From AI to Old Age: Trends That Matter for Traders
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The aging population. Advances in artificial intelligence. Consumers scraping by for deals. These are all trends influencing the economy and stocks we hold. Here, we've digested the headlines and the news to give our members a clear view of the signals out there and what they mean for our portfolios.
Let's dig in:
Aging of the Population
Another signal that confirms the potential pain ahead for the economy as more boomers move into golden years.
“A growing number of undocumented immigrants are hitting retirement age without savings or the cushion of Social Security or Medicare, making up a contingent of baby boomers who are financially insecure and poised to strain community services.” Read more here from the Wall Street Journal.
Aging of the Population, Artificial Intelligence
This shows the disruptive promise of AI in healthcare and the growing needs of an aging population.
“Cambridge scientists have developed an artificially intelligent tool capable of predicting in four cases out of five whether people with early signs of dementia will remain stable or develop Alzheimer's disease. Dementia poses a significant global healthcare challenge, affecting over 55 million people worldwide at an estimated annual cost of $820 billion. The number of cases is expected to almost triple over the next 50 years.” Read more here from Medical Xpress.
Artificial Intelligence
This finding from McKinsey suggests we are only in the early innings of the AI revolution, with spending on software and services poised to accelerate in the coming quarters benefiting several holdings, but especially ServiceNow NOW.
“CFOs and other C-suite executives are scrambling to keep pace with rapid advancements in the area of AI that are expected to boost the U.S. economy in coming years. Generative AI in particular could enable automation of up to 70% of business activities across almost all occupations by 2030, adding trillions of dollars in value to the global economy, according to McKinsey. The results of a Gartner survey announced Tuesday revealed that 62% of CFOs and 58% of CEOs believe that AI will have the most significant impact on their industries in the next three years.” Read more here at CFO Dive.
Also:
“A cloud data center building boom will help boost global IT spending to $5.26 trillion in 2024, increasing 7.5% year over year… AI consumption will also contribute to significant software market growth, driving spending to $1.1 trillion this year, up from $974 billion in 2023…” Read more here at CIO Dive.
Artificial Intelligence, Safety & Security
It’s no surprise that AI would find its way into the defense industry. The below will lead us to see what Lockheed Martin LMT and other large defense contractors say about their AI efforts when they report their second-quarter 2024 earnings.
“Growing conflicts around the world have acted as both accelerant and testing ground for AI warfare, experts say, while making it even more evident how unregulated the nascent field is. The expansion of AI in conflict has shown that national militaries have an immense appetite for the technology, despite how unpredictable and ethically fraught it can be. The result is a multibillion-dollar AI arms race that is drawing in Silicon Valley giants and states around the world.” Read more here from the Guardian.
Cash-strapped Consumer
More signs that, despite real wage growth and companies adding jobs, consumers remain selective in their spending. In that environment, we continue to prefer Costco COST and Amazon AMZN because of how they helped consumers stretch their spending dollars. Both also have differentiated business models that keep them above the fray of retailers using promotions to goose sales at the expense of their margins.
“In second-quarter results on Friday, JPMorgan Chase, Citigroup, Wells Fargo, and BNY cautioned about consumers grappling with lower savings and higher prices… Profits at Citi’s US consumer lending business, which includes credit cards, plunged 74 percent from a year ago. The bank’s chief financial officer, Mark Mason, said consumer spending was slowing overall, with account balances now lower than they were before Covid. US consumers were more cautious than they had been in a while, he added. “We are not seeing the same growth in consumer spending that we had in prior quarters,” said Mason. “There was less traffic in the retail venues that we partner with.” Read more here from the Financial Times.
“…among consumers who had purchased groceries in the previous month, 23% said that facing higher prices than other merchants was the top issue or challenge faced in the process. This share is greater than those who said the same in any other industry and greater than those who said the same of any other difficulty purchasing groceries.” Read more here from PYMNTS.
Cybersecurity
A plethora of signals keep us bullish on our First Trust Nasdaq Cybersecurity ETF CIBR shares and for why all investors should have exposure to cybersecurity in their holdings.
“Cloud computing has quickly become the bedrock of modern business operations, offering teams scalable, flexible, and cost-effective data solutions. Yet, according to a recent Cloud Security Alliance survey, only 23% of organizations reported “full visibility” into their cloud environment. A full 77% of respondents also “feel unprepared to deal with(related) security threats.” Read more here from Security Boulevard.
“Hacktivist group NullBulge claims to have breached Disney, leaking 1.1 TiB of internal Slack data. The leak allegedly includes messages, files, code, and more. This comes amidst breaches affecting AT&T and Ticketmaster.” Read more here from Hack Read.
“AT&T on Friday disclosed that hackers had accessed records of calls and texts of 'nearly all' its cellular customers for a six-month period between May 1, 2022 to Oct. 31, 2022… The company said hackers downloaded the data "from our workspace on a third-party cloud platform… This data breach is separate from one disclosed earlier this year by AT&T…” Read more here from CBS News.
“Months after the so-called “mother of all breaches” was uncovered in January, another record-breaking leak has been posted online. According to the Cybernews research team, a password compilation containing nearly 10 billion unique plaintext passwords (9,948,575,739 to be exact) was published on a hacker forum on July 4th.” Read more here from BGR.
“The nation's car dealerships experienced total losses of more than $1 billion as the result of a nationwide hacking and ransomware attack on their software and systems last month, according to a new estimate from East Lansing-based consulting firm Anderson Economic Group.” Read more here the Detroit Free Press.
“Rite Aid, the third-largest drugstore chain in the United States, says that 2.2 million customers' personal information was stolen last month in what it described as a "data security incident." Read more here from Bleeping Computer.
Digital Infrastructure
While our positions in Nvidia NVDA, Marvell MRVL, and other tech holdings exposed to AI across data center, these signals support the positive outlook for those holding and their end markets.
“Service providers, a group that includes cloud service providers, digital service providers, communications service providers, hyperscalers, and managed service providers, spent $32.2 billion on compute and storage infrastructure in Q1 2024, accounting for 68.7 percent of the total market. By comparison, non-service providers, such as enterprises and governments, spent $14.7 billion during the same period… As a result of this growth, IDC is forecasting that total cloud infrastructure spending will reach $138.3bn in 2024, up 26.1 percent from 2023, of which $108.3bn is expected to come from spending on public cloud infrastructure.” Read more here from Data Center Dynamics.
“The Romanian government this week announced Prime Minister Marcel Ciolacu had a meeting with Google and participated in the signing of an MoU between the Government of Romania and the company for ‘projects in digital infrastructure, innovation, and research.” Read more here from Data Center Dynamics.
“As of 2023, the hyperscalers operated nearly 992 data centers worldwide, with capacity doubling over the past four years. The big four, Amazon, Meta Platforms, Microsoft, and Alphabet, are expected to spend $200 billion on capital expenditures in 2024, an increase of more than 35% YoY… Existing mobile connectivity infrastructure is insufficient to handle the massive amounts of data AI systems generate. Seamless connectivity and data transmission to end users requires an extensive expansion and enhancement of cell towers, particularly in dense urban areas.” Read more here from Global X.
Homebuilding & Materials
The below signal keeps us positive on the long-term demand for the products and services from Builders FirstSource BLDR and homebuilders when interest rates fall and housing becomes more affordable.
“Filling the housing shortage is the long-term answer to making housing more affordable. We are in a big hole, and it is going to take more than the status quo to dig ourselves out of it." Across the country in 2022, there were roughly 8.09 million "missing households" — individuals or families living with nonrelatives. Compare that to 3.55 million housing units that were available for rent or for sale, and there is a housing shortage of more than 4.5 million.” Read more here from PR Newswires.
At the time of publication, TheStreet Pro Portfolio was long BLDR, NOW, LMT, COST, AMZN, CIBR, NVDA, MRVL.
