“There was a time when professional investors would sneer at retail investors and their stock buying habits,” said a wily old single family office portfolio manager, who has seen a thing or two in a 42- year career, over steak and a glass of Bordeaux this week. “However, central bankers have never failed to step in when markets get wobbly in the last twenty years, and ‘buy the dip’ is now firmly part of the retail lexicon and behaviour. Instead of being the ones who add to the volatility, they are in fact a stabiliser.” With US markets having bounced back rather rapidly from the “tariff tantrum”, it is hard to see what will keep markets down.
Spy loves a good contrarian story as much as the next fellow and was rather excited to see Invesco launch the Comstock Contrarian Equity ETF (CSTK) this week. It turns out, for Invesco, anyway, “contrarian” is nothing more than a value strategy. “The portfolio managers emphasise a value style of investing, seeking to identify well-established, undervalued companies that have identifiable factors that might lead to improved valuations.” It is not betting, for example, that Peloton will bounce back, or Beyond Meat will suddenly soar 1000% to make up for its almost total collapse. With an expense ratio of 0.35% it is firmly in the “active” pricing category for such ETFs.
Yesterday, the world got itself a new Pope. The American, Robert Francis Prevost, has been elected during the papal conclave and styled himself Leo XIV. Spy did some research to see which of the last seven popes corresponded with the best returns for the S&P 500 or equivalent. Every Pope except the short-lived John Paul I saw a rise in the market. The absolute standout winner was John Paul II. If there is a lesson here (of which Spy is admittedly dubious), longevity counts.
1. John Paul I (1978, 0.09 years): -0.8 points, -0.77%
2. Benedict XVI (2005–2013, 7.9 years): 355.5 points, 30.67%
3. John XXIII (1958–1963, 4.6 years): 17.8 points, 34.70%
4. Paul VI (1963–1978, 15.1 years): 34.2 points, 49.49%
5. Francis (2013–2025, 12.2 years): 4138.62 points, 266.83%
6. Pius XII (1939–1958, 19.6 years): 38.1 points, 288.64%
7. John Paul II (1978–2005, 26.5 years): 1065.0 points, 1130.57%.
Bonus fact: Yesterday morning, Jim Cramer, renowned CNBC pundit, said on X, “One thing is certain: The new pope will not be American.”
Do you remember negative yields? Well, like Johnny in The Shining, they’re back! At the time of writing, Switzerland’s yield curve is negative all the way up to six years in maturity. Central banks are cutting rates across the world, despite inflation still being relatively high. The reason? Growth, growth, growth.
As Spy is an old-fashioned fellow, this column is written from scratch, by hand, every week without a drop of AI. Is not using AI becoming a badge of honour, wonders Spy? Spy spotted one investment service this week that promised to be a “100% ChatGPT-Free Zone – Forever”. Conversely, Aviva Investors has just hired a nine-strong team to build specialist AI tools for its investment team. Perplexity Finance is revolutionising the auto-summarisation of earnings reports. Asset and wealth managers are spending billions to add AI to their workflows. The jury may be out but the ease with which AI tools do the drudge work, is surely going to crush those who don’t adopt it in some form, regardless of how sanctimonious the non-ChatGPT claims sound?
Talking of AI, Natixis has produced a rather juicy report on the Next Decade of Investing. The report includes a section, which has used its own AI tools to make several predictions. Spy has selected a few choice ones from an extensive list of ideas. By 2028, the report claims, we shall see “development of autonomous public transportation systems in major cities.” In 2029, “widespread use of augmented reality (AR) in education and training.” And by 2035, “major advancements in quantum computing revolutionise various fields, including cryptography, materials science, and pharmaceuticals.” The authors freely admit they have no idea if these are any truer than their own human predictions – but they all sound plausible enough, if a little unoriginal.
The story of the week, from a “core portfolio holdings” point-of-view, is the pain Google is beginning to feel from AI. While alarmist claims that Alphabet could soon become the next Eastman Kodak may be a little farfetched, it is undeniable that Grok, OpenAI, Perplexity, Mistral and other AI tools are impacting their key revenue engine. Apple executive Eddy Cue revealed that the iPhone maker is exploring adding AI-powered search to its browser, after search activity in Safari declined for the first time ever in April. When Google is not safe from mega-disruption, nobody is.
BlackRock is sick of WFH. The world’s largest asset manager has asked senior managers to return to the office five days a week. All other staff are in four days a week. If you want a promo at BlackRock, you can forget that Friday lie-in.
Spy’s quote of the week comes from Frederick Matthias Alexander. “People do not decide their futures, they decide their habits and their habits decide their futures.” People won’t thank him for this truth, though.
Spy’s photographers have been out and about in Singapore and spotted a new campaign by Capital Group. The US manager is promoting its Multi-Sector Income Fund in the Raffles Place MRT.
Until next week…
