Sunday Ghospel

Happy Sunday

Most investors might not feel like it after the week we just had. We can’t all feel like Earth, Wind & Fire all the time. But just like the iconic group’s name would imply, utility investors continue to groove on. Even in September. Within the S&P, they boast the strongest YTD performance with 21.9% (+750ppts above total benchmark performance) on the back of the strongest earnings the sector has posted in years (+21% sector-wide earnings growth reported in Q2 vs. 2023)

Cheers
Philip

The week in review

Taking the temperature

• September kicks off just in line with it being the historically worst month for performance. Indices posted some of the steepest weekly declines in more than a year. NASDAQ is down nearly 6% as of Friday’s close - NVIDIA posting a weekly decline of almost 14% is a key contributor. Technology stocks were hit particularly hard amid concerns about AI's short-term profit potential. S&P 500 fell more than 4%

• Rate cut expectations for the FOMC meeting on September 18 have driven US 10Y yields down to 3.72% (vs. 3.92% the week prior) - the lowest since June 2023. Investors in anticipation of rate declines are looking to lock in higher current rates - especially as fresh 10Y and 30Y Notes are being auctioned in the US this week (Wednesday for the 10Y auction. Thursday for the 30Y auction)

• Stocks tumbled. Arithmetically Vola spiked. Investors’ expectations of ST Vola jumped +49% this week. CBOE Vola Index rose to a closing of c. 22 on Friday (well below the 39 peaks reached during the August 5 recession)

• Commodities are as undervalued relative to common equity as ever. Signs may be pointing to the beginning of a sustained commodity bull market

Venture tabs

• VC funding for August closed the slowest month YTD. The summer slump seems real. 18.0bn in funding according to Crunchbase data concludes a MoM decline of 36%. YoY funding is down 23% based on the 23.7bn raised in August 2023.

• Germany's Black Semiconductor secured 273m to boost graphene-based chip technology - a supercharge for the local semiconductor sector. Meanwhile, in India, BigEndian Semiconductors raised 3m in seed funding. Led by Vertex Ventures and India. The company aims to leverage government schemes to establish itself as a player in the growing local semi-space. Launched in 2024, the company projects to generate its first revenue in 2026. This is part of India’s 9bn funding-supported strategy to solidify its position in global semiconductor supply chains as global companies shift towards a China + 1 supply chain strategy.

• NY-based venture - Mintlify - raised a 18.5m in Series A. The round was led by Andreessen, with Bain Capital Ventures (which has been involved since the seed) and YC participating. The company enables developers to create and maintain software documentation effortlessly by integrating DevOps documentation processes directly within the code. Mintlify’s platform includes an AI-powered chat, user engagement analytics, and features that simplify updating and deploying documentation.

• London-based Capsa AI raised 1.7m in seed funding. Outward VC led the round. Cornerstone and Antler got in on the action as well. Founded in 2023, the start-up provides an AI-driven platform tailored to PE sponsors to automate workflows including DD, data extraction, and legal contract analyses. I can see Capsa easily becoming a partner or acqui—target for ACE Alternatives, Bunch or Carta - some of the leading players innovating private market investments.

The week ahead

Economic Events

• German CPI

  • Scheduled for Tuesday the reading for August is expected to come in at (0.1)%. Consensus steady compared to July

• US CPI Data

  • The reading is scheduled for Wednesday

  • Consensus estimates MoM growth in August at 0.2% in line with July

  • YoY consensus growth estimates of 2.6% vs. 2.9% in July

  • Shortly ahead of the long-awaited September FOMC decision traders are looking for signs of whether a 25bps or a 50bps cut can be expected

• ECB Rate Decision

  • The ECB is meeting to decide the deposit facility rates (the rate at which banks can deposit overnight within the euro system) and the benchmark rate

  • Consensus pegs a 25bps cut. Overnight deposits to 350bps. Benchmark rate down to 400bps.

• US PPI

  • August MoM figures scheduled for Thursday

  • Consensus estimates set for 0.2% vs. 0.1% seen in July

Earnings I will be watching

• Oracle

• For my Memestock affine readers:

  • GameStop

  • Dave&Busters

• Krogers

• MyTheresa

• Adobe

• Tenneco