finally catching up

    Few stocks have surged like Nvidia ($NVDA) in recent years. It owes its 1,700%, five-year rise to newfound demand for artificial intelligence (AI) hardware — and other companies are joining the fray. First, it was Super Micro ($SMCI), a server producer, which saw a near 1,000% increase over the past year from its connection to Nvidia’s products — and now, semiconductor firms producing memory for AI hardware are also on the rise.

    • WSJ notes that high-bandwidth memory (HBM) is “crucial for AI number crunching” in Nvidia and AMD ($AMD) products — but only a few companies produce it, creating a tight market.

    • SK Hynix and Micron Technology ($MU) have been the main beneficiaries of demand, with their stocks doubling since the start of 2023 to surpass $100B in market cap.

    Forward-looking: Although some analysts like ARK Invest’s Cathie Wood warn that the AI rally might have run its course, Bank of America analysts recently upgraded Micron, anticipating a jump as “demand for high-bandwidth memory increases.” This could benefit SK Hynix and its South Korean neighbor, Samsung Electronics — which is trialing a new HBM chip to take on its main competition.

    😰 We live in anxious times — no wonder gold is surging

    Gold prices continue smashing records, reaching $2.25K/oz yesterday. While gold is typically seen as a hedge against inflation, its recent rally reflects concerns about geopolitical instability. With looming wars and a slew of tense global elections on the horizon, investors are turning to this “safety play” for security.

    • Amid uncertain elections in the US, UK, India, Mexico, South Korea, and beyond, one analyst notes that investors appreciate that gold “holds no national passport and has no politics” (WSJ).

    • Meanwhile, ongoing conflicts have some fearing an “endless” war between Israel and Hamas — and the UN sees “no end in sight” to Russia’s war with Ukraine.

    How high can it go? Many banks offer bullish medium-term forecasts for gold, with JPMorgan ($JPM) saying even $2.5K is possible this year. Goldman Sachs ($GS) expects high central bank purchases to drive prices up. And one analyst at Citi ($C) won’t rule out $3K — though they say it may take a global recession to get there.


    JOE’S MARKET PULSE

    🔗 Trip.com CleanSpark

    How this investment platform distributed $55M back to investors: Masterworks been able to realize a profit for investors with each of its 21 exits to date. One Banksy netted a 32% net annualized gain for investors while a Joan Mitchell piece realized a 18% net annualized gain in under two years. How can you get involved in Masterworks’ next offering? Use this exclusive link to unlock VIP access →*

    Markets & Economy

    Signs of hope for VC funds: 2023 was a slow year for venture capitalists, though a new survey shows 53% of fund managers expect to deploy more capital this year — especially established ones over emerging managers. [Read]

    Why are gas prices up this year? Spring break travel is likely why prices have been up 14% since the beginning of the year — matching previous warm-weather demand surges. While some expect prices to moderate, geopolitical unrest and tight supply could complicate that. [Read]

    The bumpy road towards 2% inflation: Price data’s inconsistency is leading some to wonder if this is just a bit of turbulence before a soft landing or a deeper issue. Either way, it’s making “higher for longer” interest rates seem plausible. [Read]

    Business & Wealth

    United ($UAL) pilots offered unpaid leave due to Boeing ($BA) delays: With fewer plane deliveries expected amid  Boeing’s safety crisis, United is reducing hours and requesting pilots take time off — potentially lasting through the summer and even into the fall. [Read]

    Gen Z embraces skilled trades: With shortages in trades like plumbing and welding and rising college disillusionment, more young people are putting on tool belts and learning a vocation. The best part? Many can earn six-figure salaries while enjoying something white-collar workers yearn for: job security. [Read]

    AT&T ($T) probes data leak affecting 73M customers: Sensitive info like SSNs leaked onto the dark web, prompting the telecom giant to investigate potential system or vendor leaks. In the meantime, they’re telling affected customers to change passwords. [Read]

    *Thanks to our sponsors for keeping the newsletter free.


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    CHART


    DIGIT OF THE DAY

    Used Clothing Sales Soar as Price-Conscious Consumers Lead the Way, Targeting 10% Market Share This Year

    In 2023, there was a shift towards affordability, from pricey homes to camper vans, premium retailers to dollar stores, and from new to used clothing. Though inflation is easing, price tags are still top-of-mind. US secondhand apparel sales rose 11% to $43B last year, nearly doubling since 2018, reports ThredUp ($TDUP).

    • Secondhand sales in the US outpaced the broader apparel market’s growth by sevenfold last year, but despite this, the industry still struggles to turn a profit.

    • ThredUp posted a $71M loss on $322M revenue in 2023, while competitor Poshmark was acquired in 2022 for one-sixth of its initial public offering valuation.

    Expensive fashion: An “oversupply of clothes,” as noted by The Or Foundation’s Co-Founder Liz Ricketts, diminishes both “the perceived value, and the real value, of everything.” Achieving profitability demands substantial investments in machinery to offset labor and fulfillment costs involved in inventory processing. It’s become such a problem that one Swiss charity is finding it “increasingly expensive” to run their organization and cover the cost of incinerating ~70% of donated clothing.


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    “Net Annualized Return” refers to the annualized internal rate of return, or IRR, net of all fees and costs, to holders of Class A shares from the primary offering, calculated from the final closing date of such offering to the date the sale is consummated. A more detailed breakdown of the Net Annualized Return calculation for each issuer can be found in the respective Form 1-U for each exit. The 3 median returns above represent the ones closest in percentage to the median of the 12 exits with holding periods over 1 year.

    Masterworks internally appraises artworks that are held by entities administered by Masterworks Administrative Services on an ongoing basis, and obtains an independent review of appraisals by a third-party appraiser on an annual basis. Appraisals are prepared in accordance with the 2020-2021 Uniform Standards of Professional Appraisal Practice (“USPAP”) developed by the Appraisal Standards Board of the Appraisal Foundation, although it is noted that there are potential conflicts of interest given that some or all individual members of the appraisal committee are employees of Masterworks and Masterworks retains an ownership interest in the subject artworks as well as ownership of the Masterworks Platform.

    Masterworks compiles historical data from public auctions to produce metrics that we believe can be helpful in measuring and analyzing historical trends in artist markets and the historical price appreciation of specific artworks.

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