What we’re reading (4/26)
“A Reckoning For The Magnificent Seven Tests The Market” (Wall Street Journal). “[E]ven after a rally this past week, the Magnificent Seven are off to their worst start to a year since the 2022 slide, according to Dow Jones Market Data. Each stock has fallen more than 6.5%, and they have collectively lost $2.5 trillion in market value. The Roundhill Magnificent Seven exchange-traded fund just posted its best four-day run ever, notching a 13% climb—that still left it down about 15% this year.”
“The Mystery Behind Gold’s Bull Market” (MarketWatch). “Gold’s recent meteoric rise above $3,400 might continue even further. But I know of no way to have much confidence that it will. That’s because none of the many theories advanced to explain gold’s rise are objectively provable.”
“The S&P 500’s Half-Decade Golden Age Of High Valuations Is Over, Bank Of America Says” (Business Insider). “Since 2020, investors have been willing to pay a premium relative to S&P 500 company earnings. So-called price-to-earnings ratios have been elevated thanks to mammoth stimulus efforts amid the pandemic and excitement around artificial intelligence developments. The optimistic outlook has propelled stocks to 146% gains from COVID-19 lows. Over that time, S&P 500 PE ratios on a trailing 12-month basis have barely dipped below 20 times and have risen as high as 41x. The average PE ratio during the last five years was just shy of 26x.”
“Large Language Models, Small Labor Market Effects” (Anders Humlum and Emilie Vestergaard). “We examine the labor market effects of AI chatbots using two large-scale adoption surveys (late 2023 and 2024) covering 11 exposed occupations (25,000 workers, 7,000 workplaces), linked to matched employer-employee data in Denmark. AI chatbots are now widespread—most employers encourage their use, many deploy in-house models, and training initiatives are common. These firm-led investments boost adoption, narrow demographic gaps in take-up, enhance workplace utility, and create new job tasks. Yet, despite substantial investments, economic impacts remain minimal. Using difference-in-differences and employer policies as quasi-experimental variation, we estimate precise zeros: AI chatbots have had no significant impact on earnings or recorded hours in any occupation, with confidence intervals ruling out effects larger than 1%. Modest productivity gains (average time savings of 2.8%), combined with weak wage pass-through, help explain these limited labor market effects. Our findings challenge narratives of imminent labor market transformation due to Generative AI.”
“Consumer Sentiment Plunges 8%” (CNN Business). “Consumer sentiment plunged 8% in April from the prior month, to a final reading of 52.2, the University of Michigan said in its latest survey released Friday. That was a slightly smaller decline than a preliminary reading from earlier this month, which didn’t capture people’s reaction to Trump’s 90-day tariff delay announced on April 9.”
