JC Weekly Brief – 10th May, 2021

by Jefferson Capital
May 10, 2021

Global Overview

Fed Warns Investors

The rise in asset prices in the stock market poses an increasing threat to the financial system, the Fed has stated in its report. High asset prices reflect soft monetary policy, but some assets are valued higher than historical rates even when using metrics that factor in Treasury bond yields.

The report also mentions risks in hedge funds and other non-bank financial institutions several times as potential threats to the system. The report notes that sectors including energy, travel and hospitality are particularly vulnerable due to their sensitivity to the pandemic.

Biden Agrees to Lower Corporate Tax Raise

During his trip to Louisiana, the U.S. President has declared that it was acceptable to raise the corporate tax although to a lesser extent than previously indicated. He expects corporate taxes to be raised up to 25% from the previous 28%.

In his massive $ 2.3 trillion infrastructure plan, Biden originally proposed raising the corporate tax rate from 21% to 28%. The corporate tax rate between 25% and 28% would help to pay for the infrastructure support plan.

Capital Markets


PX Last 1W YTD
United States
S&P 4 232.6 0.41% 12.69%
NASDAQ 13 764.76 -1.42% 6.80%
Euro Stoxx 50 4 017.75 1.50% 13.09%
FTSE 100 7 131.05 2.29% 10.38%
DAX 15.373.05 1.74% 12.06%

Smallest Chip by IBM

IBM said on Friday that it has developed a microchip with 2-nanometer transistors. This is a step that can improve the performance of phones and computers.

The company said in a statement that the smaller transistors enable faster computing with less power. The 2nm chip is based on IBM nanosheet technology and will contain up to 50 billion transistors on a fingernail-sized chip.

IAG Looks to Resume Flights

British Airways owner IAG is confident that travel will resume from July 2021. By the end of Q2, airlines will be using only 25% of their capacity. IAG, which also owns Iberia and Vueling in Spain and Aer Lingus in Ireland, declined to forecast flight volumes from July but said it would begin to recover by then after more than a year of pandemic-related restrictions.

The rise to 25% of pre-pandemic capacity puts IAG’s plans behind those of rival airlines and is only a marginal increase from the 19.6% it flew in the first three months of 2021. IAG’s first-quarter operating loss before exceptional items of 1.14 billion euros was slightly better than the 1.17 billion euro loss forecast by analysts.

Private Equity & Venture Capital

HOME for Sale

Hellman & Friedman to Buy At Home Group (HOME) For $2.8 Billion, $36 Per Share. At Home sells furniture, décor and other home goods like bedding and seasonal decorations in more than 200 stores in 40 states. The stock tumbled along with much of the market in the early days of the pandemic but has since recovered, as homebound consumers spend more time fixing up their surroundings.

The agreement follows a number of recent public-to-private deals, including Thoma Bravo’s pact with cybersecurity specialist Proofpoint and its takeover of rental house software provider RealPage in April.

Global M&A Begins its Post-Pandemic Recovery.

In all, 8,753 deals worth a combined $917.7 billion were closed in the first quarter of 2021. The total includes some of last year’s headline-grabbing deals, among them LVMH’s takeover of Tiffany & Co. and the London Stock Exchange’s acquisition of Refinitiv, but it is also an indication that confidence is returning in 2021.

Commodities & Digital Assets

PX Last 1 Week YTD
Brent Crude 68.09 2.28% 31.81%
Gold 1 815.50 3.57% -4.06%
BTC/USD 57 551 0.10% 96.55%

U.S. Etherium ETF by VanEck

Investment firm VanEck has filed an application with the US Securities and Exchange Commission (SEC) to launch an Ethereum-based Exchange Traded Fund (ETF). In the case of launching an ETF, investors will have access to the second-largest cryptocurrency by capitalization using traditional exchanges. According to the document, VanEck Ethereum Trust shares will be traded on Cboe BZX.

VanEck and the Cboe are waiting for the SEC to render a decision on whether it can list a bitcoin ETF, which the asset manager applied for in March. The regulator last week delayed a decision until at least July 17, leaving investors waiting on the US to greenlight the country’s first bitcoin ETF.

Metals are the New Bitcoin

The metal continues to grow incessantly. The leaders are copper and palladium. Precious metals are also not lagging behind. Analysts project to see a significant increase in demand for silver. Gold looks less attractive as it is, for the most part, a hedge against inflation.