Post-Sicily Thoughts: The Third Great Technology Wave

I just got back from Sicily, where my family, my brother’s family, and my parents visited Torretta, the town where my dad was born. I stayed in Isola delle Femmine, the birthplace of the great Joe DiMaggio. No wonder I counted at least 25 Yankee hats while I was there. As a die-hard Mets fan, I didn’t say anything or complain. Being a Mets fan, unfortunately, is the life we’ve chosen.

After days of eating arancini, pizza, swordfish, and an immense amount of coffee, here are my post-trip market thoughts:

1. The Fed is still too tight. I’d take the under on the number of rate cuts currently priced in for the next 12 months. There’s plenty of speculative activity, and while the economy may be soft in spots, the weakness seems ring-fenced to specific areas like housing.

2. Earnings season has been stellar. There was plenty of fear-mongering heading into this EPS season, yet results have been nothing short of spectacular. Contact Nick Cerbone if you want the summary stats, but in my view, this strength is enough to keep pushing markets higher through year-end.  We may get some seasonal weakness in Sept but the Fed will start their rate cutting cycle providing a tailwind for the economy.

3. Gold and Bitcoin are leading YTD. Sometimes you need to listen to what the market is saying. Fixed-supply assets that can hedge ballooning deficits and inflation risks have a role in portfolios. We began establishing positions in Bitcoin and Ether in our Real Assets SMA and are starting to sleeve 2–3% allocations in crypto for select clients.

Quick hits:

• Since I started in finance 25 years ago, there have been three major technology waves. This current wave, driven by AI and robotics, is the “monster wave” in my opinion.   It will permanently reshape the economy’s cost structure and create clear winners and losers.  

• At Astoria, we’ve thought this through. In September 2020, we launched a High Growth Stock SMA that provides exposure to AI, semiconductors, and companies we believe will win in this third and most powerful tech wave. Please let Frank know if you’d like a fact sheet or a call to discuss. 

Lastly, I saw a chart being circulated from BAML noted that railroad stocks made up 60% of the market in the late 1880s (assuming the data back then was accurate?).  Some bulls have argued, Why cant the “Mag 7” be just as dominant of a weight? Something to think about in the dog days of summer.