In recent months, markets have rewarded risk in ways that feel increasingly detached from fundamentals. Since US Liberation Day, companies with negative earnings have significantly outperformed their profitable peers within the Russell 2000. This trend may appear counterintuitive; however, it underscores how sentiment and liquidity can outweigh fundamentals during periods of uncertainty. While the direction of the move may not be entirely surprising given renewed risk appetite, the magnitude is.
From Dot-Com to Data Centers
Two decades after the dot-com crash reshaped Silicon Valley, another technology frenzy is taking hold. This time, the world’s largest companies are pouring hundreds of billions into artificial intelligence, betting that the next trillion-dollar revolution has already begun.
Are we in a phase where investors as a whole are overexcited about AI? In my opinion, yes… Is AI the most important thing to happen in a very long time? My opinion is also yes. - Sam Altman, CEO of OpenAI
Rising Number of Public Companies Taken Private
We believe this change is partly driven by the favorable governance structure in private companies compared to publics. Private company management teams have more flexibility to implement change quickly, an advantage to patient investors during periods of innovation.
The number of publicly listed companies has declined by 50% since the mid-1990s, and there is a rising trend in the number of public companies that are taken private.
Now It’s Time for Courage
Courage is the quiet force that defines great leadership, especially in uncertain times. Harvard Professor Gulati explores how true leaders act not in the absence of fear, but in defiance of it.
I define courage as a willingness to take bold, risky action to serve a purpose that you perceive to be worthy, usually in the face of an abiding fear. – Ranjay Gulati
Powell’s December Warning Exposes Hardening Divisions at the Fed
While this insight may dramatize the divisions at the Fed, it highlights a reality we often think about: consensus is conflicting as policy uncertainty is rising. As those divisions deepen, investors should expect a wider range of outcomes.
‘They Never Quit,’ Blue Jays Fans Pumped for the World Series Return to Toronto
Looking back to our June Insights, the Toronto Blue Jays are one game away from winning the World Series. This team’s journey reminds us that resilience and patience can go a long way. Go Jays Go!
Lauer Private Wealth at RBC serves as the investment office for a select group of institutions and families. The practice is centered on multi-asset portfolio management, estate structuring and intergenerational wealth architecture.
If you enjoyed this edition of Insights, feel free to connect or share, thank you for reading.
Works cited: Apollo, Bloomberg, ChatGPT, Global News, Harvard Business Review, The Daily Spark