The Recession Is Cancelled As Capital Investments Drive Stocks Higher

Today’s letter is brought to you by MoonPay ! Join over 30 million users who trust MoonPay as their universal crypto account. We make it easy to buy and sell crypto in over 180 countries , with no-to-low fees and all your favourite payment methods like Venmo, PayPal, Apple Pay, card and more. MoonPay is the only account you need in the DeFi ecosystem. Trade, stake and build your portfolio all in one place. Start now and get zero MoonPay fees 1 on your first transaction. CLAIM ZERO FEES To investors, The last two years have been filled with prediction after prediction of the next financial recession. Whether it was tariffs, potential inflation, or geopolitical conflicts, everyone kept promising financial pain was right around the corner. Recession odds just hit a new all-time low on prediction markets though. Kalshi is now showing only a 17% chance of an economic contraction, which is down substantially from the nearly 40% odds back in March of this year. This comes after the US stock market executed one of the fastest market recoveries in history. The S&P 500 is up 7.5% over the last month and up nearly 17% since the market bottom at the end of March. Bull Theory writes that the Nasdaq, S&P, Russell 2000, Dow Jones, Google, Intel, Micron, and Sandisk are all up every week for six straight weeks. Before everyone starts with the bubble talk, the Wall Street Journal’s Gunjan Banerji shows the S&P’s P/E ratio has actually fallen 4% since the start of the year. Not only are stocks pacing to have an above average year for returns, but the underlying companies have been getting cheaper at the same time. This highlights the significant productivity, along with the revenue and profit growth, these companies have been experiencing as the entire US economy accelerates. Mike Zaccardi shows the median year-over-year change in EBITDA from Q1 has been the best in the last 4 years. But Citadel recently explained that this breathtaking market recovery has been heavily concentrated in only a few stocks, which can be seen by the fact that only 22% of stocks in the S&P 500 have outperformed the index itself over the last 30 days. This is the highest percentage of concentration in the last 30 years. There have really only been two ways to make money: you have either been in the AI trade or you have been in the broad index. If you were in almost any other sector without index exposure, you are likely lagging the market and the high-flying AI-related companies. You can clearly see the difference when comparing the S&P return over the last two years (+42%) to the S&P excluding AI stocks (+16%) over the same time period. As investors, it is dangerous to allocate capital looking in the rearview mirror. What drove market returns in the past does not necessarily tell us where future returns are going to come from. With that said, the amount of capital being invested by AI-related companies is nearly impossible to ignore. A16Z recently showed that technology companies are 55% of all US capital spending as measured in nominal GDP terms. This is insane growth considering technology companies were only 15% back in the 1960s and around 40% in the 1990s. This begs the question: where is that money coming from and where is it going? Peter Diamandis writes “global corporate AI investment hit $252.3 billion in 2024, with private investment growing 44.5% year-over-year. U.S. private investment alone reached $109.1 billion. Money follows conviction.” Returns tend to show up months and years after capital investments are made. And it is impossible to deny the fact that companies are shoveling money into the AI trade. When these companies will reap the benefits is one of the great debates on Wall Street right now. I am of the belief that the profits will be much larger than everyone is anticipating, but investors will have to think long-term in order to capture them. Lastly, there is a common mantra in public markets to “sell in May and go away.” The argument is that stock returns after the month of May are not worth the risk. But Creative Planning’s Peter Mallouk shows “May-October returns are still positive on average (+7% annualized) with stocks higher 72% of the time.” Every data point I am seeing right now says the same thing: investors should be allocating money into the market and preparing for a strong continuation of the bull market. There is lots of noise out there. The pessimists are watching the recent market recovery with hatred in their hearts and minds. None of their critiques matter though. Companies across the US economy are collectively working to lay the foundation for the next 100 years of economic growth. We are upgrading everything from our infrastructure to our power systems to our software. The investors that clearly see the trend and can position themselves with the wind at their back are going to be very happy in the coming years. Hope you have a great start to your week. I will talk to everyone next time. - Anthony J. Pompliano Founder & CEO, ProCap Financial (Nasdaq: BRR) The AI Boom Is Very BULLISH For Bitcoin Jordi Visser is a veteran macro investor with 30+ years of experience and the author of the VisserLabs Substack . In this conversation, we break down why parabolic AI stocks are justified by real demand, who's actually buying bitcoin and why it's heading higher, the tokenization wave coming this summer, and the stocks Jordi is buying and selling right now. Podcast Sponsors Figure – True DeFi Democratized Prime to earn ~9% APY! They also have the lowest industry interest rates at 8.91% with 12 month terms! Take out a Bitcoin Backed Loan today and buy more Bitcoin. 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