Spotlight On The $84 trillion wealth transfer

INSIGHT WEEKLY: June 23, 2024

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A round-up of the need-to-know topics of our times.

🌐 Major indexes and major stocks

Another three records in the week (shaded in blue below).

S&P500 and Nasdaq set new records with some rotation as Nvidia, Broadcom gave up some of the prior week’s gains and value stocks gained.

India’s Nifty 50 made further gains as financials rallied and also on foreign investor interest.

Magnificent 7:

Semiconductor stocks:

Highest value companies (market capitalisation) in $ trillion:

Nvidia became the most valuable (by market capitalisation) company on Tuesday, but dropped to third place by the end of the week.

🇺🇸 Spotlight On Wealth Transfer - US

Generation X to Benefit Most from Wealth Transfer

Generation X is poised to benefit significantly from the $84 trillion Great Wealth Transfer over the next decade, according to a new study. This has been called the greatest wealth transfer in history!

While millennials and Gen Z are expecting substantial inheritances, Gen Xers, currently aged 44-59, will likely receive the largest windfalls in the near term, with the average age for inheriting fortunes from parents worth $5 million or more is 46.1 years, and 47.6 years for those from parents worth $30 million or more.

These are the generation classifications :

The Greatest Generation – born 1901-1924.

The Silent Generation – born 1925-1945.

The Baby Boomer Generation – born 1946-1964.

Generation X – born 1965-1979

Millennials – born 1980-1994.

Generation Z – born 1995-2012.

Gen Alpha – born 2013 – 2025.

Wealth management firms and private banks have traditionally focused on clients in their 20s and 30s, anticipating future wealth transfers. However, the Wealth-X report suggests these firms should also target Generation X, who will be the first to inherit.

A considerable wealth potential for Generation X. How will they use their inheritance?

The report also indicates that future inheritors will have different values and priorities from previous generations, emphasizing technology, clean energy, and social justice. These priorities may not align with existing family business structures, prompting wealth managers, luxury firms, and philanthropies to adapt their strategies. As the first in line to inherit substantial wealth, Generation X's influence on investment and philanthropy is set to grow significantly.

🇬🇧 UK

Investment in the UK lags behind other wealthy nations, according to the Institute for Public Policy Research (IPPR). They warn that this low level of investment makes it difficult for the economy to grow. The think tank calls for a solid industrial strategy and consistent policies to encourage private investment. Dr. George Dibb from the IPPR emphasizes that investment is crucial for economic growth, as it fuels productivity and improves living standards. The UK has had the lowest investment in the G7 for most of the past 30 years, and without increased investment, economic performance is unlikely to improve. The IPPR suggests that more public sector investment in infrastructure is needed to encourage private sector investment and calls for a comprehensive industrial strategy to support growth and stability.

UK Inflation Hits Target after nearly three years dropping from 2.3% in April to 2% in May.

What has led to the decrease? Food, drinks, recreation, and household goods.

What is not decreasing? Fuel prices, services.

Will the overall inflation number be sustained?

This news comes just before a key decision on interest rates, with the Bank expected to maintain the rate at 5.25%, the highest in 16 years.

The chances of a cut in August look more likely. The vote was 7-2 to hold with 3 members said to have made a “finely balanced” decision to hold.

Millionaires leaving the UK are expected to reach a record level this year due to political turmoil and potentially higher taxes under a future Labour government. An estimated 9,500 high-net-worth individuals (HNWIs), with at least $1 million in liquid assets, are set to leave, more than double the number from 2023. This trend reflects the ongoing fallout from Brexit, which has diminished London's status as a financial hub.

The Henley & Partners report, tracking 150,000 HNWIs, highlights a broader global migration of the wealthy, with 128,000 millionaires expected to relocate this year. The UK, second only to China in millionaire losses, has seen 16,500 millionaires leave since 2017. Economic instability, frequent leadership changes, and Brexit's impact on trade and investment contribute to this exodus. Despite Labour’s efforts to attract business, proposed targeted tax increases could further drive wealthy individuals away.

FTSE100 is flat to last week and +6.5% this year.

🇺🇸 US

Consumer behavior is cautious, with the Commerce Department reporting only a 0.1% increase in May retail sales and a 0.2% decline in April. Sales at bars, restaurants, and grocery stores fell by 0.4%.

Manufacturing signals were stronger, with the Federal Reserve announcing a 0.9% rise in industrial production in May, the fastest pace in nearly a year. Factories operated at 78.7% capacity, the highest since last November.

Business activity as reported by S&P Global reported that its composite index rose to 54.6 in June, indicating economic expansion, particularly in the services sector.

S&P500 is +0.6% this week and +14.6% this year.

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🇯🇵 Japan

Yen weakened to around JPY 158.8 against the USD, close to 34-year lows, due to U.S.-Japan interest rate differentials. Japanese authorities reiterated their readiness to intervene in case of excessive volatility, following limited success from interventions in April and May 2024. The red line appears to be in the vicinity of 160, so can we expect to see another intervention next week?

Business activity expansion in Japan's private sector stalled in June, with the flash composite PMI falling to 50.0 from 52.6 in May, driven by a decline in services due to labor constraints.

Manufacturing conditions improved slightly. Japan's exports surged 13.5% year-over-year in May, boosted by the weak yen and strong shipments to the U.S. and China

Nikkei 225 Index was -0.6% last week, and +15.3% in the year.

See previous spotlight on Japan.

🌐 Artificial Intelligence

This cover has been designed using assets from Freepik.com

Broadcom (as mentioned in last week’s newsletter) is riding the AI wave, following Nvidia in the lucrative AI chip market. The company has seen its shares soar over 49% this year. It also bought VMware for $61 billion to bolster its data center and cloud capabilities, and significant investments in AI chip R&D.

Broadcom forecasts its AI-connected chip business will generate $11 billion in revenue in 2024, up from $10 billion.

What is the outlook from analysts? The expectation is that Broadcom is well-positioned to benefit from the growing generative AI investment in the long term. Broadcom's recent 10-for-1 stock split is expected to make the stock attractive to investors.

How does Broadcom stock price compare to Nvidia? Not the same growth as Nvidia, but still impressive.

xAI supercomputer is going to be built by Dell Technologies and Supermicro powered by Nvidia. xAI is Elon Musk's AI startup. Michael Dell announced via X that Dell is collaborating with Nvidia to build an AI factory for xAI's generative chatbot, Grok. However, Dell will only assemble half of the system's racks, with Supermicro handling the rest.

Musk previously stated that xAI plans to bring 100,000 liquid-cooled Nvidia H100 GPUs online, likely in North Dakota. Despite this, Musk expressed dissatisfaction with the H100's efficiency, favoring the next-gen Nvidia B200s, aiming for a 300,000 GPU cluster by next summer.

xAI recently raised $6 billion in Series B funding (as mentioned in a previous newsletter), which will help finance these advanced systems. Musk also prioritized purchasing 12,000 H100 GPUs for xAI from Tesla, citing logistical reasons, although Tesla continues developing its Dojo supercomputer for its self-driving program. Musk's interest in Dojo seems to have decreased, as he mentioned it's a "long shot" during Tesla's January earnings call.

🌐 Crypto Corner

Tracking Bitcoin price :

Bitcoin price over different time periods showing a price dip after the interest in Bitcoin spot ETFs. Capital inflows are weakening, and there has been profit taking by some funds.

As mentioned in last week’s newsletter, analysts at Bernstein have set their end 2025 target at $200,000 by the growth to 7% for Bitcoins in circulation.

The Australian Stock Exchange (ASX) has approved the first Bitcoin spot ETF by VanEck.

see the previous spotlight on Bitcoin halving 

Ethereum spot ETFs are expected to launch in early July. Several asset managers have submitted revised proposals to the US Securities and Exchange Commission.

🏅5️⃣ Billionaire Leaderboard

Mostly driven by stock market performance :

Change in week :

1. Elon Musk (Tesla, SpaceX) $213bn ⬆️ $3bn

2. Jeff Bezos (Amazon) $206bn ⬆️ $5bn

3. Bernard Arnault and family (LVMH) $194bn ⬆️ $2bn

4. Mark Zuckerberg  (Facebook/Meta) $173bn ⬇️ $3bn

5. Larry Ellison (Oracle)  $173bn ⬆️ $5bn

SPOTLIGHTS

Links to earlier spotlights :

Residential property ;

Japan ;

India - an emerging economic power ;

Recession ;

AI chips ;

Bitcoin halving ;

US National Debt ;

Gold ;

Nvidia