🎙️ Gold Rush

Bitcoin is soaring, and some say Bitcoin is “digital gold.” But how about regular gold? It’s enjoying a nice little run of its own.

🏆 Gold closed at an all-time high on Tuesday despite higher real yields and a strong U.S. Dollar. Gold has gained nearly 4% in 2024 and 16% over the past 12 months.

Another interesting wrinkle: The price of gold is rising even as U.S. ETF assets invested in the underlying commodity keep falling.

“Gold, much more so than any other commodity, is about sentiment and psychology,” Peter Lynch once said.

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the biggest stories in markets:

• Why CEOs’ economic confidence is surging

• Chairman Powell addresses Congress

This, and more, in just 5 minutes to read.

Chart of the Day

In The News

😀 U.S. Economy Boom Fuels CEO Optimism

In late 2022, American executives were cautious, with tempered expectations about the economy. Now, their optimism is surging, with expectations of strong sales and capital investments. 

Economic resilience, baby: The Business Roundtable’s quarterly gauge of CEO sentiment is above its historical average for the first time in two years. More CEOs want to spend more on equipment and factories, and many believe the economy will remain strong through 2024. 

• Plans for hiring have also edged up modestly.
  

• "This quarter's survey results underscore the resiliency of the U.S. economy and suggest accelerating economic activity over the next six months," Cisco’s CEO noted. "To further strengthen the economy, the U.S. needs to double down on policies that spur domestic investment and bolster American competitiveness," he added. 

Other executives echoed his remarks, noting that they’re concerned about excessive regulation and overreaching antitrust actions “eroding the foundation of free enterprise and the benefits it provides.”

Why it matters:

This week, Atlanta Fed President Raphael Bostic said the increased economic strength and executive confidence likely mean the Federal Reserve can hold off on interest rate cuts for the time being. There’s no rush—not when the economy is humming along just fine. 

Not inflation again! Bostic pointed out that many executives he’s met with said they “were ready to pounce at the first hint of an interest rate cut,” meaning they’d invest heavily and increase hiring. The worry: New demand that could reignite inflation. 

• "That would create upward pressure on prices," he said. "This threat of what I'll call pent-up exuberance is a new upside risk that I think bears scrutiny in coming months."

Bottom line: CEOs don't see incredible economic growth in the year ahead. But they envision an economy that keeps growing at a healthy clip, and they expect GDP growth of 2.1% this year — up slightly from their last estimate of 1.9%.

Read more

Together With Simon & Schuster

The Holy Grail of Investing

Tony Robbins returns with the final book in his financial freedom trilogy by unveiling the power of alternative investments.

Robbins, and renowned investor Christopher Zook, take you on a journey to interview a dozen of the world’s most successful investors in private equity, private credit, private real estate, and venture capital.

They share their favorite strategies and insights in this practical guidebook. 

💭 The Holy Grail of Investing is available wherever books are sold.

🗣️ Chairman Powell Addresses Congress

How is Fed Chairman Powell feeling after two hotter-than-hoped inflation reports in January and February? Speaking before Congressional lawmakers, Powell said continued progress on inflation “is not assured,” though the Fed still expects to begin cutting rates later this year.

In Powell’s words, “If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.”

• Translation: The Fed will probably reduce interest rates in 2024, excluding a surge in inflation (especially if paired with an even stronger economy).

• After commenting that more data is needed for the Fed to feel confident about inflation, Powell added, “We’re not looking for better inflation readings than we’ve had. We’re just looking for more of them.”

Rising “real interest rates” — interest rates adjusted for inflation — are driving the decision to cut. Falling inflation has boosted real interest rates, acting like an implicit rate hike.

While that is, in theory, good for the battle with inflation, higher real interest rates increasingly weigh on borrowers, eventually hurting economic growth.

• Thus, the Fed is playing a balancing game. If inflation is mostly under control, then interest rates are higher than they need to be and undermine economic growth. But cutting too much or too soon threatens to re-energize inflation.
  

• Therefore, Fed leaders have done everything they can to tamp down on investors' aggressive rate-cut bets while acknowledging they have room to lower rates.

Why it matters:

Powell’s testimony comes at a time when inflation is near striking distance of the Fed’s 2% target by some measures (“inflation” isn’t a monolith, and there are many ways to calculate it.)

• Yet, interest rates sit between 5.25% and 5.5% — the highest levels in two decades.

But the Fed can’t catch a break. While it would ideally like to bring rates down, markets catching a whiff of rate cuts and “easing financial conditions” have almost certainly contributed to the stock market, bitcoin, gold, and other financial assets hitting record highs.

• And booming asset prices make people feel richer (and spend more) through a phenomenon known as the “Wealth Effect,” potentially counteracting progress on inflation.
  

• Powell reiterated that the Fed will “approach rate cuts carefully and thoughtfully.”

Who said being a central banker was easy?

Read more

More Headlines

🛟 New York Community Bank gets $1 billion “lifeline” from the former Treasury Secretary’s investment firm

💰 The cheapest stock Warren Buffett ever owned

🤯 JPMorgan’s AI software slashed manual work by nearly 90%

💨 Chinese investors rush abroad, hitting outbound investment limit

👟 Footlocker’s stock drops 20% on weak financials

Quick Poll

Yesterday, we asked: Do you think regulators should take more or less action against Big Tech companies?

— This commenter caught our eye, saying: “Definitely more...and I even work in this industry.”

— Said another, “We as a society cannot let so few have so much power.”

— One more: “Monopoly economics are compelling for the monopolist and terrible for the people, community, and nation. Imagine the innovation that has not happened because Microsoft or Google crowded out a startup. The only worse economic structure is government spending, which strips money out of the economy and puts it to a uniformly worse use.”

Together With Masterworks

This 77% Return Is An Outlier — But The Rest May Surprise You

The news is true: Masterworks’ 15th sale just weeks ago returned an impressive 77% to investors. While such a high return is an outlier for the blue-chip art investing platform, you might be wondering what their prior sales delivered 🎨

Glad you asked… 

Every one of their sales has returned a profit to investors, with 12 of them delivering double-digit returns, and 1 delivering triple-digit annualized returns. 

In full, Masterworks has over 300 paintings and their 16 exits have delivered: 32%, 39.3%, 36.2%, 27.3%, 9.2%, 33.1%, 21.5%, 17.8%, 13.9%, 35%, 10.4%, 325.5%, 4.1%, 17.6%, 77.3%, and 13.4% net annualized returns. 

Every sale but one outperformed the stock market in the period from when it was offered to when it was sold. 

💭 With performance like that, offerings on the platform can sell out in minutes. However, We Study Markets readers can skip the waitlist to join with this exclusive link.

See you next time!

That's it for today on We Study Markets!

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