Being born in the early 1960’s, my first memories of “news that mattered” came from Walter Cronkite who was the anchorman for the CBS Evening News during an epic run that lasted from 1962 to 1981, which was also was an extraordinarily volatile period in US and world history.
As a result, Cronkite was the face that America turned to in order to “process” the assassinations of a US President, Presidential candidate Robert Kennedy as well as civil rights leader Martin Luther King, Jr.; war in Vietnam, violent race riots across major US urban areas, the killing of four college students by US National Guardsman during a peaceful Vietnam War protest at Kent State University, Israel’s remarkable Six Day War, the ongoing Cold War between the US and the former Soviet Union, an energy crisis, the Watergate scandal that ended Nixon’s Presidency as well as the Iran hostage crisis.
Through the hindsight of history, too often, the US was not the virtuous “city on a hill” that early American settler and Puritan leader John Winthrop had envisioned (for what America would eventually become) during Cronkite’s career. Despite the epic sacrifice and valiant combat efforts of soldiers sent there, for example, the US military did not belong in Vietnam. Meanwhile, America had arguably not advanced or healed from the racial wounds that stemmed from slavery that had ended a century before. And even though Martin Luther King, Jr. found his inner “Ghandi” to lead a movement designed to peacefully address unjust social inequality in the US, violence ensued anyway.
Remarkably, Cronkite, even during such times, found a way to communicate such news in an unbiased manner without sounding like a mouthpiece for a stumbling US government. Beyond that remarkable feat, Cronkite, no matter how bad the news was, made you feel informed and, more importantly, he also made you feel that everything eventually was “going to be alright”.
Today, in the wake of tragic events that are playing out in Minneapolis, our country could sorely use the skills of Mr. Cronkite. Unfortunately, in an age of immediate, abundant and often misleading information led by an administration addicted to “tweeting” while pursuing a very different agenda than anything that has preceded it since the end of World War II, the US has entered an extreme “twilight zone”.
As reported by the Wall Street Journal, it was within hours of the shooting of Alex Pretti in Minneapolis that Homeland Security Secretary, Kristi Noem, Border Patrol Commander, Gregory Bovino, and Homeland Security Advisor, Stephen Miller, all incorrectly labeled Pretti in social media as a gun wielding terrorist. All of this, not to mention the questionable killing of Renee Good, the week before, equate to an underlying, implied and growing reality. If you’re not 100 percent on board with the ambitious, government reinventing agenda of this administration, your life seems to matter less to some of its “true believers”.
Away from the tragedy playing out in Minneapolis (and beyond…), US equity markets, led by small cap stocks, continue to grind higher. But away from the quiet and “normal” 1.94% delivered by the S&P 500 YTD through the 27th, a few noteworthy themes emerge:
Market Themes
- Understanding that the relentless build out of all things AI continues, the Semiconductor subsector’s strong 5.6% start to the year doesn’t come as a surprise.
And before leaving what is a once in a generation AI build out story, as pointed out to me by a former colleague, a second derivative global memory shortage story that is expected to run through 2027 is driving stellar near-term returns in the likes of Micron and Western Digital among others.
- The growing realization that AI (along with speculation around what happens with all of the oil now being “annexed” in Venezuela) requires an abundance of energy to run has Energy as the best performing YTD subsector in the S&P 500.
- An increasingly recognized theme of US Dollar currency debasement consciously pursued by the Trump administration (meanwhile, President Trump and Treasury Secretary Scott Bessent are currently delivering two very different messages on this topic…) which stands in sharp contrast to the strong US Dollar policies pursued by the Clinton Administration during the 1990’s. It was during the Clinton years that marked the last time that the US ran a balanced budget. Only history will tell us which approach is best. But for now, the Materials subsector of the S&P 500 is up over 10% YTD as gold prices are now approaching $5,300 an ounce.
- In terms of a good news productivity (the key to whether all of the AI hype is worth it or not…) story that ties into the future promise of AI as reported by the Financial Times in its “AI productivity is about to become visible and investable” highlights:
Walmart’s AI-driven supply chain’s 30% reduction in costs at fulfillment centers, efficiency gains in major financials as well as John Deere’s “See and Spray” technology that uses AI to reduce the usage of some chemicals by 60 percent, all speak to the “productivity” promise of AI. As a result, it is interesting to see the Industrials subsector up over 6% YTD.
- Financials, meanwhile, don’t seem to like the prospect of credit card rates potentially capped by the federal government and potentially forced rate cuts from a Fed that will be led by someone other than Jerome Powell come May.
A Few Words of Caution
- The Guardian’s ““Wake up to the risks of AI, they are almost here”, Anthropic boss warns” is worth a read as Dario Amodei acknowledges the promise of AI which could be better than humans at just about everything in just a few years. To this end, if left unregulated on its current pace of improvement, AI could halve the number of existing junior white-collar jobs while single handedly raising the unemployment rate to 20%. Beyond sweeping job losses (Amazon and UPS have both just announced meaningful reductions to headcount…) AI could also exacerbate an already existing “concentration of economic power” and wealth in Silicon Valley.
As an aside, Peter Thiel already appears to represent the embodiment of what Dario Amodei is warning against above as Thiel’s book, “The Unitary State” warrants a read. Mr. Thiel, who already quietly but still heavily impacts US politics, does not believe in the existing democratic form of government that exists in the US.
- Meanwhile, in conducting a simple chart analysis on the one-year total return difference between the Direxion 3 Times Bull and Bear Semiconductor ETFs (SOXL and SOXS), it appears clear that no one is on the “other side” of “white hot” second derivative AI plays.
- The Wall Street Journal’s “AI Stocks Still face a China Risk”, meanwhile, is worth a read. Even though last year’s ‘DeepSeek” story was overdone from a market reaction perspective, one vulnerability remains which is that China has overinvested in electricity in recent years while the US remains far behind on this front. Bernstein Research’s Stacy Ragson summarized this metaphorical “Gordion Knot” in a recent note as “the US has chips but no power; China has power but no chips”. Alexander the Great untangled the Gordion Knot of his time by simply cutting it in half with his sword. Today, this impasse is much more complex and who ascends to the ultimate throne of global AI sovereign supremacy remains open to question.
- While the US is sending an “armada” to Iran to pressure geopolitical concessions from a country beset with social unrest while trouble appears to be brewing in the Japanese bond market, one ounce of gold is now worth, as mentioned above, just under $5,300 an ounce (and let’s also not forget about silver !)
Away from some of the dizzying news flow and observations referenced above, I really wish Walter Cronkite could come back from the dead (Mr. Cronkite passed away in 2009) to wrap all of this into an evening news show to make me feel better about all of it.
In addition, if Briston Maroney is “Freakin Out On the Interstate”, perhaps we should all listen.