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Below are some of the most interesting articles, quotes and charts I came across this week. 

The long-term nature of the capital cycle means that major investment themes typically last a decade or longer. Recent trends in capital spending suggest a major transition is now underway.

'The prior decade and a half was mainly about intellectual/technical capital accumulation. The next decade will be a more physical/industrial investment period.' https://t.co/Fqf6PxIzvH by @LynAldenContact pic.twitter.com/ccB8vwbars

— Jesse Felder (@jessefelder) August 7, 2023

Significant investment in industrial capacity requires a great deal of energy, a fact investors have only just begun to appreciate.

After nearly 9 months of underperformance, energy stocks are once again starting to outpace the overall market.

From a historical standpoint, this trend remains at its early stages with the valuation of oil and gas businesses currently at one of its most attractive levels in the… pic.twitter.com/aX3YSDoXRW

— Otavio (Tavi) Costa (@TaviCosta) August 9, 2023

Despite the energy sector’s dramatic outperformance over the past few years, it remains significantly underrepresented in the major indexes and thus in investor portfolios, as well.

The Energy sector represents over 12% of S&P 500 earnings but only about 4% of S&P 500 market cap, the widest gap since 2009. The last time Energy's earnings weight was above 12% was in 2013. Back then, the sector made up over 10% of the index's market cap. @NDR_Research pic.twitter.com/vnGFmycS1U

— Rob Anderson (@_rob_anderson) August 4, 2023

Trends in fiscal policy, partly related to the shift towards industrial investment and infrastructure renewal, are not disinflationary.

Pro-cyclical deficit spending is changing the Fed's calculus.

In combination, the two main channels of money creation (deficit spending + bank lending) are rising more than 10% yoy.

The Fed can slow bank lending, but it has no control over fiscal policy. pic.twitter.com/VuNuKGhsWW

— Warren Pies (@WarrenPies) August 7, 2023

And expanding manufacturing and infrastructure spending at a time when the working population is rapidly shrinking relative to the total only compounds the problem.

Aging demographics = higher Inflation https://t.co/sFoqWlE8xb pic.twitter.com/csd8NtpIr0

— Jesse Felder (@jessefelder) August 9, 2023

More By This Author:

What If Disinflation Is Just An Illusion?
Investors Go ‘All In’ On The Soft Landing Narrative
An Opportune Time To Be A Contrarian?