Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, June 12, 2024

AI Summary. When stock analysts' forecasts of long-term earnings growth for S&P 500 firms are high by historical standards, their forecasts of short- and long-term profits are systematically disappointed later, according to the authors. The authors estimate that a 1 standard deviation rise in these long-term forecasts is followed by an investment boom that reverses two years later.

Pedro Bordalo,Nicola Gennaioli, Rafael La Porta, et al. University of Chicago
Date Posted:
Is Database:
Database

Changes in sell-side analysts’ 3-5 year profit expectations of individual S&P 500 firms predict aggregate boom-bust cycles for both corporate investment and stock valuations.

Do overly optimistic long-term earnings forecasts drive investment booms and busts?

Core argument: A 1 standard deviation increase in analysts' long-term earnings growth forecasts (LTG) for S&P 500 firms fuels an investment boom, with growth in the investment-to-capital ratio 3% above conventional levels the following year, before sharply reverting two years later.

Business cycles are typically traced to “fundamental” shocks. A positive productivity shock increases current output and rational expectations about future productivity. In principle, such shocks could [also] explain stock market volatility, because stocks are just claims on firms’ fluctuating profits. In practice, they do not. We follow a different route. Key to our strategy is the use of data on stock analysts’ consensus expectations of the earnings growth of S&P 500 firms. One measure turns out to be critical: the analysts’ forecast of a firm’s long-term earnings growth (LTG), which captures expectations of fundamentals over a 3-to-5-year horizon. When LTG is high relative to historical standards, analyst forecasts of short and long-term profits are systematically disappointed in the future. We [further] connect LTG to real activity. We show that a 1 s.d. increase in LTG fuels an investment boom: growth in the investment-to-capital ratio is 3% higher than conventional levels in the following year, corresponding to a 0.4 s.d. increase. The investment boom sharply reverts 2 years later. Finally, we connect LTG to conventional business cycle analysis. In the short term, higher LTG acts like a positive shock: it predicts growth in consumption, employment, and wages.

Takeaways by Macro Roundup® AI

  1. A 1 standard deviation increase in analysts' long-term earnings growth forecasts (LTG) for S&P 500 firms fuels an investment boom, with growth in the investment-to-capital ratio 3% above conventional levels the following year, before sharply reverting two years later.
  2. When LTG is high relative to historical standards, analysts' forecasts of both short- and long-term profits are systematically disappointed in the future.
  3. Higher LTG acts like a positive shock in the short term, predicting growth in consumption, employment, and wages, while fundamental productivity shocks in practice do not explain stock market volatility.

Related Articles:

  • Long Term Expectations and Aggregate Fluctuations — Analyst long-term earnings growth forecasts for S&P 500 firms, when high by historical standards, are systematically disappointed and coincide with higher expected stock returns in surveys, which the authors interpret as excess optimism. A one standard deviation rise in these forecasts is associated with an investment boom that reverses two years later.
  • Are We on the Brink of an AI Investment Arms Race? — Spending on AI chips and data centers was a bit below $100bn in 2023, around 0.4% of US GDP, and the broader set of companies exposed to AI-related investment has not yet seen a major jump in sales. The authors argue the underlying dynamics point to a spending surge large enough to shape the business cycle.
  • Credit Allocation and Macroeconomic Fluctuations — Credit expansions disproportionately channel credit to non-tradable sector firms and households, and the authors find that the sectoral allocation of credit predicts future GDP paths and the likelihood of systemic banking crises. Credit growth to non-tradable industries predicts boom-bust output patterns and elevated financial fragility, while credit to tradable industries is associated with higher future productivity growth.

AI Summary. Core consumer price inflation came in at 0.16% for the month, a 2.0% annual rate, with headline inflation at 0.01%. Core goods prices remained negative and core services inflation has been receding even as shelter inflation has not slowed, which the author argues supports hope for further inflation reduction and puts a second inflation-based interest rate cut in play.

Jason Furman @jasonfurman
Date Posted:

.@jasonfurman on the May CPI report “Big picture: core goods inflation stayed negative but core services inflation has been receding.”

Does cooling core services inflation put another rate cut in play?

Core argument: Furman notes core goods inflation stayed negative while core services inflation has been receding even though shelter inflation is not slowing, which gives him more hope about the last mile of inflation reduction.

Core CPI was 0.16% in May (2.0% annual rate). Headline was 0.01%. These are the best monthly readings since 8/21 & 7/22 respectively. Big picture: core goods inflation stayed negative but core services inflation has been receding. This is happening despite the fact that shelter inflation is not slowing. It gives me more hope about the last mile of inflation reduction. In my view, it puts a second inflation-based rate cut in play for the year. Plus prices weren't up for American families in May relative to April (seasonally adjusted).

Takeaways by Macro Roundup® AI

  1. Furman notes core goods inflation stayed negative while core services inflation has been receding even though shelter inflation is not slowing, which gives him more hope about the last mile of inflation reduction.
  2. Furman argues the May CPI report, with core CPI at 0.16% (a 2.0% annual rate) and headline at 0.01%, puts a second inflation-based rate cut in play for the year, with seasonally adjusted prices flat versus April.

Related Articles:

  • Is Consumer Spending Slowing? — The dollar value of US consumer spending has grown about 6% a year since mid-2022, but a growing share of that growth comes from "imputed" categories rather than actual transactions, and excluding those, spending appears to be slowing. Meanwhile core goods inflation has accelerated, running at 2% annually.
  • An Analysis of Pandemic-Era Inflation In 11 Economies — A cross-country analysis of 11 economies finds wide agreement that global energy and food price increases and supply disruptions in key sectors drove pandemic-era inflation, and that their recession accounts for most of the global cooling of inflation. The authors find tight labor markets had smaller but more persistent inflationary effects, leaving wage inflation as the larger remaining factor.
  • An Update About How Inflation Has Affected Households at Different Income Levels Since 2019 — The Congressional Budget Office estimates that income after transfers and taxes grew faster than consumption prices for all income groups, lowering the share of income needed to buy the same goods by 2% for the lowest-income fifth and 6.3% for the highest-income fifth.

AI Summary. Business fixed investment has held at roughly the same share of U.S. GDP as before COVID, a better outcome than after every other recession since 1980, when investment typically fell as a share of GDP and contributed less well into the recovery. American businesses invested $430bn more than if investment had followed its usual historical pattern.

Eric Van Nostrand U.S. Department of the Treasury
Date Posted:

US business investment is at least $430B higher than if it had followed the pattern of fixed investment as a share of GDP for all US business cycles since 1971.

Has business investment held up better than in past recoveries?

Core argument: U.S. business fixed investment has held roughly the same share of GDP as before COVID, a better outcome than after every other recession since 1980, whereas investment typically falls as a share of GDP and contributes less well into recovery.

Figure 1 shows business fixed investment as a share of GDP since the COVID business cycle peak (blue), compared with the analogous period in the Great Recession and Recovery (orange), and the average behavior in all U.S. business cycles since 1971 (dotted). Typically, investment tends to fall as a percent of GDP in a recession and to continue to contribute less well into the recovery.  This was especially the case in the 2008 Great Recession, when business investment as percent of GDP fell by more than 2 percentage points.  In recent years, business investment has bucked that trend, remaining at roughly the same share of GDP since before COVID: a better outcome than after every other recession since 1980. Indeed, in this cycle, American businesses invested $430 billion more than if overall growth had been the same but investment followed its usual historical pattern. Factory construction has contributed almost one-third of business investment growth since the end of 2021.

Takeaways by Macro Roundup® AI

  1. U.S. business fixed investment has held roughly the same share of GDP as before COVID, a better outcome than after every other recession since 1980, whereas investment typically falls as a share of GDP and contributes less well into recovery.
  2. American businesses invested $430 billion more in this cycle than if overall growth had been the same but investment had followed its usual historical pattern.
  3. Factory construction has contributed almost one-third of U.S. business investment growth since the end of 2021, while in the 2008 Great Recession business investment as a share of GDP fell by more than 2 percentage points.

Related Articles:

  • Business Spending Is Lining Up to Reinforce Growth — Around 70% of sectors are posting positive year-over-year profit growth, with big tech showing the largest acceleration in demand and profits but strength broadening across the economy. Companies are responding with rising capital spending growth and more optimistic investment plans, as firms typically add capacity with a slight lag after real demand picks up.
  • Making Manufacturing Great Again — US manufacturing construction spending has more than doubled over the past year and risen as a share of gross domestic product, a surge attributed to two laws: the Inflation Reduction Act, whose core is green energy subsidies, and the CHIPS Act, which promotes domestic semiconductor production.
  • The AI Transition One Year Later: On Track, but Macro Impact Still Several Years Off — Investment in AI hardware is projected to rise substantially as a precursor to integrating AI into business processes, with the investment cycle estimated to peak at 2–2½% of GDP and early signs visible among AI-enabling companies. The authors estimate generative AI could raise developed-market labor productivity growth by 1.5pp annually over a 10-year adoption period, roughly 15% cumulatively.

AI Summary. The foreign-born share of the population has risen sharply since 1990 in nearly every large Western country. As mainstream politicians from the center-right to the left dismissed voters' concerns about immigration, many voters drifted toward extreme-right parties that promised to reduce it.

David Leonhardt New York Times
Date Posted:

.@DLeonhardt suggests the rapid rise of the foreign-born share of national populations since 1990 is driving the recent electoral success of the 2016 Brexit campaign, Trump, and EU parliamentary results for Le Pen in France and the AfD in Germany.

Is rising immigration pushing Western voters toward extreme-right parties?

Core argument: The foreign-born share of the population has risen sharply since 1990 in nearly every large Western country, and it is not clear whether immigration has ever previously risen so quickly in so many countries at once.

The first thing to understand is how unusual the modern migration boom has been. In nearly every large Western country, the foreign-born share of the population has risen sharply since 1990. It’s not clear whether immigration has ever previously risen so quickly in so many different countries. If anything, the chart understates the trend because it ends in 2020, the last year with available data. For years, mainstream Western politicians, from the center-right to the center-left to the left, have dismissed voters’ concerns about immigration. Many voters responded by drifting to the only parties that promised to reduce immigration — parties on the extreme right.

Takeaways by Macro Roundup® AI

  1. The foreign-born share of the population has risen sharply since 1990 in nearly every large Western country, and it is not clear whether immigration has ever previously risen so quickly in so many countries at once.
  2. Data on the Western migration boom end in 2020, the last year with available figures, so the chart may understate the trend.
  3. Mainstream Western politicians from the center-right through the left dismissed voters' concerns about immigration for years, and many voters drifted to extreme-right parties, the only ones promising to reduce it.

Related Articles:

  • Exploring the Implications of Sub-Saharan Africa’s Demographic Explosion — Sub-Saharan Africa is projected to hold a quarter of the world's working-age population within a few decades and to surpass China's working-age population in roughly a decade. Even with modest productivity growth near 2%, the region's growth is estimated at 4.5–5.5%, raising its share of global output from about 3% while remaining small.
  • Europe Hopes Barbed Wire Will Keep Migrants Out. It Won’t — The total length of border fences in the European Union grew from 315km to 2,163km over roughly a decade, yet unauthorised crossings made up just 0.13% of all external crossings into the EU. Most migrants arrive via the Mediterranean rather than the Balkans or the eastern land border.
  • Without Immigrants, US Working-Age Population Would Shrink — All net US employment growth since early 2020 has been among foreign-born workers, and without immigration the US working-age population would be shrinking — a pattern likely to persist for the rest of the decade. The jump in immigration appears to be enabling a soft landing that most economists had thought impossible.

AI Summary. The European Commission will provisionally apply additional duties of 17–38% on imported Chinese electric vehicles, on top of an existing 10% tariff, with the rate depending on how far each carmaker cooperated with an EU subsidy investigation. EU officials say heavily subsidized Chinese imports put European industry at risk of injury.

Andy Bounds, Alice Hancock, and Gloria Li Financial Times
Date Posted:

The EU is imposing tariffs of up to 48% on Chinese EVs; currently, the PRC applies a 15% tariff on European EVs. The EU market share of EVs imported from China increased from 4% in 2020 to 25% in September 2023.

Will Europe impose new tariffs on subsidized Chinese electric vehicles?

Core argument: The European Commission notified carmakers it will provisionally apply additional duties of 17–38% on imported Chinese electric vehicles from next month, on top of the existing 10% tariff on all Chinese EVs, for a combined rate of up to 48%.

The European Commission notified carmakers Wednesday that it would provisionally apply additional duties of between 17 and 38% on imported Chinese EVs from next month. The duties will be applied on top of existing 10% tariffs on all Chinese EVs, depending on the extent to which they complied with an EU investigation into electric carmakers that was announced last September. “We have no option but to act in the face of soaring imports of heavily-subsidised battery electric vehicles, from China,” Valdis Dombrovskis, EU trade commissioner, told the Financial Times. “This puts our industry at risk of injury.”

Takeaways by Macro Roundup® AI

  1. The European Commission notified carmakers it will provisionally apply additional duties of 17–38% on imported Chinese electric vehicles from next month, on top of the existing 10% tariff on all Chinese EVs, for a combined rate of up to 48%.
  2. The size of each additional duty depends on the extent to which carmakers complied with an EU investigation into electric carmakers announced last September.
  3. EU trade commissioner Valdis Dombrovskis told the Financial Times that the bloc has no option but to act in the face of soaring imports of heavily subsidised battery electric vehicles from China, which puts European industry at risk of injury.

Related Articles:

  • A Detailed Look at Biden’s New China Tariffs — New US tariffs on Chinese goods are designed to shield sectors supported by American semiconductor and clean-energy industrial policy, betting that trade restrictions give domestic manufacturers room to match China's supply chains. US battery shipments totaled $15.8bn against $23.9bn in net imports, so domestic capacity would have to grow much faster to replace Chinese imports.
  • China’s Plan to Reshape World Trade On Its Own Terms — Countries covered by China's free trade agreement network took about 38% of its merchandise exports, roughly $1.3tn out of some $3.43tn shipped worldwide over a 12-month period. That free trade footprint exceeds the total worldwide exports of the Netherlands or Japan, the world's fourth- and fifth-biggest exporters.
  • Can Trade Intervention Lead to Freer Trade? — China accounts for over 31% of global manufacturing but under 13% of global consumption, while the United States accounts for under 17% of manufacturing and nearly 27% of consumption. The author argues persistent surpluses reflect household subsidies to producers, and that the US could counter them with tariffs or taxes on capital inflows.

AI Summary. China has shifted exports toward Southeast Asia and Latin America and away from the West, with shipments to Southeast Asia up 12% over two years while exports to the U.S. fell 17%. With a housing collapse weighing on domestic demand, Beijing has leaned on exports to drive growth.

Jacky Wong Wall Street Journal
Date Posted:

The share of China’s exports going to the developing world is rising as the EU and US adopt measures to protect their economies from China’s chronic surplus. In response, Latin American countries have started to impose tariffs.

Can China sustain export growth without Western buyers?

Core argument: Chinese exports rose 7.6% year over year in May in dollar terms while imports rose 1.8%, as Beijing leaned on its export engine after the housing market's implosion dragged down domestic demand.

Chinese exports in May increased 7.6% from a year earlier in dollar terms, while imports rose 1.8%. The implosion of China’s housing market has dragged down domestic demand, so Beijing has revved up its export engine to drive growth. Overall, China has been selling less to the West and more to Southeast Asia and Latin America. Exports to Southeast Asia in the first five months of this year rose 12% from the same period two years earlier. Over the same time, China exported 17% less to the U.S. In 2023 alone, China’s exports to the U.S. dropped 14%. This could partly be because Chinese companies are rerouting their trades through countries like Vietnam or Mexico, though those countries have also been building up lower-end manufacturing while China moved up the value chain.

Takeaways by Macro Roundup® AI

  1. Chinese exports rose 7.6% year over year in May in dollar terms while imports rose 1.8%, as Beijing leaned on its export engine after the housing market's implosion dragged down domestic demand.
  2. China's exports to Southeast Asia in the first five months of the year rose 12% from the same period two years earlier, while exports to the U.S. fell 17% over that span, including a 14% drop in 2023.
  3. The shift away from Western markets could partly stem from Chinese companies rerouting trade through countries such as Vietnam and Mexico, which have also been building up lower-end manufacturing as China moved up the value chain.

Related Articles:

  • Brazil, India, and Mexico are Taking on China’s Exports — Foreign direct investment into China fell to a 30-year low even as Chinese leaders launched an investment push in high-tech goods such as batteries and electric vehicles. Weak domestic demand for cars, chemicals, and steel has pushed Chinese goods into global markets, with average manufactured export prices down nearly 10% and export volumes near record levels.
  • Pettis On China’s Export Strategy — China is shifting investment from its weakened property sector toward manufacturing, which already accounts for 27% of Chinese GDP versus 14% elsewhere and is constrained by weak demand rather than scarce capital. Since China holds about 18% of global GDP but 30% of global manufacturing, added output must be absorbed abroad absent higher consumption.
  • China’s Excess Savings Are A Danger — China's current account surplus of 4% of GDP is larger in global terms than its 2007 peak of 10%, because its share of the world economy at market prices rose from 6% to 17%. Sustaining that surplus would require China to fund deficits in smaller developing countries.

Thursday, June 13, 2024

AI Summary. China has nearly 12,000 local government financing vehicles whose aggregated assets and liabilities equal roughly 120% and 75% of national GDP, and whose earnings before interest, taxes, and depreciation do not cover their interest payments. Their average borrowing cost of about 5% far exceeds their 1% return on assets, and 80–90% of their annual spending is funded by new debt.

Jonathan Sine Cogitations
Date Posted:
Is Database:
Database

Interest-bearing debt of China’s ~12,000 local government financing vehicles (LGFVs) has grown from 13% of GDP in 2014 to 48% in 2023. @JonathonPSine finds their average borrowing cost of 5% far outpaces their 1% return on assets.

How large and indebted are China's local government financing vehicles?

Core argument: China's nearly 12,000 local government financing vehicles (LGFVs) held aggregated assets equal to 120% of GDP and liabilities equal to 75% of GDP as of 2020, according to bottom-up surveys of LGFV financials.

There are nearly 12,000 local government financing vehicles (LGFVs) in China, collectively, they are gargantuan. As of 2020, according to bottom-up surveys of LGFV financials, aggregated assets and liabilities equal 120% and 75% of China’s GDP, respectively. LGFV’s financial situation is, to put it frankly, very bad. In aggregate, earnings (before interest, taxes, and depreciation, i.e., EBITDA) do not cover even their interest payments. Including government subsidies only occasionally pushes the interest coverage ratio above one. Moreover, the average borrowing cost for LGFVs, 5% or so, far outpaces their 1% return on assets, posing obvious sustainability problems. Cash flows paint an equally troubling portrait. Every year 80 to 90% of LGFV spending is funded by new debt. On the whole, LGFVs operating inflows do not come close to covering operating expenses. New debt is routinely added simply to make up the gap and sustain current operations.

Takeaways by Macro Roundup® AI

  1. China's nearly 12,000 local government financing vehicles (LGFVs) held aggregated assets equal to 120% of GDP and liabilities equal to 75% of GDP as of 2020, according to bottom-up surveys of LGFV financials.
  2. LGFV earnings before interest, taxes, and depreciation do not cover their interest payments in aggregate, and including government subsidies only occasionally pushes the interest coverage ratio above one.
  3. LGFVs borrow at an average cost of roughly 5% against a 1% return on assets, and 80–90% of their spending each year is funded by new debt added to sustain current operations.

Related Articles:

  • China Economy Memo: Tempest in a Teapot or Crisis A-Brewing? — The authors argue China is heading into a protracted debt crisis in which about 40% of local government financing vehicles default, hitting regional banks most exposed to such lending. They estimate total losses for these creditors at roughly $5tn, or about 30% of China's GDP.
  • China Begins Nationwide Push to Reveal Hidden Government Debt — China's Ministry of Finance reported governments across the country held 37tn yuan ($5.1tn) in on-book debt, with no official tally of hidden debt or who owes it. The International Monetary Fund estimated local government financing vehicles held 66tn yuan ($9.2tn) of hidden debt at end-2022, up from 40tn yuan in 2019.
  • Can China’s Long-Term Growth Rate Exceed 2–3 Percent? — China invests roughly 42–44% of its GDP, while more mature, capital-intensive economies typically invest about 15–20%. Modeling a ten-year path that lowers China's investment share to 30% of GDP, the author argues the resulting growth rate depends mainly on how fast consumption grows.

AI Summary. China tops the Nature Index, which counts contributions to papers in a set of prestigious peer-reviewed journals, after ranking second at the index's launch with less than a third of America's contribution. Six Chinese universities or institutions rank in the world's top ten by research output in the Leiden Ranking, and seven by the Nature Index.

Economist Staff The Economist
Date Posted:

China has surpassed the US as the leading source of scientific papers published in prestigious international journals. Next year Chinese universities are expected to produce nearly 2x as many science and technology PhDs as the US.

Has China become the world's leading producer of high-quality scientific research?

Core argument: China reached the top spot in the Nature Index by 2023, having ranked second when the index launched in 2014 with a contribution to eligible papers less than a third of America's.

[China] tops the Nature Index, created by the publisher of the same name, which counts the contributions to articles that appear in a set of prestigious journals. To be selected for publication, papers must be approved by a panel of peer reviewers who assess the study’s quality, novelty, and potential for impact. When the index was first launched, in 2014, China came second, but its contribution to eligible papers was less than a third of America’s. By 2023 China had reached the top spot. According to the Leiden Ranking of the volume of scientific research output, there are now six Chinese universities or institutions in the world's top ten, and seven according to the Nature Index.

Takeaways by Macro Roundup® AI

  1. China reached the top spot in the Nature Index by 2023, having ranked second when the index launched in 2014 with a contribution to eligible papers less than a third of America's.
  2. Six Chinese universities or institutions rank in the world's top ten by volume of scientific research output according to the Leiden Ranking, and seven according to the Nature Index.
  3. The Nature Index, created by the publisher Nature, counts contributions to articles in a set of prestigious journals, whose papers must be approved by peer reviewers assessing quality, novelty, and potential for impact.

Related Articles:

  • Creating and Connecting US and China Science: Chinese Diaspora and Returnee Researchers — The authors estimate that China-born researchers working in the US contributed to 27% of US-addressed scientific papers, while China-born researchers with US experience who returned home contributed to 38% of China-addressed papers. Papers with these authors averaged more citations and appeared more often in high-impact journals than other papers.
  • The U.S. Is Turning Away From Its Biggest Scientific Partner at a Precarious Time — More than 40% of high-quality U.S. scientific papers involve collaboration with researchers abroad, and China and the U.S. are each other's largest research partners, with their joint work consistently among the most-cited across fields. In some strategic areas, analysis of publication data finds the U.S. depends on China more than China depends on the U.S.
  • Paper Tiger? Chinese Science and Home Bias in Citations — Researchers disproportionately cite work from their own country, and measured against a benchmark that distributes world citations by the size of citing and cited countries, every country studied shows some home bias. The authors estimate China is a clear outlier at 42.3%, followed by Iran and India at 23.2% each and the US at 15.9%.

AI Summary. One stock, NVIDIA, has accounted for 35% of the increase in the S&P 500's market capitalization so far this year. This extreme concentration of returns leaves investors more vulnerable to single headlines affecting the one stock driving index gains.

Torsten Sløk Apollo
Date Posted:

NVIDIA currently accounts for 34.5% of the S&P 500’s market cap growth this year. Torsten Sløk @apolloglobal notes “If it starts to decline, then the S&P 500 will be hit hard.”

Does one stock driving index gains leave investors more vulnerable?

Core argument: NVIDIA alone accounts for 35% of the increase in the S&P 500's market capitalization since the start of the year.

Thirty-five percent of the increase in the S&P 500’s market cap since the beginning of the year has come from one stock. Such a high concentration implies that if NVIDIA continues to rise, then things are fine. But if it starts to decline, then the S&P 500 will be hit hard. The bottom line is that the extreme concentration of returns in the S&P 500 makes investors more vulnerable to single headlines impacting the one stock-driving index returns.

Takeaways by Macro Roundup® AI

  1. NVIDIA alone accounts for 35% of the increase in the S&P 500's market capitalization since the start of the year.
  2. The concentration of S&P 500 returns in NVIDIA implies the index holds up if NVIDIA keeps rising, but would be hit hard if NVIDIA begins to decline.
  3. Extreme concentration of S&P 500 returns in a single stock leaves investors more vulnerable to individual headlines affecting that stock.

Related Articles:

  • Stock Market Concentration — Over 2014–2023 the 10 largest U.S. stocks averaged 19% of market capitalization while generating 47% of total economic profit, and by 2023 they were 27% of market capitalization and 69% of economic profit. The S&P 500 returned above its average when concentration was rising and below it when concentration was falling.
  • Long-Term Shareholder Returns: Evidence From 64,000 Global Stocks — A study of about 64,000 global stocks estimates net global stock market wealth creation of $75.7tn, with returns highly concentrated: the top 159 firms (0.25%) account for half of net wealth creation and the top 1,526 (2.39%) account for all of it. Fewer than half of stocks beat one-month US Treasury bills, 42.6% of non-US and 44.8% of US stocks.
  • The Concentration Conundrum; What To Do About Market Dominance — The largest US stocks make up a bigger share of the equity market than during the 2000 technology bubble, yet their valuations are lower than in earlier bubble episodes including the Nifty 50 of the early 1970s and Japan's late-1980s bubble. Today's dominant companies are also more profitable with stronger balance sheets.

AI Summary. There are 61 nuclear power plants under construction globally, roughly 90 more in planning and over 300 proposed, alongside a push to reopen shuttered plants. Uranium prices have climbed 233% over five years, more than triple the gains in gold and copper.

Geoffrey Morgan and Jacob Lorinc Bloomberg
Date Posted:

Uranium is up 233% from 2019 as utilities pivot back to nuclear. 61 nuclear power plants are under construction globally with another 90 in the planning stage.

Is the global nuclear buildout driving uranium prices sharply higher?

Core argument: Uranium prices have risen 233% over the past five years, more than triple the gains in gold and copper even after declining somewhat in 2024.

Today, there are 61 nuclear power plants under construction globally. Another 90 or so are in the planning stage and more than 300 have been proposed. There’s even a push to re-open old plants that had been shuttered years ago. The surge in the price of uranium is a testament to the magnitude, and speed, of this pivot back to nuclear. Over the past five years, the metal has climbed 233% — more than triple the gains in gold and copper even after declining a bit in 2024.

Takeaways by Macro Roundup® AI

  1. Uranium prices have risen 233% over the past five years, more than triple the gains in gold and copper even after declining somewhat in 2024.
  2. Globally, 61 nuclear power plants are under construction, about 90 more are in the planning stage, and more than 300 have been proposed.
  3. The pivot back to nuclear power includes a push to re-open plants that had been shuttered years ago.

Related Articles:

  • Plant Vogtle Unit 4 Begins Commercial Operation — The 1,114-megawatt Unit 4 reactor at Georgia's Plant Vogtle entered commercial operation, completing an 11-year expansion that brings the plant's capacity to nearly 5 gigawatts and makes it the largest US nuclear plant. No nuclear reactors are currently under construction in the United States, where nuclear supplies about 19% of electricity.
  • Nuclear Power Is Hard. A Climate-Minded Billionaire Wants to Make It Easier — Start-up TerraPower has begun building a sodium-cooled nuclear reactor designed to be smaller and cheaper than conventional water-cooled plants, with completion expected no earlier than 2030 and the design not yet approved by the Nuclear Regulatory Commission. The company says the reactors should ultimately generate electricity at half the cost of traditional nuclear plants.
  • Electricity 2024 — More than 8,000 data centers operate globally, with about 33% in the United States, 16% in Europe, and close to 10% in China. US data center electricity use is projected to rise from roughly 200 TWh in 2022, about 4% of US electricity demand, to almost 260 TWh, or 6% of total demand.