DFCF, LLC
Drulard Family Capital Fund (DFCF, LLC)
Drulard Family Capital Fund
Fortnightly Macro View
JD Straight Up:
S&P 500 at 5951 – down 3% from 6115 two weeks ago
VIX at 20 – up 33% from 15 two weeks ago
10yr Treasury yielding 4.23% (down 7% from 4.53% two weeks ago)
Agg (US Aggregate Bond Index) at 98.93 – up 1% from 97.70 two weeks ago
Gold at 2902 per oz (flat from 2911 two weeks ago)
Crude Oil (WTI) at 70 per barrel (down 1% from 71 two weeks ago)
Bitcoin at 90k (down 6% from 96k two weeks ago)
JPM shares at 264 (down 5% from 277 two weeks ago)
Deutsche Bank shares at 21.90 (up 8% from 20.20 two weeks ago)
Truist shares at 46.46 (down 1% from 46.81 two weeks ago)
Blackstone shares at 163.34 (down 1% from 164.84 two weeks ago)
Magnificent 7 Index at 317 (down 9% from 347 two weeks ago)
US unemployment: at 242,000 in latest claims – up 14% from 213,000 two weeks ago - highest since Oct 2024
EUR at 1.05 USD (flat from 1.05 two weeks ago)
GBP at 1.27 USD (up 1% from 1.26 two weeks ago)
Macro Environment
US inflation persists at 3% though the US Treasury Secretary believes it will reach its 2% target in the course of the year. Yields on the US 10yr dropped to 4.2% from 4.8% in January, but the direction of travel remains unclear. Gaza ceasefire expired so negotiations and posturing are ongoing for next steps. US and Europe push for a plan for peace in Ukraine, but US relations with Ukraine are fraught. US tariffs on Canada, Mexico, China and others are scheduled to take effect imminently. US consumer spending slowed in the first months of 2025. Market volatility is increasing.
Macro View
US is pushing EU countries to increase their defense spending while those countries struggle with slowing growth and persistent inflation. China meets for the 'two sessions' to state its growth and inflation targets and set plans for investment and recapitalization. Whether through market economies or planned economies or a combination, leading countries have to determine their balance of defense spending, infrastructure, social services, technology, and other expenditures while the cost of capital is inflated relative to five years ago. This determination is critical to achieving growth while keeping prices in check.
Relevance
Markets celebrate clarity and punish uncertainty. The charts above show a plateau of uncertainty from US election day November 2024 until now. These charts consist largely of volatility with minimal upward momentum. Investors and trading partners alike are waiting for clarity on tariffs, policy, and actions. The grand dream of cutting government waste while deregulating and inspiring growth continues, but the likelihood of it working and the timing for its impact are unknown. AI and quantum computing are central to the dream of increased productivity, but the materiality and timing of their impacts are also unknown. Huge capital expenditure is going to building out 'compute', but evidence of its value in tangible and readily understood and relatable examples is required. Discovery of new drugs, treatments, elements, compounds, models that have widespread benefit and clear connection to AI innovation will justify the expenditure and focus. Moving beyond ace-ing the LSAT or MCAT or beating Kasparov or Stockfish at chess to tackle real problems and offer real solutions is required. In the meantime, investors will inevitably question the expectations for future earnings generation in the Mag7 and beyond. The Mag7 is off 14% from its peak at end of 2024. The NASDAQ traded down 7% in the last week. There is no doubt that AI and quantum computing will have transformational impacts on many industries and much of the world, but there is lack of clarity on how, when, and what it will cost relative to the value produced. This uncertainty along with the general and macro uncertainty that the US administration brings to the world is sure to produce volatility in the near term.
Head Scratchers
What will become of the hundreds of thousands of government workers that are removed by the DOGE? Are they expected to find meaningful and productive employment in the private sector? Or maybe they are supposed to take the jobs that the workers being detained and deported by ICE are leaving vacant? Perhaps the DOGE team already did some AI matching and provided those jobs, the relocation plan to fill them, and the training for a seamless transition and we will never see those workers show up in increased unemployment claims...
Drulard Family Capital Fund
Drulard Family Charitable Fund
#12 - 3Mar25