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Growth Team Weekly Investment Insights

In this week's post, we highlight the recent batch of macro data, the latest company to reach the $1 trillion milestone, US market returns without NVIDIA, the outlook for advertising, a China monetary policy shift, and easing permitting messaging from Donald Trump. 

Macro Roundup

Employment

The US jobs report for November painted a mixed picture . Nonfarm payrolls rose by 227,000, a strong rebound from the upwardly revised 36,000 for October, when hurricanes and strikes disrupted hiring. Additionally, payroll figures were revised up for September, signaling stronger job growth than initially reported.

Despite this positive momentum, the unemployment rate ticked up slightly to 4.2% from 4.1%. Meanwhile, average hourly earnings grew 4.0% year-over-year, slightly exceeding expectations by 0.1%, a sign of steady wage inflation.

 

 

 

 

Inflation

November inflation data was reported in line with expectations across the board and revealed a nuanced picture of price pressures in the US economy. Consumer prices rose 2.7% year-over-year,  accelerating slightly from 2.6% in October, while the core inflation rate remained steady at 3.3%. These figures suggest inflation risks persist at levels that could challenge the Federal Reserve's (Fed’s) tolerance.

Despite this, the Fed cut rates by an additional 0.25% interest rate hike at the Federal Open Market Committee (FOMC) meeting. However, the outlook for policy beyond December remains uncertain, as the Fed balances inflationary pressures with concerns about broader economic growth.

 

 

 

 

 

A silver lining in the report came from shelter costs, which ticked down from October. This slowdown could indicate easing pressure in one of the most stubborn components of inflation.

 

 

 

 

 

 

 

 

 

 

 

 

However, an area of concern is the goods part of the economy, which experienced a sizable increase, especially new vehicle prices.

 

 

 

 

 

 

 

 

 

 

 

 

The takeaway from the CPI data points is continued uncertainty on the trajectory of interest rates in 2025. This led to an unwinding of the inverted yield curve (when short-term rates are higher than long-term rates) for the first time since late 2022.

 

 

 

 

 

 

 

 

 

 

 

 

 

The Newest Member of the $1T Club: Broadcom

Broadcom surpassed $1 trillion in market valuation for the first time, driven by a 220% surge in AI-related revenues during its 2024 fiscal year. Shares soared 24% following its announcement, highlighting “massive” AI growth expectations. CEO Hock Tan projected the company’s addressable AI market could expand to $60 billion–$90 billion by 2027, from close to $20 billion today. Broadcom is well-positioned amid booming demand for AI chips as companies look to diversify beyond NVIDIA’s technology.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

On the topic of the outperformance of large-cap US technology companies, one stat making the rounds is that removing NVIDIA from the Russell 1000® Index would cause the index return during this bull market, which started in late 2022, to nearly match that of European stocks.

We ran the data. The return of the Russell 1000® Index from 30 Sep 2022 through 13 Dec 2024 is 74% compared to the MSCI EMU Index at 59%, which is a 16% outperformance. If you strip out NVIDIA, the Russell 1000 Index’s return would drop to 66%, and outperformance would drop to 7%.

It is surprising how small the gap becomes, considering how many other US mega-cap technology companies have had a great couple of years. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising Outlook

The Financial Times provided some of the highlights from a recent outlook published by a media agency (GroupM). Highlights include:

• The global advertising industry is set to exceed $1 trillion in revenue for the first time in 2024 with Google, Meta, ByteDance, Amazon and Alibaba capturing more than half of the market.
• Global advertising revenue is projected to grow 9.5% in 2024, despite economic challenges in key markets such as the US and UK. Growth is projected to continue at 7.7% in 2025.
• Digital advertising will account for 73% of total revenue by the end of 2024 and 82%, including streaming and digital publications.
• Digital advertising is expected to grow 12.4% in 2024 and 10% in 2025.
• Print ad revenues will fall by 4.5% in 2024 and another 3% in 2025, while audio revenues remain stagnant.
• Television, including streaming, is projected to see modest compound growth of 2.4% through 2029.

China Moves to “Moderately Loose”

 

After Chinese shares rallied sharply in late September/early October, they lost steam. However, investor optimism was sparked again last week after China’s leadership shifted its monetary policy stance to “moderately loose” from “prudent” for the first time in 14 years, signaling a stronger focus on addressing the country’s economic challenges.

This change, announced by the politburo led by Xi Jinping, comes ahead of the Central Economic Work Conference, where China’s 2024 economic agenda will be outlined. The announcement emphasized proactive fiscal policies and extraordinary countercyclical adjustments to boost consumption, investment efficiency and domestic demand. The politburo prioritized boosting consumption over supply chain upgrades and innovation, but implementation remains uncertain.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trump’s Permitting Message

 

Last week, Donald Trump posted the following to his social media platform:

“Any person or company investing ONE BILLION DOLLARS, OR MORE, in the US of America, will receive fully expedited approvals and permits, including, but in no way limited to, all Environmental approvals. GET READY TO ROCK!!!”

The president-elect's offer reflects his plan to spur more domestic investments through deregulation rather than the tax credits and subsidies.

Clean energy would be an especially important area, where faster permitting is seen as critical to rolling out the big projects needed to accelerate the energy transition. Developers of cross-state transmission lines, which are considered critical to efforts to electrify the energy sector and support more battery-powered cars, have also complained that permitting rules have stunted construction.

 

The Artisan Growth Team manages portfolios that hold securities issued by Amazon and Alphabet as of 9/30/24.  Portfolio securities are subject to change.