Market Pulse
Friday, March 8, 2024
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 stories this week are:
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.
Today marks International Women's Day, offering a moment to reflect on progress and challenges. Since the pandemic, the tech sector in the US, UK, and EU has seen an uptick in women's employment, thanks in part to high demand and more flexible work arrangements.
On the surface it seems encouraging, but a closer look reveals a glacial pace towards equality. In the UK, women's representation in tech increased from 29% in 2019 to 32% in 2023, suggesting gender parity might not be achieved until the 2040s[1].
The appeal of tech jobs for women is partly due to flexible working options. A recent study found that companies with a 1-2 days office requirement hire 27% more women[2]. However, with over 90% of companies planning to implement return to office policies by the end of 2024[3], a shift back to office-centric policies could put progress at risk.
Corporate leaders must carefully consider the balance between on-site and remote work. Hampering progress to equality in the name of ‘office culture’ or ‘productivity’ strikes us as short sighted. We believe embracing workplace innovation and hybrid flexible models is crucial to speed up the pace of gains made in gender diversity within tech and in the broader economy.
AI technologies such as ChatGPT have become incredibly popular, with many people recognising their potential to benefit society. However, what's probably less known is that the data centres powering AI consume significant amounts of water for cooling and electricity.
Data centres are responsible for 1-2% of the world's electricity usage, comparable to a country like France, and this demand is expected to rise fast. AI servers, which perform complex computations, use up to 10 times more energy than more traditional servers. According to the Economist, training ChatGPT 3 consumed around 1 GWh of electricity, enough to power 5,000 households for a year, while ChatGPT 4 required 10 times that amount. How much might ChatGPT 5 use?[4]
Despite concerns about power-hungry AI, AI is being leveraged to improve efficiency and reduce resource consumption. Google's use of DeepMind's machine learning to cut data centre cooling energy by 40% is a prime example. Recognizing the environmental implications of AI's growth, companies and investors are increasingly exploring sustainable energy sources. Microsoft's agreement to purchase fusion power from Helion Energy by 2028 illustrates this shift[5].
In the meantime, with stricter environmental regulations, especially in Europe, tech giants like Microsoft, Amazon, Meta, and Google must demonstrate that AI can contribute to environmental solutions, not make environmental problems worse.
Note: We own Microsoft, Amazon, Meta and Alphabet in our Flagship Strategy
The stock market is hovering near historic highs, which might cause some investors to worry about the best course of action. However, historical data suggests that staying invested during these times could be beneficial. On average, the 12-month returns following an all-time high for the S&P 500 are 10.3%, compared to 8.6% during non-record months, suggesting that staying invested, rather than attempting to time the market, has historically been the smarter play[6].
But good investing is difficult and there are other data points to consider. In the US, insiders, such as CEOs and board members of companies, have to disclose their trading activity and the market usually keeps a very close eye on this. These insiders have been increasingly selling their shares of late, possibly hinting they are anticipating a downturn. After all, who knows more about a company's prospects than the people who work there?
"Magnificent 7" insiders have been selling shares at a rate not seen since 2021. Their timing in 2021 was spot on. Barely a few months later, share prices started falling, and during 2022 the Magnificent 7 share prices dropped more than 45%.
The Magnificent 7 makes up nearly 20% of the total value of global developed market companies. If insiders get it right again, their potential decline could drag down the entire stock market. And don’t forget we have more than 4bn people in more than 70 countries heading to the polls in 2024. A showdown between current US president Joe Biden and ex-president Donald Trump is also looking increasingly likely. While stocks got off to a strong start in 2024 we think things could get a bit choppy as the year progresses[7].
Note: We own Microsoft, Amazon, Meta, Nvidia, Tesla, Apple and Alphabet in our Flagship Strategy
[1] https://www.ft.com/content/f37f3af3-2c3a-4082-84c3-e6fe7fe53252
[5] https://www.reuters.com/technology/microsoft-buy-power-nuclear-fusion-company-helion-2023-05-10/
[7] https://www.economist.com/international/2024/02/11/2024-is-a-giant-test-of-nerves-for-democracy
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.
