Artificial intelligence has been the dominant investing theme for the last two years, and Nvidia has stolen the spotlight. The company reported triple-digit sales growth in the last five quarters, and shares have surged more than sevenfold since January 2023, making it the best-performing stock in the S&P 500 (SNPINDEX: ^GSPC) during that period.

However, artificial intelligence is not the only theme investors should explore. The hedge fund managers listed below (all of whom are billionaires) sold Nvidia stock in the second quarter while buying shares of the iShares Russell 2000 ETF (NYSEMKT: IWM), an index fund that tracks the small-cap Russell 2000.

• Ken Griffin of Citadel Advisors sold 9.2 million shares of Nvidia, slashing his stake by 79%. He also added 125,383 shares of the iShares Russell 2000 ETF (exchange-traded fund), increasing his position by 27%.

• David Shaw of D.E. Shaw & Co. sold 12.1 million shares of Nvidia, reducing his stake by 52%. He also added 638,084 shares of the iShares Russell 2000 ETF, increasing his position by 169%.

Importantly, Ken Griffin and David Shaw run the best-performing hedge funds as measured by net gains since inception. Neither fund manager closed their position in Nvidia, so we can’t assume they have lost confidence in the chipmaker. But we can assume they are bullish about small-cap stocks.

Tom Lee, head of research at Fundstrat Global Advisors, shares that optimistic outlook. In January, he told CNBC that the Russell 2000 could end the year above 3,000. That implies 43% upside from its current level of 2,091, which suggests identical gains for shareholders of the iShares Russell 2000 ETF.

Here’s what investors should know.

The case for small-cap stocks

The Russell 2000 index measures the performance of approximately 2,000 small-cap U.S. stocks, representing 5% of domestic equities in terms of total value. The median market capitalization among Russell 2000 companies is roughly $1 billion. By comparison, the S&P 500 is a large-cap index, and the median market capitalization is $33 billion.

Tom Lee is optimistic about small-cap stocks for two reasons. First, small-cap valuations are at their cheapest level in decades relative to large-cap stocks. Second, small-cap companies are more sensitive to interest rates, so they stand to benefit more than large-cap companies when the Federal Reserve starts cutting rates.

Regarding valuations, J.P. Morgan strategist Michael Cembalest recently wrote, “Small-cap stocks are at their cheapest levels in the 21st century with potential market and political catalysts in their favor.” But he also noted that small-cap companies are likelier to have lower margins and negative earnings than large-cap companies.

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With respect to interest rates, small-cap companies rely more heavily on floating-rate debt, meaning debt with a variable interest rate tied to some benchmark, often the federal funds rate. So, when the Federal Reserve lowers its benchmark rate, floating-rate debt becomes less expensive. “Small-cap companies tend to take on more floating-rate debt, and so lower rates are very helpful,” according to Sonu Varghese at Carson Group.

Importantly, the market expects the Federal Reserve to start cutting interest rates at its meeting later this month.

The iShares Russell 2000 ETF

The iShares Russell 2000 ETF lets investors spread capital across the Russell 2000 index, giving them diversified exposure to roughly 2,000 small-cap companies. The 10 largest holdings in the index fund are listed by weight below:

1. Vaxcyte: 0.5%

2. FTAI Aviation: 0.5%

3. Insmed: 0.4%

4. Sprouts Farmers Market: 0.4%

5. Ensign Group: 0.3%

6. Fabrinet: 0.3%

7. Fluor: 0.3%

8. Halozyme Therapeutics: 0.3%

9. Mueller Industries: 0.3%

10. Applied Industrial Technologies: 0.3%

The small-cap Russell 2000 has consistently underperformed the S&P 500 over the last five years, 10 years, and 20 years, and the underperformance was often extreme. For instance, the Russell 2000 returned 105% during the last decade, compounding at 7.4% annually. Meanwhile, the S&P 500 returned 224%, compounding at 12.4% annually.

The iShares Russell 2000 ETF has a reasonable expense ratio of 0.19%, meaning the annual fees will total $1.90 for every $1,000 invested in the fund. For comparison, the average expense ratio across U.S. index funds was 0.36% in 2023, according to Morningstar.

Here’s the bottom line: Patient investors should consider buying a small position in the iShares Russell 2000 ETF today. The index fund could soar when the Federal Reserve starts cutting rates and small-cap stocks trade at historically cheap valuations.

However, shareholders should not expect a 43% return by year-end. Additionally, investors who own the iShares Russell 2000 ETF should consider balancing their portfolios with an S&P 500 index fund. The Russell 2000 could conceivably outperform the S&P 500 in the future, but history says that outcome is unlikely to persist over long periods.

Should you invest $1,000 in iShares Trust – iShares Russell 2000 ETF right now?

Before you buy stock in iShares Trust – iShares Russell 2000 ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and iShares Trust – iShares Russell 2000 ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $630,099!*

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends JPMorgan Chase and Nvidia. The Motley Fool recommends Sprouts Farmers Market. The Motley Fool has a disclosure policy.

Billionaires Are Selling Nvidia Stock and Buying an Index Fund That Could Soar 43%, According to a Wall Street Analyst was originally published by The Motley Fool

Warren Buffett-led Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) achieved a new milestone in August, surpassing $1 trillion in market cap for the first time.

Although Berkshire is known for its public equity investments in companies like Apple and Coca-Cola, the value of the rest of the business is actually much higher. In fact, Berkshire’s holdings in public companies are worth about $320 billion compared to the $1.026 trillion market cap for Berkshire as a whole.

Berkshire has a treasure trove of property and casualty insurance segments, ownership of BNSF Railway, 92% ownership of Berkshire Hathaway Energy, manufacturing, service, and retailing businesses, and more. It also has a combined $79.41 billion invested in Bank of America (NYSE: BAC), American Express (NYSE: AXP), Visa (NYSE: V), and Mastercard (NYSE: MA).

While you could buy Berkshire Hathaway stock to get exposure to these top companies and Berkshire’s private holdings, a simpler and perhaps more effective way of investing in the financial sector is through an exchange-traded fund (ETF) like the Vanguard Financials ETF (NYSEMKT: VFH). In fact, Berkshire Hathaway stock is the fund’s second-largest holding with an 8.1% weighting.

Here’s why financials are one of the market’s most diversified and value-orientated sectors and why the Vanguard Financials ETF could be worth buying now.

Getting to know the financial sector

The financial sector is the second most valuable sector behind technology — making up 13.3% of the S&P 500. It includes a diverse array of industries, from big banks to regional banks, investment banking, insurance providers, payment processors, financial exchanges, and more.

Although the financial sector generally benefits from economic growth, not every part of it reacts to economic factors in the same way. For example, banks can benefit from higher interest rates by collecting more interest income from consumers. But credit card companies make money by the number of transactions and the average amount of each transaction. So, they would prefer lower interest rates and higher spending rates.

Similarly, investment banks and venture capital firms may prefer lower capital costs to spur merger and acquisition activity. However, an insurance company depends more on regulations than economic conditions.

Stodgy low-growth pockets of the financial sector tend to have dirt cheap valuations and pay rising dividends. In contrast, faster-growing companies may pay small dividends (or none at all) and focus more on reinvesting in the business.

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Diversification is especially important in the financial sector. For example, several regional banks failed in early 2023. Having diversification across the industry and not just one niche can help protect against a crisis. But too much investment in banks or insurance companies would have led investors to miss out on the boom in credit card companies.

One of Berkshire’s best long-term winners has been American Express — which is now its second most valuable position behind only Apple. The combined market cap of American Express, Visa, and Mastercard nearly matches the combined value of the three largest U.S. banks by market cap — JPMorgan Chase, Bank of America, and Wells Fargo — illustrating the importance of payment processors to the financial sector.

A balanced sector with plenty of opportunities

The Vanguard Financials ETF is a simple, low-cost way to unlock diversification and invest in a blend of growth, income, and value stocks. The ETF has a mere 0.1% expense ratio, or just $.10 per $100 invested. And with a minimum investment amount of just $1, it’s easy to dip your toes in the ETF without allocating a large chunk of your portfolio.

Thanks to the inexpensive valuations of so many large financial companies, the ETF has a 16.3 price-to-earnings (P/E) ratio and a yield of 1.8% — which is especially impressive considering the fund is up 20% year to date.

The following table shows that the fund’s top 10 holdings include a variety of leading companies from different segments of the financial industry.

Data source: Vanguard.

Combined, the top 10 holdings make up 42% of the fund, which represents balance and diversification.

Let the Vanguard Financial Sector ETF work for you

The Vanguard Financial Sector ETF is a low-cost way to invest in Berkshire Hathaway and other top financial stocks. It’s a useful tool for getting baseline exposure to various companies.

Some investors may look to pair the ETF with individual stock holdings if they want extra exposure to particular companies. For example, if you’re extra confident in the growth potential of payment processors, then you may want to consider buying Visa, Mastercard, and American Express to increase your exposure beyond what the ETF provides.

The Vanguard Financial Sector ETF is worth a closer look for investors who want to put new capital into the market without chasing high-flying companies with sky-high valuations.

Should you invest $1,000 in Vanguard World Fund – Vanguard Financials ETF right now?

Before you buy stock in Vanguard World Fund – Vanguard Financials ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard World Fund – Vanguard Financials ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $630,099!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

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*Stock Advisor returns as of September 3, 2024

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Goldman Sachs Group, JPMorgan Chase, Mastercard, Microsoft, Nvidia, S&P Global, and Visa. The Motley Fool recommends the following options: long January 2025 $370 calls on Mastercard, long January 2026 $395 calls on Microsoft, short January 2025 $380 calls on Mastercard, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Berkshire Hathaway Holds Bank of America, American Express, Visa, and Mastercard Stock, but So Does This Low-Cost Vanguard ETF was originally published by The Motley Fool

It’s no secret that semiconductor stocks have been particularly big winners amid the artificial intelligence (AI) revolution. With share prices skyrocketing, several high-profile chip companies have opted for stock splits this year. Some AI chip stock-split stocks you might recognize include Nvidia (NASDAQ: NVDA), Super Micro Computer (NASDAQ: SMCI), and Broadcom (NASDAQ: AVGO).

Indeed, each of these stocks has done wonders for many portfolios over the last couple of years. However, I see one of these chip stocks as the superior choice over its peers.

Let’s break down the full picture at Nvidia, Supermicro, and Broadcom and determine which AI chip stock-split stock could be the best buy-and-hold opportunity for long-term investors.

1. Nvidia

For the last two years, Nvidia has not only been the biggest name in the chip space but also essentially emerged as the ultimate gauge of AI demand at large. The company specializes in designing sophisticated chips, known as graphics processing units (GPUs), and data center services. Moreover, Nvidia’s compute unified device architecture (CUDA) provides a software component that can used in conjunction with its GPUs, providing the company with an enviable and lucrative end-to-end AI ecosystem.

While all that looks great, investors cannot afford to be starry-eyed due to Nvidia’s existing dominance. The table below breaks down Nvidia’s revenue and free-cash-flow growth trends over the last several quarters.

Data source: Nvidia Investor Relations.

Admittedly, it’s hard to throw shade on a company that is consistently delivering triple-digit revenue and profit growth. My concern with Nvidia is not related to the level of its growth but rather its pace.

For the company’s second quarter of fiscal 2025 (ended July 28), Nvidia’s revenue and free cash flow rose 122% and 125% year over year, respectively. This is a notable slowdown from the last several quarters. It’s fair to point out that the semiconductor industry is cyclical, and a factor like that could influence growth in any given quarter. Unfortunately, I think there’s more beneath the surface with Nvidia.

Namely, Nvidia faces rising competition from direct industry forces, such as Advanced Micro Devices, and tangential threats from its customers — namely, Tesla, Meta, and Amazon. In theory, as competition in the chip space rises, customers will have more options.

This leaves Nvidia with less leverage, which will likely diminish some of its pricing power. In the long run, this could take a hefty toll on Nvidia’s revenue and profit growth. For these reasons, investors might want to consider some alternatives to Nvidia.

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2. Super Micro Computer

Supermicro is an IT architecture company specializing in designing server racks and other infrastructure for data centers. In recent years, soaring demand for semiconductor chips and data center services has served as a bellwether for Supermicro. Moreover, the company’s close alliance with Nvidia has proved particularly beneficial.

That said, I have some concerns with Supermicro. As an infrastructure business, the company relies heavily on other companies’ capital expenditure needs. This makes Supermicro’s growth susceptible to external variables, such as demand for data center services, chips, server racks, and more. Furthermore, Supermicro is far from the only IT architecture specialist in the market.

Competition from Dell, Hewlett Packard, and Lenovo (just to name a few) bring their own levels of expertise to the marketplace. As a result of competing in such a commoditized atmosphere, Supermicro can be forced to compete on price — which takes a toll on profit generation.

Infrastructure businesses do not carry the same margin profile as software companies, for instance. Given that the company’s gross margins are fairly low and in decline, investors must be cautious. While Supermicro’s management tried to assure investors that the margin deterioration is the result of some logjams in the supply chain, more recent news might signal that gross margin is the least of the company’s concerns.

Supermicro was recently the target of a short report published by Hindenburg Research. Hindenburg alleges that Supermicro’s accounting practices have some flaws. Following the short report, Supermicro responded in a press release outlining that the company is delaying its annual filing for fiscal year 2024.

Given the unpredictability of demand prospects, a fluctuating margin and profit dynamic, and the allegations surrounding its accounting practices, I think investors now have better options in the chip space.

3. Broadcom

By process of elimination, it’s clear that Broadcom is my top buy-and-hold choice among chip stocks right now. This is not because Broadcom’s returns this year have lagged its counterparts, though. The underlying reasons Broadcom’s shares have paled compared to other chip stocks could shine some light on why I think its best days are ahead.

I see Broadcom as a more diversified business than Nvidia and Supermicro. The company operates across a host of growth markets, including semiconductors and infrastructure software. Grand View Research estimates that the total addressable market for systems infrastructure in the U.S. was valued at $136 billion back in 2021 and was set to grow at a compound annual growth rate of 8.4% between 2022 and 2030.

Systems infrastructure comprises opportunities in data centers, communications, cloud computing, and more. Considering corporations of all sizes are increasingly relying on digital infrastructure to make data-driven decisions, I see the role Broadcom plays in network security and connectivity as a major opportunity and think its recent acquisition of VMware is particularly savvy and will help unlock new growth potential.

If you look at the growth trends in the chart above, it’s obvious that Broadcom is not experiencing the same level of demand as Nvidia and Supermicro right now. I think this is because Broadcom’s position in the broader AI realm is yet to experience commensurate growth compared to buying chips and storage solutions in droves.

While I’m not saying Nvidia or Supermicro are poor choices, I think their futures look cloudier than Broadcom’s right now. I believe Broadcom is in the very early stages of a new growth frontier featuring many different themes (with AI being just one of them). For these reasons, I see Broadcom as the best option explored in this piece and think long-term investors have a lucrative opportunity to scoop up shares and hold on tight.

Before you buy stock in Broadcom, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Broadcom wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $630,099!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Amazon, Meta Platforms, Nvidia, and Tesla. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Meta Platforms, Nvidia, and Tesla. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

Nvidia, Super Micro, or Broadcom? Meet the Artificial Intelligence (AI) Stock-Split Stock I Think Is the Best Buy and Hold Over the Next 10 Years. was originally published by The Motley Fool

Intel (NASDAQ: INTC), the world’s largest producer of x86 CPUs for PCs and servers, was once a bellwether of the semiconductor sector. But over the past 10 years, its stock has dropped more than 50% as it withered into a less valuable chipmaker than AMD, Nvidia, and Qualcomm.

Intel’s fall from grace was caused by manufacturing problems, product delays, market share losses, and jarring strategic shifts under three CEOs. It missed the shift toward mobile chips, focused too much on cutting costs, and kept buying back its own shares instead of resolving its persistent manufacturing issues or investing in new chips.

From 2013 to 2023, Intel’s revenue had an anemic compound annual growth rate (CAGR) of 0.3%. AMD, which outsourced its production to Intel’s foundry rival Taiwan Semiconductor Manufacturing (or TSMC), had a CAGR of 15.6% during the same period.

That’s why it wasn’t too surprising when a few recent reports said Intel was exploring some drastic options to rightsize its struggling business. Let’s see if any of those rumored ideas will make its stock worth buying again.

What are Intel’s main problems?

Intel is still an integrated device manufacturer, meaning it designs, manufactures, and markets its own chips. That sets it apart from fabless chipmakers like AMD and Nvidia, which outsource their production to third-party foundries.

Intel’s foundries once produced the world’s most advanced chips. But over the past decade, it slipped behind its two Asian competitors, TSMC and Samsung, in the “process race” to manufacture smaller, denser, and more power-efficient chips.

Intel’s troubles started with a difficult transition from 14 nanometer to 10nm chips (2018-2019) and worsened with even more delays in its subsequent transition to 7nm chips (2020-2023). Those grueling delays drove many PC makers to replace Intel’s CPUs with AMD’s.

According to PassMark Software, which measures PC performance, Intel’s x86 CPU market share dropped from 82.5% to 61.8% between the third quarters of 2016 and 2024, as AMD’s share expanded from 17.5% to 35.4%.

Unlike TSMC, which aggressively ramped up its research and development spending, Intel tightly controlled its capital expenditures and set aside too much cash for share buybacks and dividends. Bob Swan, CEO from 2019 to 2021, even briefly considered following AMD’s lead to become a fabless chipmaker to permanently resolve its production issues.

Pat Gelsinger, who succeeded Swan, doubled down on expanding its first-party foundries to catch up to TSMC and Samsung. That was a costly strategy: Gelsinger expected to offset those costs with government subsidies in the U.S. and Europe, but TSMC also secured some of those government subsidies for its overseas plants.

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Does Intel need to shrink to grow again?

After Gelsinger took the helm, Intel offloaded numerous businesses, including its Optane memory chip, network switch chip, 4G/5G connectivity solutions, pre-built server, and cryptocurrency mining divisions. It also continued the multiphase sale of its NAND memory chip division to SK Hynix, spun off its automotive chip division Mobileye, and liquidated its remaining shares of the mobile chip designer Arm Holdings.

In early August, Intel suspended its dividend and said it would lay off 15% of its workforce to save up to $10 billion by 2025. Those shocking announcements accompanied a dismal second-quarter earnings report that broadly missed analysts’ expectations as the company struggled to ramp up its production of its newest Meteor Lake chips.

The latest reports suggest Intel might spin off or sell its struggling foundry unit. That move would mirror AMD’s spinoff of GlobalFoundries in 2009, but it would also completely undo Gelsinger’s original plans.

If that happens, Intel might go fabless and significantly reduce its spending by outsourcing all of its production to the newly spun off unit or other foundries like TSMC. But taking that drastic step would merely make it similar to AMD and subservient to TSMC.

Some other rumors suggest Intel might sell Altera, the programmable chipmaker it bought in 2015. But that divestment would erode its defenses against AMD, which acquired and integrated Altera’s top competitor Xilinx in 2022.

Did Intel just waste three years?

Intel hasn’t confirmed any of these rumors, but they imply it’s abandoning Gelsinger’s grand plans of reclaiming the process lead from TSMC by 2025. It also seems to be drifting back toward Swan’s idea of turning Intel into a fabless chipmaker.

Doing so might rightsize the business and stabilize its earnings growth again, but it also tells us the chipmaker wasted a lot of valuable time and billions of dollars over the past three years. That’s why I believe Intel’s focus on shrinking its business is actually a bright red flag that could generate tailwinds for TSMC and AMD.

Should you invest $1,000 in Intel right now?

Before you buy stock in Intel, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Intel wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $630,099!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of September 3, 2024

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and Mobileye Global and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.

Intel Might Need to Shrink to Grow Again was originally published by The Motley Fool

(Bloomberg) — US Bitcoin exchange-traded funds have posted their longest run of daily net outflows since listing at the start of the year, part of a wider retreat from riskier assets in a challenging period for global markets.

Most Read from Bloomberg

Investors pulled close to $1.2 billion in total from the group of 12 ETFs over the eight days through Sept. 6, data compiled by Bloomberg show. The drop comes amid a rocky period for shares and commodities on economic growth worries.

Mixed US jobs data and deflationary pressure in China are both taking a toll on traders. The uncertainty is buffeting the cryptocurrency market, whose gyrations have become more closely tied to moves in stocks based on a rising short-term correlation between the two.

Bitcoin has struggled in September, posting a loss of approximately 7%. But the largest digital asset eked out modest gains over the weekend and climbed roughly 1% to $54,870 as of 1 p.m. on Monday in Singapore.

Hedging for Debate

“The small relief rally seems to be driven in part by some prominent influencers closing out their shorts,” said Sean McNulty, director of trading at liquidity provider Arbelos Markets. He cited as an example a recent social media post from Arthur Hayes, co-founder of the BitMEX trading platform.

An improved showing by Donald Trump, the pro-crypto Republican nominee for the US presidential election, in polls and prediction markets may also be playing a role, McNulty said. He reported greater demand for options hedges in case Tuesday’s debate between Trump and Democratic nominee Vice President Kamala Harris stirs volatility. Harris has yet to detail her stance on crypto.

The US Bitcoin ETFs investing directly in the original cryptocurrency debuted in January with much fanfare. Unexpectedly strong demand for the funds helped to drive the token to a record high of $73,798 in March. The inflows subsequently moderated and Bitcoin’s year-to-date rally has cooled to about 30%.

The token will likely trade in its recent $53,000 to $57,000 range until the US releases consumer-price data on Wednesday, said Caroline Mauron, co-founder of Orbit Markets, a provider of liquidity for trading in digital-asset derivatives. The inflation numbers may shape expectations for the pace of anticipated monetary easing by the Federal Reserve in the US.

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Rachel Reeves has been urged to start charging capital gains tax on second homes and businesses after their owners die.

Scrapping relief that wipes out capital gains tax charges on death would simultaneously drive economic growth and raise £2bn a year for the Treasury as the Chancellor scrambles to fill a £22bn budget black hole, according to the Institute for Fiscal Studies (IFS).

The think tank’s head of tax, Helen Miller, said: “It is a bad tax relief and I would love it if the Government scrapped it.”

Arun Advani, associate professor at the University of Warwick, said: “It would be good for growth. It would stop this problem of people hanging on to assets that they don’t actually really want. And it would be good from a revenue perspective.

“It would be weird if HMRC and the Treasury weren’t pitching this to the Chancellor.”

Capital gains tax is charged on the profits on the sale of assets such as shares or second homes, at a rate of around 20pc for a higher rate taxpayer, depending on the asset.

However, under the existing system, if a person does not sell during their lifetime and instead holds the asset until they die, they can avoid paying the tax altogether because of a relief known as “uplift on death”.

This means that no capital gains tax is charged on their period of ownership, although some assets are still liable for inheritance tax.

The person who inherits the asset does so at its current market value. This means that when they sell, they will only pay capital gains tax on the increase in value since they took ownership.

Any overhaul would trigger accusations that the Chancellor is double taxing inheritance.

However, speculation is growing that there will be a wide-ranging crackdown on capital gains in next month’s Budget.

Investment bank Citi on Friday said it was expecting a package of tax rises in the Autumn Statement on Oct 30 that would raise an extra £15bn to £25bn a year and include reforms to capital gains tax.

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Ms Reeves could feasibly raise “high single-digit billions” from an overhaul of the capital gains tax system, including bringing the headline rates in line with income tax rates, Ms Miller said.

However, she added that if Ms Reeves increased the rates, she must also reform the tax to make it less distortionary.

Ms Miller said the relief held back economic growth because it encouraged people to hoard businesses and property until they died. She said: “It is a massive incentive not to sell.”

Mr Advani added: “That capital is not supporting growth in the economy.”

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Scrapping the relief will become even more important if the Chancellor is planning to raise capital gains tax rates, Ms Miller said, because higher rates will create an even bigger incentive to hold on to assets until death.

Scrapping the relief would bring in an extra £2bn for the Treasury per year by the end of this parliament, according to the IFS, but this number would be even bigger if Ms Reeves increases the headline rates.

The relief also incentivises people to pass on businesses as inheritance to their children, rather than considering a sale, which is also bad for the economy, Mr Advani said.

If a person holds on to their business until they die, not only will their capital gains be wiped for tax purposes, but their inheritor will also benefit from business relief on inheritance tax, which is worth up to 100pc on business assets, such as shares in an unlisted company.

Mr Advani said: “The empirical evidence is that kids tend to run businesses worse than their parents did. So it is actually better off being passed on from a growth perspective.”

A Treasury spokesman said: “Following the spending audit, the Chancellor has been clear that difficult decisions lie ahead on spending, welfare and tax to fix the foundations of our economy and address the £22bn hole the Government has inherited.

“Decisions on how to do that will be taken at the Budget in the round.”

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