🎙️ Toolbelt Generation

Gold keeps on keeping on. U.S. interest rate cut expectations—and the metal’s appeal as a safe-haven asset—have propelled it to fresh highs to kick off the month of April.

The precious metal is up ~9% in 2024 and ~74% over the past five years, nearly matching the S&P 500.

No, that’s no April Fool’s joke — just a good old flight to safety. It’s not just anxious investors eying several global crises, though. Central banks are increasingly leading the demand for bullion.

— Matthew & Shawn

Here’s today’s rundown:

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

• The race to secure funding before the 2024 election

• Gen Z becomes the toolbelt generation

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

Chart of the Day

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In The News

🗳️ Companies Race To Secure Financing Before November Elections

Election season isn’t just causing headaches for millions of Americans fatigued by waves of political ads, social tension, and other fallout from a contentious upcoming presidential election—companies are also uneasy.

Ahead of an expected bout of politically-fueled market volatility, firms are racing to shore up their financing needs, even as interest rate cuts loom.

• U.S. corporate borrowers have raised about $606 billion from bond issuance this year, up about 40% from the same period last year and the highest total since at least 1990, per the Financial Times.

Why the surge? “Low spreads,” a historically narrow gap between the government’s borrowing costs and the interest rates at which companies can borrow, fueling demand for debt.

• While that is the fundamental factor underpinning corporate-debt appetites, the end-of-year election is pulling forward much of that borrowing, argues Morgan Stanley’s co-head of global investment-grade debt syndication, who says, “I certainly think the election is a driving force for all of this supply.”
  

• He adds, “We’re running circa two months ahead of what I would consider a normal type of schedule for investment-grade (corporate debt) issuance.”

Why it matters:

For further evidence of the election’s impact on markets, look at the Vix index — the market’s “fear gauge,” as the media calls it.

Derived from pricing in the options market, the Vix is a barometer for implied volatility going forward. As the FT writes, “Traders are pricing in a rise in market stress months earlier than normal ahead of an election.”

• Of course, not all market corners are equally impacted by the election. Analysts are eyeing businesses in the healthcare and energy industries and those tied closely to China for their vulnerability to different election outcomes.

Chips off the table: After two years of low issuance, investors specializing in corporate debt have had ravenous appetites, pushing yield spreads compellingly low for companies looking to borrow money.

• That, combined with election uncertainty, is pushing businesses to take “chips off the table now” despite 0.75 percentage points of expected Fed interest rate cuts for 2024.

Make the good times last: Whether election-induced or born from an organic recessionary cycle, there’s a feeling that times are good right now, but that may not last. Hence, the race to capitalize on the market’s positive mood, as the Fed’s proposed soft-landing seems increasingly believable, with inflation under control and a robust economy.

The IPO market, too, looks to be getting much busier after Reddit successfully went public. Companies will certainly be hoping to lock in fundraising by selling shares of stock with indexes at all-time highs, with the November election being an obvious volatility catalyst disrupting the good mojo.

Read more

More Headlines

🤑 California’s effective minimum wage increased 25% on Monday

📉 Trump’s media stock plunges after posting big 2023 loss

🔻 Twitter/X’s valuation is down 73% since 2022

✂️ Walmart, Chipotle, and the art of the rare stock split 

📞 73 million customers impacted in AT&T data leak onto the dark web

🗣️ ChatGPT’s new voice cloning technology can recreate a person’s voice after only 15 seconds of audio, but the company is hesitant to release it

🔨 How Gen Z Is Becoming the Toolbelt Generation

At first glance this morning over coffee, we thought it was a scam: Gen Z being dubbed “The Toolbelt Generation” by The Wall Street Journal. After all, it is April Fool’s Day. 

But no, in a surprising twist straight out of a Stephen King novel, Gen Z is reshaping the American workforce by gravitating toward the skilled trades, challenging the long-standing belief that college is the only path to success. (Think plumbing, electrical work, carpentry, etc.)

Big shift! Fueled by rising pay scales, technological advancements, and a growing skepticism about the value of higher education, Gen Z is transforming the perception of jobs like plumbing and electrical work from "dirty" and "low-end" to lucrative and respectable career choices. 

• Many work long hours, but some earn well over $100,000 annually a few years out of high school without a college diploma or student debt.
  

• With college and university enrollments declining, vocational training programs are rising. Enrollment in vocational-focused community colleges saw a 16% increase last year alone, marking its highest since 2018. Notably, programs in construction trades saw a 23% rise.
  

• HVAC and vehicle maintenance programs also saw a 7% uptick.

Case study: Take one 20-year-old welding program graduate who embodies this trend. He describes vocational training as a "really smart route for kids who want to find something" without committing to a traditional college path. 

• He anticipates a six-figure annual income within five years, highlighting the allure of steady job prospects and earning potential.
  

• Note that professional and business services workers make a median of $78,500 compared to $69,200 in construction, according to ADP. 

Why it matters:

The demand for skilled tradespeople is surging, driven by an aging workforce nearing retirement and a consequent labor shortage. This shortage has driven up labor costs, impacting homeowners who have faced rising repair and renovation bills. 

Rising pay: The median pay for new hires in construction rose to $48,089 last year, surpassing the earnings of new hires in professional services and information sectors.

• One survey revealed that 75% of high school and college-age respondents expressed interest in vocational schools offering paid on-the-job training. Plus, many trade school students believe they can earn significantly more over time if they own or operate these businesses.
  

• Get this: The rise of generative AI influences career choices, with most respondents believing that blue-collar jobs offer better job security in the face of AI advancements.

Sustainable path? You can imagine this has created friction in some households, where mom and dad would prefer to say their son is going to Harvard or the local state school than, say, plumbing or electrical school. However, high schoolers are reconsidering the traditional college path anyway.

• As one analyst says, “After Covid, it seemed a lot of people realized the trades are a life-sustaining career path.”

Read more

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Quick Poll

On Thursday, we asked: What do you think of SBF’s 25-year sentencing?

— Many people believe the sentence to be just right. One reader observed, “Our justice system often seems irrational. Recivisit criminals not punished in any meaningful way. Twenty-five years is reasonable and serious. I hope this is the start of a trend.”

—Another noted that SBF’s behavior might have tiled the odds against him. “If he had been more humble, it might have been 10-12 years. People underestimate the importance of sincere intention and motive, not only during the incident — but also after the incident if we have made a mistake. That sincerity would reduce the sentence.”

— As for too short, a reader commented: “The sentence needs to act as a deterrent to future offenders. The enormity of the crime warrants a harsher sentence.” Said another: “Scam Bankster Fraud should have been given a sentence nearly as long as Bernie Made-off. Misspelling of names is intentional aof for emphasis.”

— As for too long? “All punishment in the USA is too long. It is just cruel,” one reader noted.

See you next time!

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