Welcome to this week's Market Pulse, your 5-minute update on key market news and events, with takeaways and insights from the Sidekick Investment Team.
Our three stories this week:
1. Market Pulse 100: Sidekick Investment Upgrades
2. Optical Computing: Shining the Light on AI
3. Out of Step: The EU-US Rate Divergence
It’s important to note that the content of this Market Pulse is based on current public information which we consider to be reliable and accurate. It represents Sidekick’s view only and does not represent investment advice - investors should not take decisions to trade based on this information.
This week marks the 100th edition of Market Pulse, representing just under two years of weekly market updates and commentary from the Sidekick investment team. I want to thank every member of our community for joining us on this journey as we continue working to unlock the financial advantages of the ultra-wealthy. In this centennial issue, I’m thrilled to share some significant upgrades to our investment experience to help you grow your wealth as effectively as possible.
This week, we launched a revamped version of our public market offerings, focused on globally diversified exposure through ‘core portfolios.’ Our new stock and bond core portfolios facilitate low-cost access to the type of foundational assets that enable growth throughout market cycles. Thanks to our set of expert-curated ETFs, it’s never been easier to access high-quality global market assets.
I’m also happy to share that Sidekick is expanding our cash management capabilities with money market funds. Money market funds are designed to maintain a stable value while investing in low-risk debt (such as short-term gilts or high-quality corporate paper). This enables investors to earn a competitive yield while still accessing the stability of a par value investment.
And this is just the beginning. Over the next few weeks, we’ll share additional information on a host of new features as we roll them out. Soon, Sidekick users will be able to easily tailor their portfolios with the launch of custom indexing and thematic investing. Additionally, we’ll be sharing more details shortly on our new semi-liquid offerings in the private markets space.
Finally, I want to invite you to help shape the future of Sidekick by completing a brief five-minute survey on thematic investing. By answering this survey, you’ll help ensure we capture the themes that matter most to the Sidekick community. Thanks again for being a part of this journey, and please reach out to our team by email or through the app should you have any questions about these changes.
As with all investing, capital is at risk
Ever since the first digital computers were unveiled in the middle of the 20th century, computers have relied on tiny electrical switches to process information. Today, essentially every consumer computer chip in the world is built on electrical data transmission. With the AI arms race pushing up demand for computing power, though, interest is growing in an even faster pathway for information processing – light.
The idea of using light to transfer data is not entirely new. Fiber optic cables, for instance, are widely used for high-speed internet traffic over long distances. Using light in computer chips, though, is a far more novel idea, and forms the basis of a burgeoning field known as optical computing.
Last week, some of the biggest names in AI tech helped validate the concept with a $155 million investment in optical chip designer Ayar Labs. Nvidia, AMD, and Intel all participated in a deal that pushed Ayar’s valuation over $1 billion. According to Ayar, the company’s light-based chips can achieve up to 10x higher bandwidth and 8x greater power efficiency than traditional ones.
Ayar’s recent capital raise also comes on the back of Alphabet’s ‘Willow’ quantum computing breakthrough, announced earlier in December. According to Google’s parent company, the Willow chip was able to complete a benchmark computation in under five minutes that would take traditional supercomputers longer than the age of the universe to finish.
Both quantum and optical computing are intriguing examples of how AI-driven demand for computing power is having knock-on effects on technological development. Doubtless, many of the AI startups we’ve seen emerge over the last few years may not survive a consolidation cycle. The underlying chip technology they help foster, though, could fundamentally alter how computation works in the future.
Since the onset of the Covid-19 pandemic, global rates have largely moved in lockstep. A rapid easing of economic conditions soon gave way to a gradual hiking cycle as supply-induced price pressures began to accelerate. But while central banks have continued to match each other’s cuts this year, such uniform behaviour may not last in 2025.
In the United States, for instance, a widely-expected Federal Reserve rate cut next week has been coloured by a 2.7% inflation reading in November. While the news likely won’t alter the Fed’s decision to cut, it does show that price pressures remain stubbornly above the central bank’s inflation target. Trump’s tariff plans, meanwhile, could threaten to “derail” the country’s progress on inflation, according to US Treasury Secretary Janet Yellen.
In Europe, however, weak growth appears to be a far greater downside risk. What’s more, bond giant Pimco warned this week that a trade war with the US could drive rates down to “emergency levels” as policymakers seek to soften the blow. With the ECB cutting rates by 25 basis points on Thursday, an accelerated easing path could be in store in 2025.
The story is much the same in the UK. In the third quarter, the economy barely grew, and price pressures have mostly eased (despite a small uptick in October). One silver lining is that by virtue of being able to negotiate independent deals outside the EU, the UK may be able to avoid the worst of any Trump trade wars.
Overall, policy paths could be set to diverge significantly between the US and Europe, resulting in structurally different rate environments on either side of the Atlantic. For savers, dollar-denominated assets might offer relatively higher yielding opportunities throughout 2025.
Please remember, investing should be viewed as longer term. Your capital is at risk — the value of investments can go up and down, and you may get back less than you put in.