The Adani Group's Rally is Put to the Test, The Labor Market Signals Recession and Bond Traders Hedge Portfolios in this Week's Edition...
Take a Lap Around the Industry
Job Sites Report the Market for Remote Work Positions is Shrinking (WSJ)
Lockheed Martin, Raytheon Land Record Defense Contracts (FoxBiz)
DOJ Sues Google to Break Up its Advertising Business (Bloomberg)
Bill to Ban TikTok Nationwide to be Introduced in Senate (FoxBiz)
Hindenburg Research Releases a Short Report on the Adani Group
Yesterday, Investment Research Firm Hindenburg Research released a report on the Adani Group after opening a short position in the Indian multinational conglomerate founded by Gautam Adani. Hindenburg, whose namesake is based from the 1937 Hindenburg disaster, is known for publishing public short reports on companies they believe are overvalued and prime for a market correction. The Adani Group has been on a rally for the past two months, gaining more than 2,500 points. Hindenburg has questioned the sustainability of the rally and the company's fundamentals, calling Adani a "house of cards" and stating that the rally was driven by momentum rather than fundamentals. This prediction has raised concerns among investors and prompted some to take profits, leading to a pullback in the stock.
"Valuations will have to normalize before it makes sense to re-enter the market..."
Kamil Dimmich, North of South Capital
Private Funding Pulse Check
The Bunting Family Office, Knollwood Investment, has participated in a $3.2M Seed funding round for Blue, a blockchain service company offering DeFi protocols such as Uniswap and Curve
SetPoint Medical, a novel bioelectronic medicine therapy company that aims to treat those suffering with autoimmune diseases, has finalized on a $80M Follow-On Venture round; participants included Euclidean Capital
Builders Private Capital engaged in a $27.6M Follow-On Series B funding round in EarthOptics, an AgTech company developing tools that help farmers sustainably manage their soil
Point72 Asset Management took part in a $75M Follow-On Series B deal with Vannevar Labs, a Silicon Valley technology company targeting national security problems
The Temporary Workforce Pulls Back, Suggesting Further Job Losses
In what is seen as a warning sign for the labor market, staffing firms have witnessed a fifth straight monthly decline in temporary employment levels. Temporary jobs are often seen as a barometer of the labor market, as companies tend to terminate temporary staff during times of economic uncertainty. Additionally, this short-term class of employees is typically the first to go when companies are looking to cut costs. Data from the Labor Department reveals that temp jobs fell by more than 30,000 in December, with the number of temp jobs as a percentage of total employment sitting at its lowest level since 2010.
"For me, it’s a real warning sign...The jobs market may not be invulnerable to the downturn story."
James Knightley, ING
Bond Traders Position Portfolios Ahead of FED Decision
With the Federal Reserve Rate decision on deck next week, bond traders are hedging for the possibility that this may be the Fed's final rate hike. Traders are betting that following next week's decision, the central bank's subsequent move will be to hold rates steady or cut them. The Fed has said it will be patient with future rate increases, which some traders have interpreted as a sign the central bank is nearing the end of its tightening cycle. The yield on 10-year Treasury notes, which moves inversely to prices, fell to 1.8% on Monday, the lowest in a month, as investors sought the relative safety of government debt.
"Given the timing of the window between the February and March FOMC meetings, the Fed will have a much greater understanding of the performance of the US economy when it meets late in Q1..."
Ian Lyngen, BMO Capital Markets
Goodbye Private Equity, Hello Private Credit
After what was labelled by many as the "stratospheric era" for the Private Equity industry, a number firms in the space have shown a hesitancy to writing down their assets. Up until last year, PE was largely funded by "cheap debt and a relentless flow of investor capital". Now in the period of inflation, high interest rates and a trepid funding environment returns are more difficult to attain. The performance of their funds is not the only concern for PE, as increased competition in the space has dried up interest, especially for those launching a new fund. Additionally, funds may face difficulties exiting positions, especially with companies struggling to meet their debt obligations. Strategists point to the weakness in PE as an emerging opportunity for private credit and infrastructure funds to step in and fill the void.
"They love their assets like their children, they really don’t want to write down those assets...They are also fundraising, so it’s not really going to help them to write down those assets."
Charles Schwab has announced it has acquired The Family Wealth Alliance, a provider of resources to family wealth firms (BW)
Carson Wealth is acquiring an equity stake in White Ember Financial Planning, which prior to the deal had $117M in assets (Yahoo)
Hong Kong Wealth Advisor, Leo Wealth, has expanded into Singapore with the purchase of Jachin Capital, an independent fund manager (Int.Investment)
Written by:
Andrew Popp | Sr. Research Associate
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