AGC's Year-End 2024 Tech Capital Markets Update

Across America and around the world, there are monumental reasons for celebration and also reasons for grave concern. With Christmas and New Year's nearing, we come together with family and friends in appreciation and joy for our good fortune for the benefits of living in the most bountiful and powerful nation in the world. While the other advanced economies are experiencing rapidly decelerating growth, the U.S. economy is growing at close to a 3% rate, dramatically outperforming our peers. Our GDP is $29T, which is larger than 15 of the top 20 economies combined. The U.S. stock markets are at record highs, bringing good cheer to all those in equities. The Nasdaq and S&P 500 combined are worth $72T, dwarfing any other country's stock exchange. China's stock market is down 35% from its high and has a combined market capitalization of only $6.5T. The U.S. dollar has been rising for years against virtually every other currency and has been on a tear for the last 2 months. Just take a trip abroad and enjoy the strength of the dollar everywhere.

A large part of the 16-year historical economic growth here in the U.S. and across the world has been driven by enormous and unabating government deficits as well as the Federal Reserve's massive infusion of capital into the U.S. economy. Since 2008, with the beginning of the Great Recession, the U.S. has poured $21T of deficit dollars into the U.S. economy in tandem with the Federal Reserve, which pumped another $9T in with open market purchases of mortgages and treasuries which they termed Quantitative Easing. That amounts to pumping an extra $30T of gas on the growth fire that was only a $25T economy, growing an average of $0.8T every year – that is a lot of stimulus. All that deficit spending has driven our national debt up to $36T and has only generated $14T of GDP growth over those 16 years. Not very well-spent dollars by the U.S. government. In 2024, the U.S. had $5T in tax income but spent $6.8T, leading to a $1.8T deficit, or 37% more than they collected. That government wasted all that money not in war, pandemic, or crisis, but rather in keeping the mythical growth rate alive and well. For reference, a theoretically healthy debt-to-GDP ratio is 30%, which is where we were in the 1980s. We are currently at 121% and rising. The annual deficit spend as a percentage of GDP forever was 1-2% but is now at 8%. Simply put, the U.S. government has been massively subsidizing the U.S. economic growth with piles and piles of debt.

As stocks, bonds, and private equity have been roaring, up 600-1,700%+, the American worker's earnings have only increased 59% on a nominal basis, equating to a meager 6% in real terms over the last 16 years. You have to ask, was the $21T in debt and $9T in Fed monetary stimulus meant for the people or for those in high places? Don't get me wrong, there is so much in America to be excited about as we enter 2025. I am reminded of that in so many ways – every day I hang out with my 3 little grandbabies. AGC currently has 10 companies under LOI for sale and another 15 in the market with pitch activity up 100% in December. That said, we need to be cognizant of the massive hole that our government has dug for us and be disciplined not to dig it any deeper and to have the grit to take the medicine to get healthy and the fortitude to stick to the mission.