What we’re reading (7/19)
“After Stock Market’s Torrid Run, Earnings Misses Face Punishment” (Bloomberg). “The second-quarter earnings season is off to a ripping start, with consumer strength powering resilient corporate profits. In the stock market, however, the reaction has been fairly quiet, an ominous sign that much of the good news is priced in — and investors are punishing disappointments.”
“The Stock Market Bargain That’s Right Under Your Nose” (Wall Street Journal). “Will small stocks stink forever? Little companies are supposed to earn higher returns over time than big ones, but that hasn’t been the case for more than a decade. Since the beginning of 2014, the S&P 500 has grown at an average of 13.2% annually; the Russell 2000 index of small stocks has gained just 7.2%. Many people seem to be throwing in the towel. So far this year, investors have pulled $12 billion out of exchange-traded funds investing in small U.S. stocks, according to FactSet. Meanwhile, investors added $149.6 billion to ETFs that track large U.S. companies. Money always chases performance, and big stocks have all the momentum—burnished by the artificial-intelligence boom. But what if AI turns out to be a bust, it fails to meet expectations or the biggest stocks end up stagnating? Then investors who didn’t give up on smaller stocks will be rewarded.”
“Is America Breaking The Global Economy?” (Foreign Affairs). “[F]orecasters have struggled to predict where the U.S. economy will ultimately end up. But two main visions bookend a dispersed and unstable set of individual projections. In the first, the United States is on a bumpy journey that will culminate in an economic restructuring resembling the ones that took place under U.S. President Ronald Reagan and British Prime Minister Margaret Thatcher, where it will emerge with less debt and a more efficient private sector and where it will trade in a fairer international system. In the second scenario, the country is slowly slipping into the stagflation and, as happened under U.S. President Jimmy Carter, could end up in a deep recession, perhaps with pronounced financial instability.”
“What Flint Teaches About the Chances Of Rust Belt Renewal In Trump 2.0” (Politico). “Policies designed to stimulate economic growth will fail to revitalize cities like Flint unless they are accompanied by efforts to repair the social and environmental damage that previous failed policies left behind.”
“The Epic Battle for AI Talent—With Exploding Offers, Secret Deals And Tears” (Wall Street Journal). “Hundreds of employees at one of Silicon Valley’s hottest AI startups gathered in their offices last Friday expecting a celebratory announcement. For months, OpenAI had been talking to Windsurf about buying it for $3 billion, and now it seemed like the rank-and-file were finally getting confirmation that the deal was about to become official. Windsurf’s marketing team even began filming the all-hands meeting for promotional material. Instead, they learned that Windsurf’s chief executive, Varun Mohan, had left the company to join Google, taking with him a small group of artificial-intelligence researchers and engineers. After hearing the news, some of the staff began to cry.”
