by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM EDT] | PDF

Our Comment today opens with the initial results from the European Parliament elections over the weekend, which suggest that surging support for right-wing parties will produce big changes in the European Union’s economic and social policies. We next review several other international and US developments with the potential to affect the financial markets today, including an update on China’s effort to rescue its residential real estate market and some notes on US fiscal policy.

European Union: In weekend elections for the European Parliament, centrist parties kept their majority, but far-right parties did better than in the 2019 elections and appear to have won almost 180 of the 720 seats in the body. Support for the right grew strongly in Germany and France, prompting French President Macron to call snap elections on June 30 and driving down EU stocks and the euro so far today. The new parliament will likely shift European Union policies in a more anti-immigration direction and roll back the EU’s climate stabilization policies.

• Results so far suggest the center-right European People’s Party (EPP) alone will have 186 seats, making it the biggest party in the parliament. The center-left Socialists and Democrats (S&D) are projected to have 134 seats, while the center-left Renew party is on track to end up with 79 seats.
• The hard-right European Conservatives and Reformists (ECR) are expected to have 73 seats, and the hard-right Identity and Democracy (ID) group will have 58 seats. Along with smaller parties that share their ideology, the hard right will have almost one-fifth of the seats.
• The environmentalist-leftist Greens are expected to have only 53 seats.

Israel: Centrist politician and former general Benny Gantz said he is resigning from Prime Minister Netanyahu’s emergency cabinet to protest what he called Netanyahu’s mistakes in prosecuting Israel’s war against the terrorist Hamas government in Gaza. Gantz also called for early elections. Netanyahu’s conservative party and its right-wing allies retain a majority in parliament even without Gantz’s support, so the move doesn’t immediately topple Netanyahu. However, Gantz’s move adds to the destabilizing political uncertainty in Israel.

China:  Major residential real estate developers Country Garden, Vanke, and Shimao have now all reported significantly higher home sales in May than in April. The firms’ sales are still down dramatically from year-earlier levels, but the reports suggest the government’s new plan to rescue the sector is having at least some success. However, we remain skeptical that the sector can regain its former luster merely based on the plan’s eased mortgage standards and financial incentives for local governments to buy up excess properties.

Iran: Ahead of the presidential election later this month, the Guardian Council has approved a list of candidates consisting almost entirely of hardline conservatives. The Council, made up of clerics charged with defending the nation’s theocracy, banned two prominent reformers who had called for more moderate religious policies and rapprochement with the US. The Council’s decision helps ensure that tensions between Tehran and the West will continue to present risks to global investors in the coming years.

Chile: New reporting shows that a powerful and dangerous criminal gang from Venezuela has rapidly built a presence in Chile, boosting the incidence of extortion, kidnapping, murder, and other crimes. Although Chile retains its reputation as one of Latin America’s most developed and safest investment locations, the new spike in violence and the inequality protests that ushered in a leftist president in 2021 continue to raise investor concerns.

US Monetary Policy: The Federal Reserve holds its latest policy meeting this week, with its decision due on Wednesday at 2:00 PM EDT. With price pressures stubbornly high, the policymakers are widely expected to keep the benchmark fed funds interest rate unchanged at 5.25% to 5.50%. Just as important, the officials will also release their updated economic projections, including their “dot plot” of expected rate changes going forward.

• Based on interest-rate futures pricing, investors currently look for the Fed’s first rate cut in the autumn. The biggest uncertainty is whether the policymakers will implement further cuts later in the year.
• Because of today’s sticky inflation, we continue to believe the policymakers could keep rates “higher for longer” than investors currently believe.

US Fiscal Policy: In an interview with the Financial Times, the International Monetary Fund’s second-ranking official argued the US has “ample” resources to bring down its fiscal deficit to more sustainable levels. In the interview, First Deputy Managing Director Gita Gopinath said that US policymakers should consider boosting taxes on high-income individuals. She also said that in the US, as in all advanced economies, there is “no way of getting around” the fact that population aging will require fundamental reforms to pension systems and medical spending.

• The volume of individual income taxes, Social Security and Medicare taxes, and corporate income taxes has certainly risen over the last decade, as shown in the chart below. However, the increase has been much smaller than it would have been without the tax cuts of 2017.
• Importantly, the rise in tax revenues hasn’t been nearly enough to cover the rise in spending. The biggest increases in spending have come from Social Security, Medicare, Medicaid and other healthcare, and net interest.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM EDT] | PDF

Good morning! Equities futures are down after strong employment data suggests that the economy remains robust. In sports news, the US Cricket team was able to score an upset victory over top contender Pakistan as it prepares for the World Cup. Today’s Comment dives into the European Central Bank’s latest rate decision, the recent flight to safety in the 10-year Treasury, and the ongoing investor uncertainty surrounding elections. As always, we’ll wrap up with a look at key domestic and international data releases.

European Central Bank: The ECB decided to lower its benchmark policy rate on Thursday but was mum on future hikes until data provided support.

• The ECB lowered its key interest rate by 0.25% on Thursday, signaling a cautious approach to future reductions. The move was widely expected and followed weeks of hints from policymakers about their willingness to ease borrowing costs. While most council members supported the cut, there was one dissenter. Robert Holzmann, head of Austria’s central bank, believed the ECB acted too hastily given recent CPI data, which suggested a pick-up in price and wage pressures across the eurozone. Consequently, there’s uncertainty about whether another rate cut will occur this year.
• The central bank’s recent rate cut raises questions about the effectiveness of its tightening measures. Policymakers boosted inflation forecasts for 2024 and 2025 but held steady for 2026. The economic outlook has brightened with upwardly revised GDP for 2024 as the region recovers from the near recession of 2023. Despite a recent uptick in core CPI, which rose from 2.80% to 2.83% last month, the ECB remains confident that inflation will eventually decline. This confidence rests on its belief that the effects of past interest rate hikes are still filtering through the economy.

• The recent ECB rate cut could be a response to market pressures, following strong hints of a reduction in the weeks leading up to the meeting. This may lead the ECB to adopt a more cautious approach as they look to avoid boxing themselves in, or worse, be forced to make a U-turn to prevent a reacceleration in inflation. Wage pressures are in focus as they have been a key driver of service-sector inflation. However, leading economic indicators suggest a cooling labor market, potentially paving the way for one more cut later this year, as markets have anticipated. September or later seems to be the most likely timeframe.

US Treasurys: Subpar economic data has recently driven the yield on the 10-year Treasury to its lowest level in three months.

• US worker productivity rose by a modest 0.3% from the previous quarter, marking the slowest pace since early 2023. While exceeding expectations slightly, the increase reflects a broader slowdown in economic activity. This follows a string of concerning reports, particularly disappointing retail sales, job openings, and home prices. However, a glimmer of hope emerged in May. Both ISM and S&P Global PMI surveys reported a pick-up in service activity, while consumer confidence took a surprising leap. Despite these signs, the overall market sentiment leans toward slowing US GDP growth.
• Weak economic data is driving a dovish shift in investor sentiment. The 10-year Treasury yield has plunged nearly 30 bps in 10 days, reflecting hopes that the Fed can achieve a soft landing. Recent inflation reports, including April’s CPI and PCE price index, showed a welcome deceleration in price pressures, suggesting inflation may be nearing the Fed’s 2% target. In addition, labor’s share of economic output has fallen significantly from its peak of 59% to 55%, reaching its lowest level in almost a decade. This suggests that wage pressure on inflation should continue to subside over the next few months.

• The Federal Reserve’s policy undeniably shapes long-term bond yields. However, investors shouldn’t overlook the impact of geopolitical changes. Since the Great Financial Crisis, US foreign demand for Treasury bonds has fallen considerably. This loss represents a critical source of buyers who are less sensitive to interest rate fluctuations. Additionally, US reliance on imports, a major disinflationary force, has also been disrupted. Rising deficits coupled with growing trade tensions suggest a potential opportunity for investors to sell 10-year Treasurys before interest rates rise again.

Global Elections: At nearly the halfway point of the year, elections continue to present surprises, potentially causing trouble for investors.

• A notable trend has been the unexpected pushback against establishment candidates. Last week in India’s elections, the Bharatiya Janata Party (BJP) was widely expected to increase its majority, but it instead suffered an embarrassing setback and was forced to form a coalition. Meanwhile, in Mexico, the overwhelming dominance of Morena also caught investors off guard. This trend is expected to carry over to Europe and the US, with elections likely to show major victories for far-right candidates, including Marine Le Pen’s National Rally Party in France and the gaining popularity for former US President Donald Trump.
• The rise of less conventional candidates has yielded mixed results for emerging markets, as investors grapple with the uncertainty surrounding policy impacts. Argentine President Javier Milei initially received a positive response from markets following his victory in December, but sentiment shifted once the challenges of implementing his proposed changes became evident. India had the opposite impact as investors believed that the BJP may still be able to push its agenda despite losing seats. South African and Mexican markets have yet to recover from their recent elections, as investor pessimism persists due to a lack of clear policy direction.

• Europe casts its first ballots this weekend, with parliamentary elections kicking off a wave of voting across the Atlantic. The UK follows next month, and the United States rounds out the year with its national elections in November. A common thread runs through these elections: anxieties over immigration, debt, and inflation. Early exit polls indicate a narrow victory for the left-wing parties in the Netherlands, with far-right candidate Geert Wilders making significant gains. Meanwhile, UK polls suggest that the Labour Party is poised to easily defeat the Tories. In the US, election polls show former President Trump leading in November, while other prediction markets show a dead heat.

In Other News: A record heat wave in the western states could potentially weigh on economic activity in June. China is cracking down on mutual funds with large-scale audits as it continues to scrutinize the financial sector.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM EDT] | PDF

Good morning! Equity futures are off to a modest start as investors eye Friday’s jobs data. In sports news, the Lakers are looking at hiring UConn Coach Dan Hurley to take over the team. Today’s Comment explains the potential reasons other central banks may be waiting on the Federal Reserve before making future rate decisions. We also explore whether Nvidia can sustain its current momentum and discuss the implications of the disappointing election results for Modi’s new government. As always, our report will include a roundup of international and domestic data releases.

Rate Cuts in the West: Despite policy pivots by the European Central Bank (ECB) and Bank of Canada, the dollar’s strength against major currencies may persist in the near term as other central banks await Fed action.

• The ECB became the latest central bank to cut interest rates, lowering them for the first time since 2019. This move aims to stimulate the eurozone economy, which has seen a series of quarters with subpar growth. The ECB’s decision comes as annual inflation has dipped from a peak of nearly 6% in 2023 to under 3% a year later, suggesting a need to balance GDP growth and price stability. The ECB follows similar recent rate cuts by the Bank of Canada and the Swiss National Bank.
• Central banks are likely to tread carefully on further rate cuts despite the market’s positive reaction. A wider gap between their policy rates and the Fed’s rate could strengthen the dollar, making imports more expensive, especially for dollar-priced commodities. While there is optimism that the Fed might cut rates later this year, it’s far from certain. Before their blackout period, several Fed officials emphasized the need for more data before easing monetary policy. Adding to the complexity, the euro area is also experiencing a rise in price and wage pressures.

• Central bank flexibility hinges on the Fed’s ability to deliver on its planned rate cuts this year. Next Wednesday’s release of the Summary of Economic Projections will be a key indicator. Recent data weakness suggests a high likelihood of 1-2 cuts, aligning with market expectations. If the Fed delivers, other central banks are likely to follow suit with similar cuts to maintain parity, potentially easing pressure on the US dollar. However, a Fed decision to hold rates steady could see other banks stand pat, lending support to the dollar.

Nvidia Takes Over: The biggest mover of the Magnificent Seven is soaring, but its rapid rise could be masking a hidden weakness.

• So far in 2024, US chip designer Nvidia has surged to become the world’s second-most valuable company, boasting a market valuation exceeding $3 trillion and surpassing Apple. This remarkable rise follows a period of strong demand for their graphics processing units (GPU), particularly after the company strategically pivoted to develop advanced artificial intelligence (AI) capabilities. While Nvidia faces competition from Intel and AMD, its dominance in AI is undeniable. The company holds a staggering 70% to 95% market share for AI accelerators, solidifying its position as a leader in this rapidly growing field. This strategic shift toward AI has fueled consistent, impressive earnings reports, making Nvidia a major driver of growth within the S&P 500.
• Despite its dominance in AI and high-performance computing, some analysts view Nvidia’s valuation as riskier compared to the established Magnificent Seven tech giants. While the AI market holds immense potential, its relative youth raises questions about Nvidia’s long-term sustainability if the AI boom falters. Unlike its more diversified peers, it’s heavy reliance on AI could expose it to a significant correction if market demand cools. This lack of diversification is a familiar concern for companies reliant on a single hot trend. Tesla exemplifies this as their recent stock price decline has coincided with a slowdown in electric vehicle demand.

• Nvidia’s momentum could be amplified by its upcoming stock split on June 7. The lower share price might attract more retail investors, potentially mirroring past trends. Historically, Bank of America research suggests companies outperform the market over the next year (25% vs. 12%) following a stock split. However, it’s crucial to remember that past performance doesn’t guarantee future results. Investors should consider both Nvidia’s long-term prospects and its ability to meet current market expectations. Focusing on the company’s valuation fundamentals alongside short-term momentum can be a wise approach for building a well-rounded portfolio.

The New India: Prime Minister Narendra Modi failed to attain a demanding victory in the election, calling into question his longer-term ambitions.

• Modi was formally named the Prime Minister of India for the third consecutive time on Wednesday despite his party’s disappointing performance at the polls. The ruling Bharatiya Janata Party (BJP) won 240 out of the 543 seats in parliament, falling short of a majority and necessitating a coalition to maintain power. This result signifies a weaker mandate for Modi. Throughout his tenure, Modi has been a strong advocate for Hindu nationalism and has sought to amend the country’s secular constitution, a move that would require approval from two-thirds of the parliament.
• Modi’s hold on power, albeit with a reduced majority, has reassured investors by signaling continuity in market reforms. Throughout his tenure, Modi has set an ambitious agenda, aiming to propel India to developed nation status by 2047. In pursuit of this goal, his party has pushed pro-market reforms to enhance India’s attractiveness to investors and boost its overall competitiveness. He’s expected to leverage his new term to address labor and land regulations, which have faced significant resistance. Notably, farmer protests in 2022 forced the government to repeal three laws intended to deregulate the agricultural sector.

• One source of concern is that Modi, who is 73, is widely believed to be considering retirement in a couple of years. Although his party has downplayed this speculation, retiring at that age would be consistent with previous Indian leaders. His successor is widely expected to be his right-hand man, Amit Shah, whose views are highly nationalist. Given the likely negative impact Hindu nationalism had on the outcome of this election, the party could face significant challenges if Modi decides to step down. While optimism prevails due to recent reforms in India, we’ll be closely monitoring any political developments.

In Other News: The Federal Trade Commission has opened an investigation into the Microsoft AI deal, in another demonstration of the regulatory risks facing Big Tech. Boeing Starliner reached orbit in a sign that the company is looking to take on Musk’s SpaceX in the space race.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM EDT] | PDF

Good morning! Equities futures are off to a strong start as investors digest the latest ADP jobs data. In sports news, the US Women’s National Team (USWNT) delivered a convincing victory over South Korea in their pre-Olympics preparation. Today’s Comment will focus on why a slowdown in job openings may be good news for the market, why the regional banking system remains a point of concern, and why the UK Prime Minister debate wasn’t a clear win for either candidate. As usual, our report concludes with a roundup of international and domestic data releases.

Labor Cooling: Job openings have fallen in recent months in a sign that rising interest rates may finally be impacting the US economy.

• US job openings have plunged to a three-year low, according to the Bureau of Labor Statistics. April data shows that 8.06 million jobs are available, down from 8.35 million in the previous month, which pushed the job openings rate down to 4.8% from 5.0%. This marks the third straight month of decline and fuels speculation of an economic slowdown. The Atlanta Fed’s GDPNow forecast predicts second-quarter growth of just 1.8%, down from last week’s estimate of a 2.7% rise. This weak reading was seen as bullish for risk assets as it raised the possibility of the Federal Reserve cutting rates to prevent a recession.
• The recent jobs data offers a glimmer of hope for a soft landing. The ratio of job openings to unemployed workers is steadily declining and is now approaching pre-pandemic levels. This suggests employers are adjusting to wage pressures by scaling back on hiring, as opposed to reducing their workforce. This aligns with past comments from Fed Governor Christopher Waller. A few years ago, he suggested companies might freeze hiring rather than resorting to layoffs during an economic slowdown. This trend strengthens the case for potential rate cuts by the Fed in the latter half of the year.

• A Goldilocks scenario seems likely for the economy, with growth potentially slowing enough to tame inflation without tipping into recession. Friday’s jobs report is a crucial test for this forecast. The expected gain of 190,000 jobs would be considered modest. A significantly weaker number could fuel expectations of a rate cut, possibly as early as September. If our forecast holds true, this could lead to a rise in stock prices, with small-cap and mid-cap stocks potentially outperforming their larger counterparts as investors embrace riskier assets. Additionally, US government bonds should also rally as investors look to get ahead of the Fed.

Bank Troubles: Even though some indicators suggest financial conditions are still relatively stable, regulators remain concerned about potential trouble for banks.

• The Federal Deposit Insurance Corporation (FDIC) identified an increase in bank vulnerability, with 63 banks now considered at risk. This marks a rise from 52 in the fourth quarter of 2023. The US banking system faces a growing burden of unrealized losses totaling $517 billion. This represents an 8.2% increase from the previous quarter. Residential mortgage-backed securities are the primary culprit, accounting for 95% of the recent rise in losses. Additionally, there is an upward trend in the volume of past due and nonaccruals (PDNA), with most of the increase coming from the largest banks.
• Despite signs of vulnerability in some banks, broader financial conditions remain easy. The Chicago Fed National Financial Conditions Index reflects this disconnect, with 101 out of 105 indicators signaling looser-than-average conditions. As a result, hawkish voices within the Fed are rising. Last week, Dallas Fed President Lorie Logan, a non-voting FOMC member, emphasized the need to keep rate hikes on the table in order to prevent reigniting inflation through premature easing. She finds support from Atlanta Fed President Raphael Bostic, Minneapolis Fed President Neel Kashkari, and Fed Governor Michelle Bowman, who have also signaled openness to further tightening.

• A recent increase in banks identified as potential problems by the FDIC raises concerns. However, with only 1.2% of the system flagged, the overall health of the banking industry remains strong. This will be a key factor for policymakers as they navigate next week’s rate decision. While recent economic data is unlikely to completely derail rate cuts, rising inflation concerns may prompt the Fed to scale back its plans. Instead of the previously anticipated three cuts, the Fed might opt for a more measured approach with just two reductions. Additionally, policymakers may choose to monitor the effects of slowing the balance sheet reduction before resorting to more aggressive measures to safeguard the banking system.

UK Showdown: Prime Minister Rishi Sunak clashed with his Labour counterpart Keir Starmer as he attempted to boost support for his re-election campaign.

• The debate opened with a fiery exchange, as Sunak launched a direct attack by accusing Starmer of proposing a £2,000 tax increase (roughly $2,550). Starmer countered, insisting the figure was grossly inflated and based on flawed assumptions about his policies. However, despite his pushback, Starmer struggled to deflect concerns about potential tax hikes, leaving him on the defensive throughout most of the verbal sparring. That said, Sunak struggled to defend his party’s 14-year record in power, likely damaging his overall likeability rating.
• Although polls showed that Sunak was the victor of the debate, his party is still heavily favored to lose the election that is set to take place on July 4. Two of the most pressing concerns for the British are the rising cost of living and immigration. While inflation has come down from its peak, prices in the UK are still rising faster than in the eurozone. Additionally, many voters are concerned that immigration is placing a strain on housing affordability and public services. Although the country has implemented stricter immigration policies, there is still a push for lawmakers to go further.

• Despite exiting the European Union more than four years ago, the UK continues to search for a clear national identity. If polls hold true, the country could be on its fourth prime minister in that timeframe. This persistent leadership change is likely to complicate efforts to predict the future course of policy, as the UK grapples with ongoing challenges. One key issue in the coming months will be the country’s ability to manage its debt in order to achieve economic stability. A successful approach could attract investment, but failure could lead to investor hesitancy.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM EDT] | PDF

Our Comment today opens with shipping data that points to strong global demand and high freight rates worldwide. We next review several other international and US developments with the potential to affect the financial markets today, including a testing scandal in the Japanese auto industry, surprise results in India’s official vote counting, and a preview of new immigration policies expected to be announced in the US today.

Global Shipping Industry: Shipping giant A.P. Møller-Mærsk yesterday raised its full-year earnings guidance for the second time in barely over a month. The upward revisions illustrate how shipping rates have increased amid strong global demand and disruptions in the Red Sea related to the Israel-Hamas conflict. While increased freight rates are positive for ship owners and operators, they also could buoy price inflation and help keep global interest rates high.

Japan:  An investigation by the Transportation Ministry has discovered multiple cases of erroneous vehicle certification tests by Toyota, Honda, and other top producers. The faulty tests reportedly don’t relate to safety or emissions, but they have been deemed serious enough for the government to suspend some vehicle shipments within Japan. As a result, Japanese auto-industry stocks took a hit yesterday, with top producer Toyota’s stock price falling 2.5%.

India: Contrary to what exit polls had shown during the weekend, official vote counts suggest the coalition led by Prime Minister Modi’s Hindu-nationalist Bharatiya Janata Party won only a narrow parliamentary majority in the recent elections. Vote counting continues, but the results so far point to a Modi who is politically weaker than expected. Amid worries that Modi will be limited in his ability to push through more of his business-friendly policies, India’s benchmark Sensex stock index fell 5.7% today, reversing Monday’s 3.4% gain.

Australia-China: In a new poll by the Lowry Institute, nearly 75% of respondents thought China would become a military threat to Australia within the next two decades. Consistent with that, 65% of respondents expressed support for the AUKUS alliance, in which Australia will buy nuclear-powered attack submarines from the US and the UK. The findings show how rising geopolitical threats from authoritarian leaders have drawn Western countries even closer to the US — not just in military terms, but potentially in economic and financial terms as well.

• Only 17% of respondents trusted China “a great deal” or “somewhat” to act responsibly in international relations.
• Only 12% said they were confident that Chinese President Xi Jinping would “do the right thing regarding world affairs,” although that was higher than the number who trusted Russian President Putin or North Korean Paramount Leader Kim.

China: Of course, China is already seen as an economic threat in the developed West, especially now that General Secretary Xi is pushing more investment in “new quality productive forces” such as electric vehicles and solar panels. The Wall Street Journal today carries a useful chart book explaining how this new investment has led to excess capacity and why it threatens to unleash a wave of cheap exports that could harm Western producers.

• Exemplifying the challenge, new data from Schmidt Automotive Research shows European registrations of Chinese-made EVs in January through April were 23% higher than in the same period one year earlier.
• As a result, Chinese-made EVs had a market share of about 20% in the period, pointing to strong competition for Europe’s domestic automakers and auto industry workers.
• The rapid growth in China’s market share goes far toward explaining why the European Union has launched an anti-dumping investigation into Chinese EVs. The results of that investigation are expected to be released next week, leading to the imposition of significant new tariffs against the Chinese vehicles.

Canada: The government and the union representing its 9,000 border agents are racing today to agree on a new labor contract to avoid a “work to rule” strike set to start on Thursday. If the negotiations fail and the Public Service Alliance of Canada members begin working strictly to existing contract rules, the loss of productivity could greatly slow US-Canadian truck and tourist crossings, with potentially significant negative impacts on US and Canadian economic activity.

US Immigration Policy:  President Biden is expected to announce today that he is signing an executive order that would restrict migrants’ ability to request asylum if they have crossed the US border illegally. The move comes as more voters complain about the surge in illegal migration across the southern border, making it a major issue in the November election. However, the order may not withstand scrutiny by the courts, since it is similar to an order by then-President Trump that was later ruled illegal.

• As we noted in our Bi-Weekly Geopolitical Report of May 20, many of today’s illegal entrants and asylum seekers are probably helping to fill the shortage of lower-skilled workers left over by the coronavirus pandemic.
• Given the low level of US births and shrinking numbers of high school graduates, immigrants will likely be an essential part of any future growth in the labor force, especially if today’s anti-immigration sentiment dissipates.

US Economy: This year’s Fortune 500 list of the largest US companies by revenue has been published today, with Walmart taking the top spot, followed by Amazon, Apple, and UnitedHealth Group. For the first time since 2013, California is the state with the most firms on the list, clocking in with 57 of the companies. Texas and New York tied for second place, with 52 of the companies each.

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