In an intriguing shift, steadfast U.S. stock investors are defying bearish consumer sentiment, creating a notable divergence between asset allocation and consumer sentiment. Historically, when consumer sentiment turned negative, individual investors tended to withdraw their investments from the stock market. However, recent data from the American Association of Individual Investors (AAII) reveals a departure from this pattern. The AAII's measurements indicate that despite persistently low consumer sentiment, its members have been consistently allocating over 60 percent of their portfolios to stocks. This divergence between asset allocation and consumer sentiment became evident in 2020, a year marked by the devastating impact of the pandemic on the economy while witnessing a surge in tech stocks. Previously, the 5-year rolling correlation (R2) between these two factors remained above 0.4, even approaching 0.7 on multiple occasions. However, in recent times, this correlation has plummeted to zero. As the economy struggles to recover and consumer sentiment remains low, this unexpected behavior from individual investors raises questions about the factors influencing their decisions and the potential implications for the broader financial landscape.
"Retail investors have stepped off the accelerator...It was just unsustainable. Conviction is starting to be shaky."
Marco Iachini, Vanda
Private Funding Pulse Check
India's leading kids fashion brand, Hopscotch, has successfully secured $20M in their Series E round, with participation from Singapore-based family office, LionRock Capital
The Grosvenor Family Office, Grosvenor Estate, has invested in a $9M Series A funding round in Qualis Flow, a digital platform enabling construction teams to collect real-time materials and waste data at source
BBy, Inc, a medical device company that condenses breast milk, has garnered $3M in investment in a recent Seed round, with the participation of Cathexis Holdings LP
Grok Ventures has participated in a $50M Series C investment in Fleet Space Technologies, an agile space company connecting the IoT using a large fleet of small low-cost satellites
Addressing the Skills Gap: Urgent Measures Needed for U.K. Industries Relying on Aging Workers
According to data from the Office for National Statistics, the U.K. farming, trucking, and bed & breakfast industries are facing a significant risk of labor shortages due to their heavy reliance on an aging workforce nearing retirement. Over half of U.K. farmers are aged 55 and older, with almost 30% over 65. Similarly, half of all truck drivers are over 50. This trend has been compounded by skill shortages and the exit of over 500,000 workers, primarily aged 50 and above, during the pandemic. The exodus has resulted in challenges for businesses across various sectors, including food industry supply chains and the availability of goods and services. The National Farmers' Union and the Road Haulage Association emphasize the need to attract younger generations to these industries to address the growing skills gap that poses a risk to long-term output levels. The concerning demographic patterns observed in the U.K. should serve as a wake-up call for nations around the world, such as the United States, where the workforce median age has risen by 3.4 years between 2000 and 2022. The U.K. government has taken steps to train more drivers through skills bootcamps, but ongoing efforts are required to secure a younger workforce in these sectors.
"We all know that producing food can be challenging and exciting, but it is not always depicted as a viable career path for young people..."
NFU Spokesperson
Nvidia Emerges as a Major Winner in the AI Revolution with Trillion-Dollar Market Cap
Artificial intelligence's rise is reshaping the business landscape, and chipmaker Nvidia has emerged as a big winner. With a market capitalization surpassing $1 trillion, Nvidia joins elite tech companies like Apple, Google/Alphabet, Amazon, and Microsoft. Nvidia's recent announcement of new processors and AI-optimized systems further strengthens its position. One notable product is the GH-200 Grace Hopper "Superchip," designed for generative AI, which is now in full production. Nvidia's hardware and software tools for training and deploying large language models make them a clear beneficiary of the AI boom. However, the long-term winners in this evolving landscape are yet to be determined. Additionally, Microsoft's collaboration with OpenAI and Google's AI proficiency may also put them in a favorable position, although the implementation of generative AI for conversational responses could potentially disrupt Google's search advertising business.
"[The Nvidia earnings results] are jaw dropping...it shows the historical demand for AI happening now in the enterprise and consumer landscape."
Dan Ives, Wedbush Securities
Dubai Leads Global Luxury Real Estate Sales with Surging Market Rebound
In the world of luxury real estate, Dubai has emerged as a driving force behind a rebound in sales, surpassing renowned cities like Hong Kong and New York. According to a recent report by real estate company Knight Frank, Dubai recorded 88 homes sold for over $10M in the first quarter, outpacing its competitors. This surge in sales has propelled Dubai's share of the global luxury real estate market from 2% in 2019 to a significant 17% today. The report also indicates that London ranked second, with a 14% market share. Overall, the global luxury real estate market experienced a revival after a few months of slower activity caused by higher interest rates and geopolitical risks. While the number of luxury sales rose by 11% in the first quarter compared to the previous three months, the total value of properties purchased dipped by 4% to $7.2B. Knight Frank estimates that luxury purchases will reach around $27B this year, down from $33B in 2022. Despite the slight decline in overall value, Dubai's impressive sales figures underscore its status as a key player in the luxury real estate market, driving growth and shaping global trends in the sector.
"The role of Dubai in supporting the global super-prime market cannot be overstated...Dubai’s sales boom has helped propel prime prices higher since the beginning of 2020, well ahead of the numbers seen in comparable markets."
Franklin Resources has agreed to buy rival money manager Putnam Investments, paying Putnam's owner Great-West Lifeco as much as $1.3B in stock and cash (WSJ)
Georgia-based Merit Financial Group LLC has acquired Planned Futures Financial Group, increasing Merit's assets by about $460M (PlanAdvisor)
Hightower made a substantial acquisition with the purchase of Vigilant Wealth Management, a New England-based RIA with around $2.3B in client assets (Barron's)
Written by:
Andrew Popp | Sr. Research Associate
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