Cover Story:
-The business of overseeing an endowment has evolved significantly, with managing millions or even tens of billions of dollars across the capital markets becoming a match of three-dimensional chess. Harvard Management Co. CEO N.P. "Narv" Narvekar, who manages Harvard University's $53B endowment, has been facing criticism from Students for Justice in Palestine and conservative activists like Christopher Rufo who accuse universities like Harvard of padding their endowments with federal grants while spreading far-left ideology. In February 2024, Narvekar, along with Harvard Corp. senior fellow Penny Pritzker and President Alan Garber, received a subpoena from the House Committee on Education and the Workforce related to an investigation into Harvard's handling of on-campus antisemitism. Harvard's endowment has seen a plunge in fund-raising, with philanthropic contributions falling by 14% in fiscal year 2024 as several billionaire donors publicly severed ties with Harvard over its response to campus antisemitism.
Meanwhile, the Trump administration has requested that the Internal Revenue Service start the process of revoking Harvard's tax-exempt status.
Interview:
-Scotts Miracle-Gro, a seed company based in Marysville, Ohio and it is owned by Jim Hagedorn, CEO. The company's two flagship brands, "the grow side" and "the kill side," own Ortho and distribute Roundup to consumers. Miracle-Gro, originally a liquid-based plant fertilizer product, was co-founded in 1950 by entrepreneur Horace Hagedorn. In 1995, Scotts offered to buy Miracle-Gro for $400M, but Hagedorn decided it was worth more than Scotts. Today, the company has a market cap of nearly $3B, with Hagedorn and his family controlling 25% of the company's common stock. Hagedorn began investing in the weed business in 2013, when SMG invested in a Colorado indoor-gardening products company focused on growing marijuana. The company created a subsidiary, Hawthorne, which made acquisitions in companies selling marijuana cultivation supplies and invested in a Canadian business directly involved in growing and selling marijuana.
Tech Trader:
-Wall Street is experiencing uncertainty as tech earnings season begins and tariffs continue to impact investor sentiment. ServiceNow, IBM, Intel, and Alphabet reported mixed views on the current state of tech. Meta Platforms, Microsoft, Amazon.com, and Apple are expected to report within a 24-hour period next week, with the Nasdaq Composite down 11% on the year. The economic environment has drastically shifted due to ongoing tariff announcements from the Trump administration. Investors will be more focused on guidance tech companies provide than quarterly results. Intel CFO David Zinsner stated that the current macro environment is creating elevated uncertainty across the industry. The stock was down 7.3% on Friday due to Intel's weaker-than-expected outlook.
The Trader:
The healthcare sector is expected to perform well in 2025, despite concerns about Health and Human Services Secretary Robert F. Kennedy Jr. and UnitedHealth Group's earnings guidance. The Health Care Select Sector SPDR exchange-traded fund is flat this year, while the broader market is down. Tariffs and trade war worries are less of a concern due to the domestic focus of many industry companies. Investors appreciate that many of the companies in the group are relatively recession-resistant. Jonathan Curtis, chief investment officer at Franklin Equity Group, believes that people will continue to get sick, pay insurance premiums, and see their doctors. However, there are also exciting opportunities in the sector due to innovative medications and biotech-developed treatments. Eli Lilly, the largest holding in the Health Care ETF, is up 11% in 2025, while Johnson & Johnson and Amgen are up due to solid earnings and strong pipelines.
-Coca-Cola shares have seen a significant increase, up nearly 18% this year and trading near a record high, making it the top-performing stock in the Dow Jones Industrial Average. Warren Buffett is also a shareholder, with Berkshire Hathaway holding a stake of over 9%. The company's stock is expected to be discussed at Berkshire's annual shareholder meeting on May 3. Despite concerns about President Trump's aluminum tariffs and the impact of GLP-1 weight loss drugs and the Make America Healthy Again movement on sugary beverage intake, Coke remains bullish. CEO James Quincey believes the company can adapt to changing consumer behavior and tighter regulations from Health and Human Services Secretary Robert F. Kennedy Jr., and 23 of the 29 analysts covering Coke have a buy on the stock. Coke recognizes the need to expand its beverage portfolio beyond carbonated sodas, with a push into milk and protein shakes with Fairlife, the lactose-free dairy brand bought in 2020.
Features:
-President Trump's recent campaign to pressure Fed Chair Jerome Powell may signal that the Federal Reserve still holds the final say in monetary policy. Trump's attacks on the central bank, involving social media and public and private comments, tested the extent to which American political leaders can influence monetary policy and the central bank's willingness to resist them. The standoff between Trump and Powell, dubbed "Mr. Too Late" for the Fed's refusal to cut interest rates, was rooted in the Trump administration's "Liberation Day" announcement of a trade policy shift that would apply a baseline 10% tariff on most imports. The proposal was met with skepticism, leading to stock falls and lower Treasury yields. The White House implemented a 90-day pause on many new tariffs, except for those on China.
-A small part of Pope Francis's legacy will be financial, as the Vatican's investments are generating profit, possibly due to a renewed focus on social values aligned with the Catholic Church. In 2023, the Administration of the Patrimony of the Apostolic See (APSA) made nearly 46 million euros from its investments, covering 37.9 million euros for Church expenses and the rest as profit. ASPA invested in international securities and fixed-income securities, providing consulting, financial solutions, and access to capital markets for the Church. The total investment rose more than 40% from 2022, when the Church issued a document outlining "faith-based measures for Catholic investors." The Church reiterated that it wouldn't invest in companies that didn't conform to Church teachings, such as the immorality of abortion, birth control, pornography, excessive alcohol use, weapons, capital punishment, and mining. The Church believes that investing in companies that score well based on environmental, social, and governance (ESG) metrics aligns with the principles of Catholic Social Teaching. However, it isn't entirely clear which companies the Church believes fit those criteria, as it doesn't list specific holdings.
Europe:
-Apple and Meta Platforms have been fined by the European Union for breaches of the EU's Digital Markets Act. The move could exacerbate tensions between President Donald Trump and the Trump administration, who has previously threatened tariffs as retaliation for sanctions on US companies. Apple received a €500M ($571.3 million) penalty, while Meta, the owner of Facebook, was fined €200M. Trump has previously threatened tariffs in response to digital services taxes, fines, practices, and policies imposed on American companies. The relatively small scale of the fines could reduce the likelihood of retaliatory action from the Trump administration. The EU Commission requires companies to comply with the Commission's decisions within 60 days to avoid periodic penalty payments.
Emerging Markets:
-The US is increasingly resembling an emerging market, with President Donald Trump attacking the independence of the Fed and its chairman, Jerome Powell. Trump demands aggressive rate cuts and threatens to fire Powell if he doesn't get them, but this time amid a generational loss of confidence in the US dollar and Treasury bonds. Trump's behavior, including his irrational tariffs and administration's abandonment of traditional allies, disregard for the rule of law, and threats against Powell, intensifies the drop-off in confidence. The growing US debt since 2008 provides an ominous backdrop. This is a result of the "EM-ification" of US politics, where growing social polarization, political violence, and institutional conflict generate political instability, policy uncertainty, and market volatility typical of emerging markets. Since at least 2017, most US assets have rallied despite an 18% increase in political risk, a bigger increase than seen for any other developed market.
Commodities:
-Gold has seen a 30% increase in value this year, reaching $3,406 per troy ounce. Over the past 20 years, SPDR Gold Shares has surged 630%, 85 points more than the SPDR S&P 500. This is not expected, as businesses are expected to outperform gold over decades. Gold's price action is mostly about demand, as nearly every ounce found is still around somewhere. Since 2022, price action has been ravenous and broad. The US and its allies placed sanctions on Russia, including its largest banks, and China went on a bullion spree. However, other central banks have stepped in, possibly due to decadeslong diversification by finance ministers away from the US dollar. The recent uptick in gold stockpiling looks to JPMorgan Chase, the world's largest bullion dealer, like a debasement trade. Investors are nervous about President Trump's tariffs, his browbeating of the Federal Reserve Chairman over interest rates, and blowout US deficits.