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The Power of the Cloud

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Hi there!

Welcome to April, or as people who look at a lot of PowerPoint presentations call it, the start of Q2. Here’s what we’re watching:

  • The bulls are beating the bears, for now: Stocks have been climbing despite worries about interest rates, failing banks, and escalating tensions between Russia and NATO as Finland joined the alliance. If rate hikes end soon, the bulls will have history on their side. Since 1982, the S&P 500 rose five out of six times and gained an average of 8% in the three months after rates peaked. But many experts are warning that there are more twists and turns ahead, and JPMorgan CEO Jamie Dimon, in his annual letter to shareholders this week, said the banking crisis is not over.
  • Tech’s doing all the hard work: Like every group project in high school, a few heavyweight stocks are pulling the market higher. Just ten tech stocks account for 95% of S&P 500 returns in 2023, which doesn’t bode well, said Morgan Stanley’s Mike Wilson. A great way to see this is on an S&P 500 heat map. Since he sees a recession risk, Wilson recommends “defensive” sectors like consumer staples and health care instead of “cyclical” tech. Learn more about this in our prior coverage.
  • Gas prices to balloon: After falling in recent months, the prices of oil and gasoline are set to rise once again after OPEC countries decided to cut production. Financial experts see this as bad news because it could awaken the inflation dragon again, but some have also noted that it could accelerate the switch to cheaper, greener alternatives. As Bloomberg pointed out, the costs of battery and electric vehicle material, polysilicon for solar panels, and steel used in wind turbines have all fallen. In related news, more US electricity was generated from renewables than coal last year.

Looking back at Q1, one of the best-performing US-listed stocks was cloud computing services provider Fastly, which rallied 116.8%. Later, we’ll share insights on where financial advisors suggest you look to invest in the physical infrastructure that supports these “clouds” and the push to make them greener.

News you can use

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  • It’s raining downgrades! Thousands of ETFs and mutual funds will have their ESG ratings lowered by MSCI at the end of April, reports Bloomberg. The major ratings provider has changed its methodology, and as a result just 0.2% of global funds will have the highest AAA rating, down from roughly 20%. This adjustment comes after investor complaints about generous ratings, the politicization of ESG, and embarrassing oversights in the case of India’s Adani Group and Russian assets. You can learn more about looking up the ESG ratings of stocks and funds here.
  • Cisco, Hilton, and American Express have topped Fortune’s latest list of the 100 Best Companies to Work For. Large firms are ranked on relevant data points and the feedback of over 1.3 million US employees. The researchers also found that happy workers and non-toxic workplaces are good for business. Employees at these 100 companies are more productive and more willing to go the extra mile on average.
  • Investors are pouring record amounts into money market funds, per reports. These are a type of mutual fund that invests in short-term debt instruments with very low risk, like certificates of deposit (CDs) and US Treasuries. One reason is that these funds offer higher returns than bank accounts, and the other is safety, as people fear bank failures and a recession. While they are great for stability and easy access to funds (liquidity), they aren’t meant for long-term investing goals like stocks and bonds are.

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