Market

Rather than ‘Will cryptos drop to zero?’, investors should be asking this question instead, says strategist

Stocks are looking up at the end of a volatile week for both equities and cryptocurrencies. Keeping the newsflow going on the latter was another tweet from Tesla boss Elon Musk that has sent a popular meme-coin surging (see below).

That brings us to our call of the day from Nordea Investment’s senior macro strategist, Sebastien Galy, who suggests that instead of wondering whether cryptocurrencies like bitcoin could tumble to zero, investors should ask “What comes next?”

“In theory, any good that can be replicated at infinity equals either zero or its marginal cost from a supply perspective. Yet, demand is clearly there with the product progressing in mainstream and we postulate that it will stop trending higher in a few years to trend with inflation. The question is what will replace this product,” said Galy in a note to clients.

The answer? Artificial intelligence, said the strategist, who envisions a decade from now we will see lower growth and below target inflation in lots of aging, developed markets, plus China.

“Anything linked to higher productivity such as AIs [artificial intelligence] and automation are likely to be the rage. Each year, the generation of AIs becomes slowly more capable following a very slow uptrend compared with the microchip development, but the potential benefits for those holding the upstream are likely wild,” he said.

“If you can buy into the right company doing AI research, it will be the one delivering on better generations of AIs decades from now in a slow process of development. Ultimately, AIs will take over ever wider swath of our economies in a slow process of accretion over decades,” he added in emailed comments.

Nordea’s own Global Disruption fund invests in Google parent Alphabet
GOOGL,
+1.31%
,
online retailer Amazon.com
AMZN,
+0.30%

and Chinese technology giant Tencent
700,
+0.52%
.
The list of AI funds out there is long, including the ARK Autonomous Technology & Robotics ETF
ARKQ,
-0.85%
,
the iShares Robotics and Artificial Intelligence ETF
IRBO,
-1.01%
,
and dozens more listed on ETF Database.

Galy believes that as cryptocurrencies mature, surging demand will likely fade away and we’ll see “stability reinforced by options trading. The question is whether excessively loose monetary policies will continue to drive the products higher or they will start moving with inflation over longer periods. Over a period of a decade or so, more orthodox monetary policies suggest that cryptos will start to trade with longer-term inflation.”

Retail sales and how dogecoin is back

Tech is leading stock futures
YM00,
+0.50%

ES00,
+0.67%

NQ00,
+1.08%

higher ahead of April retail sales data that are expected to rise 0.8%, after a 9.8% jump in March, with the University of Michigan consumer sentiment index due later. European stocks
SXXP,
+0.66%

are up and Asian equities rebounded hard, led by the Nikkei 225
NIK,
+2.32%
,
though Singaporean stocks
180987,
+0.00%

tumbled 3%, as the country returned to lockdowns over rising COVID-19 cases.

Meme cryptocurrency dogecoin
DOGEUSD,
+36.28%

has surged to 56 cents after Tesla
TSLA,
-3.09%

Chief Executive Elon Musk tweeted late on Thursday: “Working with Doge devs to improve system transaction efficiency. Potentially promising.” He recently said bitcoin
BTCUSD,
+2.48%

would no longer be accepted as payment for the company’s electric cars, over environmental concerns. Bitcoin
BTCUSD,
+2.48%

is holding steady atop $50,000.

Crypto platform Coinbase’s
COIN,
-6.53%

results largely met forecasts, with 56 million verified users, and more growth expected.

Disney
DIS,
+0.28%

shares are down, after the media and entertainment giant’s theme-park revenue blew past expectations but Disney+ streaming results underwhelmed.

Fisker
FSR,
-3.30%

shares are surging, after the electric-vehicle company announced plans to make cars in the U.S. with a manufacturing partner that has worked with tech giant Apple
AAPL,
+1.79%

the past.

Israeli artillery pounded northern Gaza early on Friday, as fighting between the two sides worsened.

The chart

Our chart of the day from Larry Tentarelli, editor and publisher of the Blue Chip Daily Trend Report, zeroes in on his top-ranked sector right now — healthcare.

“This sector continues to show improving relative strength, with many leaders currently at or near breakout levels. The group also has reasonable valuations, in a market that has become more focused on valuations over the last 8-12 weeks,” he writes on Blue Chip Daily.

AbbVie
ABBV,
+1.43%
,
GlaxoSmithKline
GSK,
+0.83%
,
Pfizer
PFE,
+1.03%
,
HCA Healthcare
HCA,
+1.65%

and Laboratory Corp
LH,
+1.71%

“could continue to perform well based on their current trends,” he said.

Random reads

What is on the menu of the future? Maggots and sea algae.

Here’s how billionaires got even wealthier during the COVID-19 pandemic.

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