🚨 Tech Stocks in Recession?

Good Morning!

The global market's rebound hit a snag in Asia today, thanks to China's latest economic buzzkill. European markets are set for a mixed opening. All eyes are on the UK's job market data, which could signal a green light for rate cuts if inflation keeps cooling. Meanwhile, the Fed's next move hinges on Wednesday's U.S. inflation report, with a 25bp cut already in the bag. China's trade data offered a glimmer of hope with exports, but imports missed the mark, leaving Chinese stocks in a seven-month slump. It's clear Beijing needs to up its game to win back investor confidence, especially with U.S.-China trade tensions heating up again.

In today’s email:

• Stonks: Most tech sectors already in recession

• Bitcoin: Took back $57k, holding steady into CPI tomorrow

• PLTR: Pops 14% on joining the big league!

• Gold: $2700/oz incoming by next year?

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THE BIG IDEA

Tech sector faces widespread weakness despite AI enthusiasm, with many sub-sectors still in recession

The tech world's AI party is in full swing, but not everyone's on the guest list. While AI giants like Nvidia and Microsoft are popping champagne, many tech companies are nursing a nasty hangover from the post-pandemic slump. BlackRock's Tony Kim puts it bluntly: "When you look at technology outside of AI, there's not that much happening. Many [sub]-sectors are still in a recession."

This digital divide is stark. Traditional tech areas like software, IT consulting, and electronic equipment production are struggling with weak demand and inventory hangovers. The numbers tell a sobering tale: S&P 500 IT companies are growing at 6.9% annually, down from their five-year average of 10%. Earnings per share growth has also taken a hit, dropping from 21% to 16%.

Small-cap tech is feeling the pinch even more. In the Russell 2000, tech was the second-worst performer in Q2, with revenue plummeting 6.1% and profits down 2.8%. It's a far cry from the AI-fueled exuberance grabbing headlines.

Even within the semiconductor industry, it's a tale of two cities

Applied Materials' CFO Brice Hill notes strong demand for AI and data center computing, but "pockets of weakness in the auto and industrial end-markets."

The tech recession isn't just about numbers; it's reshaping strategies. Companies are tightening belts, with Asana's CEO Dustin Moskovitz describing an "unwinding of the over-hiring and overspending" from the pandemic boom.

But there's a glimmer of hope on the horizon. Some investors, like T Rowe Price's Tony Wang, see signs of stabilization in the battered corners of tech. "Things have stopped getting worse in those more macro-sensitive areas," he notes, hinting at a potential shift in the tech landscape.

As the AI dust settles, the question remains: can the broader tech sector shake off its recession blues and join the party?

MARKETS AT A GLANCE

TOP NEWS

Morgan Stanley predicts a significant euro decline against the dollar due to expected ECB rate cuts and European economic challenges

Morgan Stanley's bold forecast: the euro could plummet to $1.02 by year-end, a 7% nosedive from current levels. The culprit? ECB's potential rate-cutting spree, including a possible half-point slash. This bearish outlook contrasts sharply with the consensus view of a stronger euro. With Europe's economic engine sputtering and political uncertainties revving up, investors might think twice before betting on the eurozone. The ECB's upcoming meeting could be the spark that ignites this currency rollercoaster.

Palantir's stock surges 14% following its inclusion in the S&P 500, reflecting the growing importance of tech companies in the broader economy

Palantir's joining the big leagues, folks! The data analytics firm's stock skyrocketed 14% after snagging a coveted spot in the S&P 500. This tech darling, now rubbing shoulders with the market's heavyweights, is riding high on its recent profitability streak. With a market cap of $76 billion, Palantir's ascension highlights the tech sector's growing dominance in the index. As fund managers scramble to adjust their portfolios, Palantir's stock is flirting with its all-time highs.

Platinum market faces record deficit, but prices remain sluggish despite strong ETF holdings and Chinese demand

The platinum market is eyeing a million-ounce shortfall in 2024, its biggest deficit in a decade. Yet, prices seem to be snoozing through the alarm. ETF holdings are surging, and Chinese appetite for platinum bars is growing ravenous. Meanwhile, supply is tightening as South African mines restructure and Russian production dips. With electric vehicle growth slowing and palladium prices normalizing, industry experts expect platinum's fundamentals to finally take center stage in price setting. Will this precious metal finally get its shine on?

CRYPTO

Bitcoin rebounds to $57K, but NYDIG warns of limited near-term catalysts, suggesting external factors may drive price movement

Bitcoin's bouncing back! After a rough start to September, it's climbed to $57K, outpacing the broader crypto market. But don't pop the champagne just yet. NYDIG's Greg Cipolaro warns that potential catalysts are "sparse," with Bitcoin potentially riding the coattails of macro trends and political winds. The upcoming U.S. presidential election looms large, with crypto policies hanging in the balance. Until then, Bitcoin might be dancing to the tune of the broader market.

SEC's crypto enforcement skyrockets to $4.7B in 2024, driven by a massive settlement with Terraform Labs

The SEC's crypto crackdown is going into overdrive! Enforcement actions have surged a mind-boggling 3,000% from 2023, hitting $4.7 billion this year. The lion's share? A whopping $4.47 billion settlement with Terraform Labs and Do Kwon. Despite fewer actions, the SEC's zeroing in on high-impact cases, setting industry precedents. While big fish like Telegram and Ripple felt the heat, nearly half the fines since 2020 were under $1 million. Is this the new normal for crypto regulation?

Bitcoin addresses with non-zero balances surpass 50 million in 2024, indicating strong adoption despite price volatility

Bitcoin's hodler army is growing stronger! Over 52 million addresses now hold some BTC, with the count surging since May. Despite the price rollercoaster – dropping from $70K to under $60K since March – user activity keeps climbing. This isn't just a flash in the pan; we're seeing a continuation of the upward trend that's been chugging along since 2010. Even with market hiccups, Bitcoin's long-term adoption story seems to be holding strong. Is this the foundation for the next bull run?

After an eight-day run of outflows, U.S. spot bitcoin ETFs saw a positive shift on Monday, with net inflows of $28.72 million

Fidelity's FBTC led with $28.6 million, while Bitwise's BITB added $21.99 million. Smaller inflows were recorded for ARKB and Invesco's BTCO. However, Grayscale’s GBTC faced $22.76 million in outflows, and BlackRock's IBIT saw $9.06 million out. Meanwhile, spot ether ETFs saw their fifth consecutive day of net outflows, led by Grayscale's ETHE with $22.64 million leaving the fund.

GOLD

Gold is on a bullish trajectory, supported by expectations of a U.S. interest rate cut, robust central bank buying, and geopolitical risks

ING has revised its gold forecast, predicting an average of $2,700 in 2025. Fed Chair Jerome Powell's signal for a September rate cut boosts gold's appeal, while positive ETF flows and a 206% jump in central bank demand in July further support prices. ING expects gold to average $2,580 in Q4 2024, with further gains continuing into 2025.

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