Keep pulling the thread on Troy Gayeski.
The high volume of U.S. Treasury issuance will pressure the Federal Reserve to lower short-term interest rates more quickly to manage the long end of the yield curve.
Troy Gayeski believes it is potentially achievable for the S&P 500 to grow revenue by 9% and earnings by 17% this year, driven by a strong consumer and AI infrastructure spending.
Troy Gayeski predicts that after the first half of next year, companies will need to demonstrate a material return on invested capital (ROIC) from AI to justify continued high levels of spending.
A major market risk is that the four largest hyperscalers could collectively reduce their AI spending around mid-2027 if they fail to achieve sufficient returns, which would cause a market correction.
The U.S. is currently issuing new treasuries at a rate equivalent to 5.8% to 6.2% of the total outstanding Treasury debt.
The U.S. faces a significant long-term fiscal risk unless it can sustain nominal GDP growth of 5% to 5.5% while constraining government spending growth to 1% to 2%.
Companies are choosing to stay private longer in order to focus on medium to long-term growth, avoiding the short-term pressures of public market quarterly reporting.
Future Standard has exposure to SpaceX on behalf of its clients through its venture capital portfolios.
SpaceX offers a greater diversification benefit to investors compared to OpenAI and Anthropic because it operates in a different growth vertical, whereas the other two are very similar to hyperscalers.
Since the Eurozone crisis, every market correction has resulted in a V-shaped recovery, with the exception of the 2022 bear market.
The 2022 bear market was not a V-shaped recovery because it took a long time for markets to adjust to the Federal Reserve raising interest rates from 0% to 5.25%.
During its recent rate-hiking cycle, the Federal Reserve drained the money supply at the fastest pace since the Great Depression.