The Sunday Drive - 05/11/2025 Edition [#162]
Musings and Meanderings of a Financial Provocateur
šš¼ Hello friends! Iād like to wish a Happy Motherās Day ā¤ļø to all who have brought life into this world. I hope you have a wonderful day filled with all the love and joy you deserve.
Now, letās enjoy a leisurely Sunday Drive around the internet.
š¶ Vibin'
A friend of mine recently recently remarked to me, āDonāt you think itās about time that you vibed to some Johnny Cash in the Sunday Drive?ā
I think he was right, but being the provocateur that I am, this week Iām vibinā to a tune from the Man in Black (RIP) that you may not have heard.
I hope you enjoy A Boy Named Sue, by Johnny Cash. H/t JF. š
š Ā Quote of the Weekā
āPeople donāt change when they see the light, they change when they feel the heat.ā
ā Rick Warren
š Ā Chart of the Week
Investors are well aware of the dramatic outperformance of U.S. equities as compared to the rest of the world over the last decade and a half.
There were a number of drivers of these outstanding relative returns:
Strong earnings growth amongst the largest tech companies - the so-called Mag7 stocks in particular
Of late, an AI-driven semiconductor super-cycle, led by Nvidia
Stronger GDP growth in the U.S. compared to the rest of the developed world
Up until 2022, historic levels of monetary stimulus coming out of the Great Financial Crisis
During and since the COVID pandemic, never before seen levels of fiscal stimulus with multiple multi-trillion dollar spending packages coming from the federal government.
However, this weekās Chart posits an interesting take on recent U.S. equity outperformance, which accelerated significantly since 2020.
What if our foreign trading partners actually did begin losing faith in holding their trade deficit sourced dollars in the form of U.S. Treasuries? What if they did trust their dollars to the Mag7 over the U.S. Government? š¤
Itās important to remember that this dynamic pre-dates by several years, the current tariff related ācapital flightā concerns.
Whatās interesting to contemplate is the possibility of the tariffs currently being discussed/negotiated having the effect of decreasing the U.S. overall trade deficit, and therefore the need to recycle excess dollars into U.S. Treasuries, or U.S. bonds, or U.S. equities.
What does this mean from a global asset allocation perspective? If the U.S. decreases the level of dollars being pushed out into the global financial system, does that make U.S. assets more attractive, or less?
With so many moving parts at work, itās hard to make sense of it all.
Which leads one to consider the great equalizer. Valuation. The 12 month forward P/E multiple on the S&P 500 currently stands at 20.5x, as compared to 13.2x for the EAFE Index - even after the strong year to date performance of non-U.S. stocks. (Source: Factset). All else equal, thatās a decent margin of safety - relatively speaking at least.
š Interesting Drive-By's
šÆ The Continuing Case For an American Golden Age
š” Hereās How We Might Generate Electricity From Rain
š¤ Generation Exodus
šø What Happens When Money Becomes Technology?
š¤ AI Isnāt Only a Tool - Itās a Whole New Storytelling Medium
šš¼ Parting Thought
As the proud parent of a Villanova alum (Class of ā23), it was with great wonderment and joy that we recently learned that Pope Leo XIV also earned his B.S at Villanova, and was also a math major. Talk about karmic coincidence!
Hereās hoping that some of that Papal Mojo rubs off on āNova Nation, and especially the Menās Basketball Team. Go āCats, Baby!! āš» \V/
If you have any cool articles or ideas that might be interesting for future Sunday Drive-by's, please send them along or tweet 'em (X āem?) at me.
Please note that the content in The Sunday Drive is intended for informational purposes only, and is in no way intended to be financial, legal, tax, marital, or even cooking advice. Consult your own professionals as needed. The views expressed in The Sunday Drive are mine alone, and are not necessarily the views of Investment Research Partners.
āI hope you have a relaxing weekend and a great week ahead. See you next Sunday...
Your faithful financial provocateur,
-Mikeā
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