Family Office & RIA Weekly Roundup | 5.30.24 | Volume 106
Volume 106
05/30/2024 (5 Min. Read)
?
Alt ETF Demand Rises, The U.S. Labor Market Diverges and the IEA Warns of a Mineral Shortfall in this Week's Edition...
Take a Lap Around the Industry
ETF Survey Reveals Rising Demand for Alternative Investments in 2024
The latest Brown Brothers Harriman Global ETF Survey reflects a nuanced investor sentiment for 2024, indicating a balance between optimism and caution in asset allocation. While U.S. equity ETFs lead in demand, capturing over 50% of the $271 billion in net ETF assets this year, a significant shift towards alternative investments is evident. Alternatives, including commodities and digital assets, are experiencing over 10% growth, highlighting their appeal for diversification, risk management, and income generation. These ETFs have simplified complex investment strategies, making them accessible to a broader audience. Investors are increasingly integrating alternatives into their core portfolios, transitioning from reactive to preventive risk management. The survey also reveals that U.S. investors are as bullish on alternatives as they are on equities, and believe the market undervalues assets like digital currency, alternatives, and commodities. This trend underscores a growing confidence in alternatives as a vital component of modern investment strategies.
"The expansion of the actively managed ETF category will also provide investors access to a growing roster of talented investment managers at institutional level pricing. The acceleration in product innovation has provided tools for greater diversification at a low cost, further highlighting ETFs potential role as stabilizers during periods of volatility."
BBH
Private Funding Pulse Check
Rep Activity Tracker ??
Diverging Indicators: Unpacking U.S. Labor Market Data
The U.S. labor market's health is often gauged through various indicators, with non-farm payrolls and the Quarterly Census of Employment and Wages (QCEW) being two of the most prominent. Non-farm payrolls, published monthly, offer a high-frequency glimpse into employment trends and are widely considered a leading indicator. In contrast, the QCEW provides a quarterly, comprehensive count of employment and wages reported by employers, covering over 95% of U.S. jobs, thus offering a broader perspective. Recently, a significant spread between these two indicators has emerged, raising questions about which more accurately reflects the labor market's current state. This divergence is critical for investors, policymakers, and economists as they navigate an economy marked by volatility and uncertainty. Understanding the nuances behind these figures can help in making more informed decisions, whether it's adjusting investment strategies, setting monetary policies, or anticipating economic shifts. As we delve deeper into these metrics, we uncover the complexities of labor market analysis and the importance of a multifaceted approach to economic health assessments.
"The U.S. labor market remains a focal point for economists and investors alike, with key indicators such as non-farm payrolls and the Quarterly Census of Employment and Wages (QCEW) offering insights into employment trends. Non-farm payrolls provide a high-frequency monthly snapshot and are considered a leading indicator, while the QCEW offers a more comprehensive quarterly overview, covering over 95% of U.S. jobs. The recent spread between these indicators raises questions about which more accurately reflects current labor conditions."
J.P. Morgan
Nvidia's AI Dominance Outshines Solar Sector Struggles
The divergent success of Nvidia and leading solar panel manufacturers reveals crucial insights into their respective industries. Nvidia, excelling in AI chip design, has reached a market capitalization of $2.62 trillion due to its strategic outsourcing and dominant 90% market share in AI processors. This approach results in a 56% return on assets and a net income margin of 49%. Conversely, China's top solar companies—Longi, JA Solar, JinkoSolar, and Trina—have seen their combined market cap drop to $44 billion, hindered by commoditized products and intense competition, yielding an average net income margin of only 3.7%. This stark contrast underscores the importance of monopolistic power and strategic market positioning in achieving outsized success.
"One telling detail of the above chart is the presence of one US cell company on it, First Solar Inc. After President Joe Biden doubled tariffs and announced new import investigations on Chinese solar panels this month, First Solar is now worth more than JA Solar, JinkoSolar and Trina Solar put together. That’s in spite of the fact that it uses a niche, high-cost technology that most companies have given up on, and can produce less than one gigawatt of cells for every 18 GW from the three Chinese companies."
David Fickling, Bloomberg
IEA Warns of Critical Mineral Shortfall Threatening Green Transition
The International Energy Agency (IEA) warns that the green transition could face a significant shortfall in critical minerals, essential for technologies like electric vehicles, wind turbines, and solar panels unless substantial long-term investments are made. Despite eased market pressures in 2023, with prices for metals such as copper, lithium, cobalt, and nickel dropping, the IEA stresses the need for new mines and recycling initiatives to meet future demand. By 2035, the projected supply of lithium and copper will meet only half and two-thirds of global demand, respectively. To mitigate potential supply strains, around $800 billion in mining investments and enhanced recycling efforts are required by 2040. Recycling could reduce new supply requirements by up to 30%, underscoring its importance alongside new mining projects. IEA Executive Director Fatih Birol highlights the critical need for secure and sustainable mineral access to support the accelerating demand for clean energy technologies.
"Without the strong uptake of recycling and reuse, mining capital requirements would need to be one-third higher..."
IEA