The last week was a rough one for the stock market. The S&P 500 had its worst week since September, losing 3.10%. The introduction of tariffs and investor uncertainty led to a sell-off throughout the week. Economists are trying to gauge how these tariffs will affect consumers and the economy with many expecting a slow-down. Over the weekend President Trump said we may be going into a “period of transition, because what we’re doing is very big” (WSJ). Investors viewed this quote as meaning a recession may come. This led to a huge selloff this Monday, picking up where last week ended. The S&P dropped over 2.5% and the NASDAQ dropped 4% during the day. There are a few important pieces of economic data that investors are anxiously awaiting. These reports include the consumer price index, the New York Fed survey of consumer expectations, and the Michigan consumer sentiment reading.

The jobs report came in on Friday, showing that the US is still adding jobs. There were 151,000 jobs added in February, which was below the 170,000 estimate, but still better than January’s report. The government job cuts during the month may not be reflected in this reading but may be counted in the next report. As a result, some viewed this jobs data as not being helpful. An interesting data point in the report was a measure of unemployment that includes those who have part-time jobs for economic reasons. This figure jumped to 8%, the highest it has been since October 2021. As is often the case, we need more data to draw conclusions on where the economy is headed.

The Student Investment Group will meet next week on Tuesday, March 18th, 2025.

By: Isaac Pommer

On Monday night, time ran out for negotiations with the US. At midnight, Trump announced that the 25% tariffs on Canada and Mexico along with the additional 10% on China would go into effect. The longevity of the tariffs is a big question for investors. The Secretary of Commerce, Howard Lutnick, indicated that the tariffs might be worked out in the next few days. But Trump addressed Congress Tuesday and implied tariffs may be longer term than what some thought. Trump’s tariffs have already been met with retaliatory tariffs from both Canada and China. One immediate problem that arose is that some automakers have cars that move multiple times across the Canadian and US border before being ready for sale. This could add substantially to the ending price of those vehicles. Trump gave a one-month exception to the automakers while talks resume. In response, the markets tumbled on opening and the S&P 500 wiped out all post elections gains. Economists and investors are pricing in a longer view of tariffs along with watching consumer spending.

The personal consumption expenditures price index or PCE came in last Friday. The reading increased around 2.5% annually and 0.3% month over month. These figures were in line with street estimates. Core PCE, which takes out more volatile food and energy prices, rose 2.6% annually. The report shows that inflation is not getting out of hand but has not reached the Fed’s target yet. One of the interesting areas of the reading was personal savings, which rose 4.6% annually. This increase did not surprise the market but did give a reading on the state of the economy.

The Student Investment Group will meet next week on Tuesday, March 11th, 2025.

By: Isaac Pommer

The Consumer Price Index came in last week, showing that inflation was slightly higher than estimates. For the month, inflation rose 0.5%, which equates to an annual rate of 3%. Estimates were 0.3% and 2.9%. The main driver was shelter, which accounted for 30% of the reading, was up 0.4% for the month. The rental market has grown due to high mortgage rates that have pushed away potential home buyers. The most notable jump within the food section was eggs. Walking into stores right now, you will usually be greeted by a sign that says the store is facing a shortage of eggs and may be limiting how many customers may buy. Egg prices jumped up 15.2%, due to the avian bird flu that has destroyed many farmers’ supplies. Despite the rise in inflation, the Fed did not suggest any change in interest rates. Powell said that the Fed does not react to one or two good reports, nor one or two bad reports. The Fed is waiting for the PCE (Personal Consumption Expenditures) Price Index report later this month. This index is the Fed’s main inflation gauge when making decisions on rates.

January was expected to be a slow month for retail numbers, but the reading came in even lower than expected. The expected decline was 0.2% but the actual decline was 0.9%. Auto sales decreased 1.9%, due mainly to the strong push from dealers to hit year-end incentives. This reading comes along with a strong upward revision in December’s numbers. This decline in consumer spending may be a sign that the economy is slowing, but we’ll have to wait for more data before we’ll know.

The Student Investment Group will meet next week on Tuesday, February 25th, 2025.

By: Isaac Pommer

Consumers are starting to feel more concerned about the future of the economy. The University of Michigan’s consumer sentiment index displayed a lot of fear and uncertainty heading into this year. The reading fell 5%, which made the February survey the lowest reading since July 2024. The fear of tariffs had an effect on how people viewed inflation. Consumers are expecting inflation for this year to be 4.3% compared to January’s reading of 3.3%, jumping up a whole percent in a month. There was a post-election surge that was felt; many people had more positive views of the economy after President Trump was elected, but those have come back down. During Trump’s campaign, he made statements about wanting to bring down inflation and help improve the economy. One of the reasons for the big sway in the outlook is tariffs. These fears were seen slightly in December when Trump announced his plans to enact tariffs once in office. When he followed through on these promises, alarms sounded for many consumers. There is now fear that consumers may have to take on some of the cost of these tariffs. The impact on the economy will depend on how negotiations go later this month with both Canada and Mexico.

Late on Monday, President Trump announced a global tariff on steel and aluminum of 25% that will go into effect on March 12th. These tariffs are different from the tariffs he discussed last weekend. Many of the tariffs on Canada, Mexico, and China were meant to motivate these countries to negotiate issues of national security and safety. These newer tariffs are meant to help the U.S. steel industry. Trump views foreign government subsidies to their steel producers gives them an unfair advantage against US steel manufacturers. There will most likely be retaliatory tariffs in response to these new tariffs. Domestic companies that buy from foreign steel and aluminum producers will have increased costs which may cause disruption for some manufacturers. Over these next few weeks, we will see if these tariffs are meant to be long-term and how manufacturers will navigate this change.

The Student Investment Group will meet next week on Tuesday, February 18th, 2025.

By: Isaac Pommer

For the first few weeks of President Trump’s presidency, markets have reacted to campaign promises being kept through a number of executive orders. One of the campaign promises was to place tariffs on Canada, Mexico, and China. Investors had an idea of the amount of the tariffs but were unsure when they would be put in place. There had been a lot of speculation, but there were solid answers on Saturday. President Trump announced 25% tariffs on Canada and Mexico and a 10% tariff on China, set to go into effect Tuesday. The reason for these tariffs according to the President was to protect Americans from the drug and migration issues that he says are caused by the countries. Canada was the first to act and put out its own retaliatory tariff of 25% that will also go into effect on Tuesday. Canada has already started boycotting different American products and turning to more Canadian-made items. Mexico vows retaliation but has not detailed targets. However, Mexican President Claudia Sheinbaum said that tariffs will not solve the migration and drug issues.

As of Monday afternoon, both Canada and Mexico have come to an agreement to delay tariffs for 30 days. This gives time for the U.S. to make a deal about the different issues that Trump has set before the two countries. The Wall Street Journal spoke about the agreement with Canada sharing “As part of the agreement, Canada will put 10,000 frontline personnel on the border, appoint a fentanyl czar and list cartels as terrorists, Trump said in a Truth Social post after speaking with Canadian Prime Minister Justin Trudeau on the phone” (Joseph Pisani 2025). This news relieved a lot of anxiety in the markets as the major early hours sell-off was followed up by a later rebound. Companies who relied on trade with these countries saw their stock take a hit today. Both the Canadian dollar and Mexican peso dropped when the imposition of tariffs was announced but strengthened later when the news of the 30-day delays was released.

The Student Investment Group will meet next week on Tuesday, February 11, 2025.

By: Isaac Pommer

Economic Forecast 2025

The Fed’s favorite metric to analyze regarding inflation, the Personal Consumption Expenditures (PCE) price index, was released last week. There were not many surprises in the report. Inflation rose 0.2% month over month and 2.3% year-over-year (YoY); both numbers were aligned with street estimates. In October, consumer spending rose 0.4%, while personal income reported an increase of 0.6% which is a big increase compared to the 0.3% estimates; however, the news had little effect on stocks. The main question is how the Fed is going to interpret this report heading into its last meeting of the year. The Fed has talked about its 2% target since it started battling inflation over a year ago. In the past, the Fed has cut rates when inflation was higher than that target rate. Since this last report, traders have increased the odds of a rate cut coming out of his upcoming meeting.

Black Friday has changed since before the pandemic. We were accustomed to seeing long lines of people waiting outside of retail stores right after their Thanksgiving meal, hoping to get in on all the big sales, but these lines may be a thing of the past. Since 2020, online purchases have risen, along with sales running longer, sometimes starting at the beginning of November. Early reports on Black Friday traffic and sales from RetailNext show foot traffic was down 3.2%, but retail sales reported by Mastercard were up 3.4%. Some of the top sellers were jewelry, electronics, and apparel, mainly from strong online sales. Consumers have seen a rise in prices, which has made them look for ways to help them stay within budget. This has included pulling back on some purchases or also utilizing “buy now, pay later” options. It is apparent that consumers are trying to find ways to optimize the value of their money. As more data comes in, there can be more analysis of what other trends can be recognized throughout this Black Friday season.

The Student Investment Group will meet in January on Tuesday, January 7th, 2025.

By: Isaac Pommer

Last Wednesday, the Consumer Price Index was released and it hit expectations, increasing 2.6%. Though this is higher than last month's reading, it was not off-putting to investors and economists. The biggest driver over this month was used cars and trucks, growing 2.7%. The important piece about cars and truck sales is that these price increases are a lagging indicator because car issuers must negotiate price increases with state regulators. This inflation report has not changed investors’ thoughts of the Fed cutting rates. Before the report, the futures market was giving odds of a rate cut around 60% but after the report, confidence in the Fed cutting rates grew, with the futures market increasing the likelihood of a cut to 80%. Fed Chair Jerome Powell spoke after the last meeting about how the Fed was prepared for small bumps but was still focused on its main goal. Depending on what the Fed does in December, there will be thought on what it will do next year as it strives to reach the new neutral rate.

Spirit Airlines announced that it is filing for Chapter 11 bankruptcy. The airline came into the industry as a budget-friendly airline, but since 2020, the airline has not made a profit. The airline had been looking to merge, and in 2022, the company agreed to merge with Frontier Airlines, but then JetBlue put in a higher bid. However, a federal judge denied the deal due to the belief that the merger would hurt cost-conscious travelers. The airline continues to operate while going through bankruptcy proceedings and, as of now, there is no date for when flights will stop. One of the biggest factors for Spirit's demise was its reliance on domestic flights. After COVID-19 lockdowns ended, many consumers wanted to travel abroad after being cooped up for so long. Airlines that had invested in their international networks were better prepared. Some have questioned the wisdom of the court’s decision because it has now led to Spirit’s bankruptcy filing. As the company goes through this process, there is still the possibility for a white knight to partner with Spirit, but it would be a risk. For consumers, the end of a budget-friendly option means having to accept higher fares.

The Student Investment Group will meet in two weeks on Tuesday, December 3rd, 2024.

By: Isaac Pommer

Now knowing who the next president will be, the market traded to take advantage of the change. Many of the “Trump trades” were apparent throughout last week. One of the strongest was Bitcoin, which has climbed 17% since last Wednesday and has now reached an all-time high of 88,000. With Trump being declared the winner, investors are waiting to see the results of the ideas discussed throughout his campaign. One of the largest is tariffs. Trump has emphasized tariffs, with China being the main target. Goldman Sachs has estimated that Trump will add an additional 20 percentage points to imports from China. During Trump’s last term, investors noticed the pattern of telecoms and real estate outperforming automobile, capital goods, and technology hardware stocks. The other piece is debt, since there have been talks about more government spending and the renewal of the Tax Cuts and Jobs Act put in place under his previous administration. Estimates are that the U.S. deficit could climb up to $7 trillion over the next decade. As we get closer to the transition, we will hopefully hear more detail about what is to come.

In other news, the Fed did as planned and cut interest rates by 25 bps. This comes after the half-a-point cut after the previous meeting. All 12 members voted for this, which differed from the last meeting where one member opposed the 50-bps cut. One of the main questions that Fed Chairman Jerome Powell was asked, was about Trump winning the election and how that may affect him. Trump has made it known that he would like to have a say in interest rates and has made negative remarks about Powell. When asked if Trump could force him to step down, Powell responded by saying it is not permittable under the law. Powell has said that the Fed remains independent from the president and the election would not have any effect on the Fed’s immediate policy decisions. The Fed is trying to stay ahead of the curve while finding a neutral rate for the economy. Economists are still trying to determine what this should be given that times have changed since the 2% rate post-2008.

The Student Investment Group will meet next week on Tuesday, November 19th, 2024.

By: Isaac Pommer

Last Wednesday, the gross domestic product (GDP) reading came in at an annual rate of 2.8%. There are two main drivers of this increase. The first is consumer spending. This area saw some of the strongest performance since early 2023, with consumer activity increasing by 3.7%, which contributed 2.5 percentage points to GDP. Many economists have described this time as the resilient consumer, who has remained strong despite high interest rates and inflation over the past few years. Some worry about how long the consumer can handle this environment, but with the assumption of interest rates being cut again along with inflation falling steadily over the past year, there may be some hope. The other area that contributed to GDP growth was government spending. Government spending saw a steep jump of 9.7% in the quarter, which was due to a surge in defense spending, contributing 0.6 percentage points to total GDP. Most believe that the Fed will cut rates following its Thursday meeting, but this comes with some pushback. The economy has seen inflation hit the 2% target that the Fed has spoken about along with the economy still growing. The reading is used in this final stretch of the presidential campaign trail, with both candidates trying to use this in their case for the nomination.

Going into this jobs report, many were prepared for numbers differing from the norm due to the Boeing strike. Economists were also expecting some of the effects of this hurricane season to affect this reading. The U.S. added approximately 12,000 jobs in October, which was below the 100,000 jobs expected by economists, making it the slowest growth recorded since 2020. To put this into perspective, the U.S. added 223,000 jobs just last month. The unemployment rate remains unchanged at 4.1%, in line with economists' expectations. This data has been used for the final sprint of the presidential race, with each candidate using this as a point of emphasis for undecided voters. To note, Boeing workers just voted to accept the latest contract proposal, ending the strike.

As we are reaching the end of this prolonged presidential race, we are witnessing a lot of volatility in different areas of the market. This volatility is apparent through the different types of investments being traded depending on which candidate is predicted to win. The main news around this is the “Trump trade” with many eyeing investments such as bitcoin or banks while looking to sell clean-energy stocks or the Mexican peso. So, depending on the outcome Tuesday, we may see a lot of volatility with investors trying to double down or retreat from their investments. When there is a decided winner, the market should be a bit more at ease, at least for the time being. However, as usual, the market, will soon find something else on which to fixate.

The Student Investment Group will meet next week on Tuesday, November 12th, 2024.

By: Isaac Pommer

The votes have come in, not for the presidential election, but for the Boeing machinists' strike, with 64% rejecting the deal brought before them. This vote extends the strike, which has already lasted more than a month, leaving Boeing scrambling to bring its workers back. The proposed contract would have given workers a 35% pay increase over 4 years and increased 401(k) contributions, which is better than Boeing’s first offer. The main sticking point is that workers are demanding the return of the pension fund. Boeing has not made any indication that it will reinstate the defined benefit plan. The stoppage is hurting Boeing because it needs cash badly. The news of the workers rejecting the proposal came after Boeing released poor earnings and gave negative projections through 2025. The pressure to generate cash has caused the company to find two ways to help. One way is the sale of its space business, with which Boeing has worked with NASA for decades. No price tag for the division has been reported but Boeing is looking for potential buyers. The second way is through a stock sale to raise around $19 billion. Boeing is having a public offering of 90 million shares at the Friday’s closing price of $155.01, while also issuing preferred stock. These solutions will help Boeing stay afloat in the short run but Boeing still has a lot of work to turn the company around.

The anxiety heading into the election is affecting consumer sentiment. However, retail sales were better than expected, with consumers feeling good about the economy. But this trend is something that is not new, “For the past two years, we’ve seen pretty strong consumer spending in spite of the fact consumer sentiment has been below average,” said Joanne Hsu, director of the surveys of consumers at the University of Michigan (Marketplace, 2024). Except this sentiment is not only with consumers but with businesses as well, with companies holding off on investments until after the election. There is a lot of uncertainty, so companies are waiting to see  what happens along with the rest of the country.

The Student Investment Group will meet next week on Tuesday, November 5th, 2024.

By: Isaac Pommer

China has announced cuts on both its 1-year and 5-year loan prime rates by 25 bps. This move was highly anticipated, since China is trying to spur growth. However, cutting interest rates may not be enough. According to many economists, China will need to implement a stimulus package as well. Economists believe that for the quarter, China’s GDP came in at an annualized rate of 4.6%, which is less than the prior quarter. Analysts expect a stimulus plan in the ballpark of 1 to 3 trillion yuan.

In 1999, 4 of the 10 most valuable U.S. companies were manufacturers. Currently, there are no manufacturers in the top 10. Intel and Boeing have been in severe decline over the past five years, with both seeing a drop in their stock price of over 50% during this period. Intel has lost market share, has had multiple manufacturing delays, and suspended its dividend. Boeing has had investigations into its quality checks, two fatal crashes, workers' strikes, and loss of public trust. Most of these blunders were due to the internal issues; however, these problems are not what the U.S. wants since it is heavily reliant on both companies. There has been an emphasis in the U.S. to be a leader in both areas, which is why there has been a push to bring manufacturing back to America. The impact of these companies’ failures could have huge implications for the U. S. and its need to deal with foreign competitors resulting in a loss of political power.

The Student Investment Group will meet next week on Tuesday, October 29th, 2024.

By: Isaac Pommer

The Consumer Price Index (CPI) released on Thursday showed that inflation is not out of hand, but there is still work to be done. For September, inflation rose 2.4% over the last twelve months, 10bps higher than the street estimates. The main drivers were shelter, which rose 0.2% and food which rose 0.4%. The increase was the lowest since February 2021. This reading, along with the jobs report last week, has many analysts believing the Fed will cut rates again in November. However, the consensus is for only a 25bps cut instead of the 50bps we saw last time.

Boeing announced that it plans to cut 10% of its workforce, which amounts to 17,000 jobs. This news comes with the announcement of delays on its 777X plane that is already well behind schedule. Boeing has been struggling with the ongoing strike as it has not been able to come to an agreement with the union. The strike, which has lasted for more than a month, is estimated to have cost $5 billion so far. Union president, John Holden, said the strike fund is strong and can make it until the union reaches a reasonable deal, adding to Boeing’s potential woes.

TD Bank, the 10th largest bank by assets, has pleaded guilty to criminal charges which involve violating standards to prevent money laundering. TD Bank has agreed to pay $3 billion in both fines and penalties, along with limiting the growth of the bank. Reports indicate that TD Bank knew of the problem and bankers were aware and complicit in this issue. There have been many businesses laundering money through TD Bank to get cash into the banking system. 90% of transactions went unmonitored between 2018 to April 2024. Three money laundering networks that have been confirmed have reported to have laundered over $670 million through different accounts at the Bank. According to Attorney General Merrick Garland, this is “the first U.S. bank in history to plead guilty to conspiracy to commit money laundering.”

The Student Investment Group will meet next week on Tuesday, October 22nd, 2024.

By: Isaac Pommer

On Friday, a temporary agreement was reached between the dockworkers that brought increased wages but pushed the automation talks to January 15, 2025. The deal for wage increases states that workers will receive a 62% raise over the next 6 years. To put this into perspective, the base hourly rate currently for ILA port workers is $39, which will increase to $63 over the course of this wage increase. This is less than the Union’s demand for a 77% increase, but better than the 50% increase the U.S. Maritime Alliance had offered. The rise in wages has already been factored into different shipping and cargo stocks. Now the focus is on the automation of jobs. The old contract requires Union acceptance. An example of what automation could look like for the industry is using remote-controlled electric cranes, instead of manually controlled diesel cranes. Both sides have their reasoning. Workers want job security, while the U.S. Maritime Alliance wants increased efficiency and safety. While the strike only lasted 3 days, it still affected the economy. According to J.P. Morgan analysts, the shutdown cost the U.S. GDP approximately $5 billion per day. The strike affected 36 ports from Maine to Texas with at least 45 container vessels being unable to unload. However, economists believe that the port closure was not long enough to raise the prices of goods for consumers. Once the two parties settle on the final contract which includes automation, fear of another shutdown anytime soon will abate.

September’s job data was above expectations. Unemployment ticked down to 4.1% and the number of jobs added was 254,000. The surge in new jobs was the largest increase since March of this year. One signal that was a slight concern to analysts is the number of workers quitting, which may be a sign of workers hesitant to leave their current jobs to look for new ones. This unemployment report may be the last bit of clear job data before the next Fed meeting. Muddling the employment numbers are the dock strike, the continuing strike at Boeing, and the hurricanes, increasing the difficulty of the Fed to analyze the data to discern if the economy is on target to hit the goal of a soft landing.

The Student Investment Group will meet next week on Tuesday, October 15th, 2024.

By: Isaac Pommer

From Maine down to Texas, dockworkers are preparing for a strike due to the International Longshoremen’s Association and the United States Maritime Alliance’s inability to reach an agreement. This shutdown will affect many retailers and manufacturers, and many have tried to appeal to the Biden administration to intervene. The worry is that a strike may cause higher inflation heading into the holiday shopping season. The Biden administration has not made any gesture that it plans to intervene but has urged both sides to keep talks going to reach a deal. The administration believes that the U.S. supply chain could handle a strike for about a week. There was no mention of whether there would be any intervention after that week. JP Morgan estimates the strike to cost the U.S. economy between $3.8-4.5 billion per day. Many businesses ordered goods early to get them through the ports before Tuesday, but there were still many orders that did not make it through. Experts expect the effect on energy will be lower due to the Longshoreman’s Association not being involved in the transportation of oil or natural gas. The West Coast port, which reached an agreement last year, has absorbed some of the cargo, but it cannot contain the volume that may arise if a strike goes on for a long period. The Longshoreman’s leader, Harold Dagget, said he is fighting for workers to receive 77% wage increases over the next 6 years, but has only received a 40% offer by the United States Maritime Alliance. As of Tuesday, October 1st, the Longshoremen officially went on strike.

On another note, the personal consumption expenditures price index (PCE) was announced on Friday and reported lower inflation than expected. The 12-month inflation rate was 2.2% in August, which is down from 2.5% in July - the lowest reading since February 2021. This is still above the Fed’s target of 2.0%, but it does show significant progress over the past few years. Seeing the lowering of inflation, many economists believe that the Fed can turn its focus to the risks in the labor market.

The Student Investment Group will meet next week on Tuesday, October 8th, 2024.

By: Isaac Pommer

The big news of the week was the FOMC announcement of cutting rates by .5% (50 bps). This vote was almost unanimous with only one of the twelve board members wanting a 25-bps cut. This marks the first rate cut since 2020. While many analysts expected a rate cut, many were unsure of the size of the cut. Dean Maki, an economist from Point 72 Asset Management said, “The 50 bps cut means that the Fed is worried about the labor market since it is a large move in context with the data we have seen.” Powell called it “a sign of our commitment not to get behind,” which keeps with his plan of managing a smooth landing. Stocks rose immediately after the news but fell by the end of the day, with the S&P ending down 0.3%.

The U.S. is not the only country to announce rate cuts recently. The People’s Bank of China (PBOC) has declared a cut on its 14-day reverse repurchase interest rate by 10 bps along with injecting 74.5 billion yuan ($10.6 billion) into the economy. This rate cut comes after PBOC cut its 7-day reverse repo rate in July but not its 14-day rate. Economists are anticipating that the PBOC will again cut the 7-day rate after the recent cut in the 14-day rate. These cuts come as China tries to stabilize its housing market while trying to increase liquidity in its economy. Borrowing costs are already low and consumer confidence is near record-low levels, so this move by the PBOC is being watched closely by many economists.

U.S. home sales fell 2.5% in August even though mortgage rates have declined. Despite the sales drop, home prices are still near record highs. The number of homes for sale was up 0.7% month-over-month, which is due to homeowners giving up hope for further interest rate cuts. Any change in the housing market will be closely monitored now that the Fed has started its cycle of cutting rates.

The Student Investment Group will meet next on Tuesday, October 1st, 2024.

By: Isaac Pommer

The Consumer Price Index (CPI) was released this week. Inflation was up 0.2% month over month, or the better-known figure of 2.5% year over year. This was slightly below expectations, which should improve the chance of a rate cut by the Fed later this week. This CPI report is important because it is the last piece of inflation data the Fed will get before its FOMC meeting on Wednesday. There were no red flags in this report that would sway the Fed from the expected decision to cut rates.

Jerome Powell is set to announce after Wednesday’s FOMC meeting whether the Fed will cut rates, and if so, how much. While the census is expecting a rate cut, the main question has been whether it will be 25-bps cut or a jumbo cut of 50-bps. As of Monday, CME Group’s FED Watch tool reported a 57% chance of a jumbo rate cut and a 43% chance of a 25-bps cut. This decision will show how the Fed plans to handle its mission of guiding the economy a “soft landing.”

The Student Investment Group will meet next week on Tuesday, September 24, 2024.

By: Isaac Pommer

Last Wednesday, the Fed decided to leave the federal funds rate at its current 20-year high of 5.25% to 5.5% and expects to hold it at that level for the near future (WSJ). Powell stated that his confidence in inflation continuing to decline is decreasing; however, a rate increase remains unlikely unless evidence indicates that high rates are not limiting inflation. This statement about rate hikes being unlikely led to the S&P 500 quickly gaining 1.2% on Wednesday but then falling and ending the trading session down 0.3%. The Fed is currently trying to get inflation at or below 2% without sinking the economy into a recession and will not cut rates until it appears that sustainable progress towards this goal has been met (CNBC).

The outlook for U.S. job growth has been revised downward for the second half of 2024 and is currently beginning to show signs of cooling (WSJ). According to the Labor Department, only 175,000 jobs were added in April, which is the slowest growth since October 2023 (Yahoo! Finance). Additionally, for the first time in almost 3 years, the increase in annual wages was below 4% (Reuters). Unemployment followed a similar trend, moving to 3.9% for April compared to 3.8% in March (WSJ). A cooling job market is a positive sign for the Fed looking to slow inflation and it gives hope for investors that rate cuts are possible in late 2024.

Multiple large companies released earnings last week, revealing fluctuations within the market. Starbucks fell 16% on Wednesday after reporting weak profits and fewer visits to its stores, along with cutting its guidance (WSJ). On the same day, CVS stock fell 17%, the worst drop for the company in 15 years, after weak earnings and guidance cuts. On the other hand, Paramount, Tesla, and Apple all saw large gains last week following positive news releases and strong earnings.

The Whitworth Student Investment Group will meet next in September 2024.

By: Nicholas Henning

Since our last meeting, the personal consumption expenditures index or PCE data was released, and it came in higher than expected. On April 26th, personal consumption expenditures inflation for March was up 2.8%, higher than analyst expectations of 2.7%. This data release is crucial for the Federal Reserve meeting, as it is the main indicator of inflation they note when making economic decisions. The higher-than-expected PCE report combined with CPI inflation of 3.5% for March reduces the chance of rate declines. This high inflationary data has also led Treasury yields to hit their 2024 highs, striking fear that high yields could dampen future market gains (WSJ).

In other news, there is broad consensus that the Federal Reserve will leave rates unchanged when they meet this week. At the start of the year, investors and analysts expected the Fed to cut rates up to six times, but inflation is consistently beating expectations and now it is up for debate whether the summer 2024 will see any rate changes at all (Forbes). CME FedWatch indicates that there is now a 97% chance of rates being held steady for the next month, and a 66% chance of rates holding steady through July.

Earnings are in full swing with 46% of S&P 500 companies reporting their earnings and 77% of them beating expectations (FactSet). Some recent notable earnings releases include Domino’s Pizza, which gained 4.6% on Monday after beating expectations (MarketWatch), and NPX Semiconductors, which jumped 6% (Investopedia). One-third of all companies in the S&P 500 will release earnings this week, most notably technology giants Amazon and Apple, which could have an influence on the broader markets (WSJ).

The Whitworth Student Investment Group will meet next on Tuesday, May 7th, 2024.

By: Nicholas Henning

Since our last meeting, housing market data was released, including housing starts and existing home sales. The housing market has continued to slow as 30-year fixed mortgage rates are now at 7.1%, a discouraging number for people looking to move and start a new mortgage (Freddie Mac). This figure puts mortgage rates at the highest level since late 2023, with the largest weekly increase in almost a year. As a result, existing home sales for March fell 4.3%, the largest decline since late 2022 (WSJ). The real estate market is expected to drift lower, reversing its positive start in 2024, paralleling the rise in mortgage rates since February.

Oil prices fell this week after gaining over 11% for the year to date. The decline is due to the belief that the Iran-Israel conflict will not widen to the point of impacting oil production and shipments (MarketWatch). Despite Israel and Iran tensions increasing, global crude oil prices fell 3% last week and 0.8% Monday alone. Assumptions are that the clash between Iran and Israel is for the most part over, so oil prices will likely continue to weaken. However, if tensions increase or new conflicts arise, this price drop could reverse.

In addition to oil, gold prices fell on Monday following the news of Iran downplaying the conflict. This drop is likely due to concern over global issues abating, so investors are more optimistic about riskier assets rather than safe haven commodities like gold (Seeking Alpha). Gold futures fell 2.5%, reporting the largest daily decline since dropping 2.8% in early February 2023.

The Whitworth Student Investment Group will meet next on Tuesday, April 30th, 2024.

By: Nicholas Henning

The Consumer Price Index (CPI) for March reported hotter than expected inflation. CPI, excluding food and energy, increased 0.4% in March alone and 3.8% year over year. Food prices gained 2.2% and energy rose 2.1%. This is the third month in a row that forecasts underestimated actual inflation data, which means that rates could remain elevated for longer than originally anticipated. Despite this, the Producer Price Index for March was up 0.2% versus estimates of a 0.3% gain; however, this is not likely to sway the Fed into cutting rates. Attention has now turned to the April 26th Personal Consumption Expenditures Price Index (PCE) data release, which tracks the cost of living for households in the United States and is one of the most crucial data points when tracking inflation.

In the housing market, mortgage rates hovered in the 7% range, potentially reversing hopes of the market rebounding. Currently the average mortgage rate for an American household is 3.2 percentage points lower than the 7% new mortgage rate, resulting in people holding onto their current mortgages longer than historical averages. This is posing issues for the housing market because potential homebuyers are hesitant to give up their lower fixed-rate mortgages to purchase a new home. Higher inflation data does not help the situation; while not directly correlated, the two tend to go hand in hand.

In global news, China’s exports were up 1.5% in the first quarter year over year despite falling in March. This gain is a result of Chinese producers pursuing foreign trade as there is little consumer spending in China right now. China is boosting manufacturing to offset its slower economic growth, concerning other countries that China will increase exports and undercut their domestic producers.

The Whitworth Student Investment Group will meet next on Tuesday, April 23rd, 2024.

By: Nicholas Henning

Since our last meeting, the March jobs report exceeded expectations. Employers added a staggering 303,000 jobs according to the Bureau of Labor Statistics and the unemployment rate has fallen slightly from 3.9% in February to 3.8% in March. On the other hand, annual wage growth has slowed from 4.3% to 4.1% this month, showing some cooling amid a strong labor market. Driving employment growth in March were new jobs in the healthcare, government, construction, and leisure categories. Original estimates for job growth were 205,000. This is the 39th consecutive month of job growth in the United States.

Gold prices reached another record high on Monday, with June futures closing at $2,331.70 per troy ounce. Gold futures are up 13% year to date and have closed higher in 11 of the last 13 sessions. Countries have been adding to their gold reserves recently, as the metal is more attractive in times of uncertainty. One of the major drivers is China’s central bank, which has added gold to their reserves for 17 consecutive months according to the World Gold Council. In other commodity news, silver has been following gold prices, rising 1.1% in the last session, representing the 8th consecutive day of gains.

Expectations for the Fed cutting rates have continued to shift with many analysts now expecting no cuts for the rest of the year. Previously, the consensus was for several rate cuts in 2024; however, with a strong jobs report signaling continued economic strength, the possibility of fewer than three rate cuts has increased. This news should impact financial markets, as much of the rally has been fueled by expectations of falling rates later this year. Investors will gain a more complete picture of possible rate cuts for the remainder of the year when CPI data is released on Wednesday.

The Whitworth Student Investment Group will meet next on Tuesday, April 16th, 2024.

By: Nicholas Henning

The market was slow this week with the S&P 500 moving only 0.18% since last Monday.

Notable Gainer: MU

The notable gainer for the month of March was Micron Technology. It climbed 35.20%, making its biggest jump after the company released earnings on March 20th. Its earnings beat estimates significantly. Estimated earnings were -$0.25 per share, but the actual earnings came in at $0.42 per share. Expected revenue was $5.34 billion and they reported revenue totaled $5.82 billion. The company is currently producing a 24 gigabyte 8H high bandwidth memory chip for Nvidia. These chips are expected to be shipped in the 2nd quarter and boost revenue for Micron.

Notable Decliner: ZTS

The notable decliner for the month was Zoetis which was down 12.39%. Zoetis is the largest producer of pet and livestock medicine in the world and was formerly a subsidiary of Pfizer. This past year the company has had 0 insider buys and 17 insider sells. It is also being investigated by the European Commission for antitrust violations. Zoetis owns Librela, which is the first and only monthly injectable anti-nerve growth factor monoclonal antibody therapy for dogs with osteoarthritis. The issue concerning regulators is that Zoetis acquired another therapy which was originally intended to be commercialized by an independent company. This product serves the same purpose as Librela, and the Commission is concerned about exclusionary behavior.

By: Maria Pollack

Since our last meeting, the Fed met on March 20th and decided to leave interest rates unchanged for the month. They additionally reiterated their forecast of three rate cuts for 2024. This represents the fifth straight meeting that the Fed has left rates unchanged, and they are still currently sitting at 5.25%-5.5% range, a 23-year high. The Fed is looking for inflation to be moving more consistently towards the 2% range before they decide to initiate their rate cuts. Powell stated that the Fed could also lower rates if the labor market weakens significantly and inflation remains above 2%. The Fed now expects economic growth to be 2.1% for 2024, a revision much higher than their previous estimates of 1.4%.

Following the Fed meeting, some economic data releases came in hotter than anticipated, potentially stalling the expected June rate cut. Manufacturing activity was reported as higher than expected, representing the first expansion of this segment since 2022. Related to this, component prices were also higher than anticipated. The combination of these two pieces of economic data raised concerns over inflation picking up speed once again, and according to Bloomberg, the probability of a rate cut is now below the 50% mark for June.

Internationally, stocks in China rose after data on Monday showed the manufacturing index hitting higher than expected numbers. This is a positive news release for China, but economic troubles and deflation issues are still prevalent. This is the fifth straight month that China has seen manufacturing growth. This led to Chinese stocks such as Alibaba Group, Nio Group, and Li Auto on the New York Stock Exchange rising in the premarket 1.2%-3.8%.

The Whitworth Student Investment Group will meet next on Tuesday, April 9th, 2024.

By: Nicholas Henning

Retail sales returned to positive growth in February with the Department of Commerce reporting a gain of 0.6% month over month. This report follows two months of downward trends, however it still fell short of the estimated gain of 1.0%. The reason for this uptick most likely reflects a strong labor market and wage growth leading to more consumer spending. Overall, the year-over-year increase in retail sales is currently 1.5%.

The technology sector started the week strong, helping boost US indexes following higher than expected inflation data last week. Alphabet, Apple, Nvidia, and Tesla all saw gains on Monday. Out of these major technology stocks, Alphabet was one of the most notable gainers with a 4.6% increase following news that the Google Gemini AI engine could be compatible with the next generation of iPhones, however there is no confirmed deal. These technology sector gains led to the S&P 500 rising 0.6%, NASDAQ up 0.8%, and DJIA gaining 0.2% on Monday.

Rate cuts are looking increasingly less likely in the near future. Currently, according to CME FedWatch, the odds of a quarter-point cut by June are now sitting at 50% versus 57% a week ago. Additionally, the likelihood of no rate cuts until July is now at nearly 25% compared to 8% last week. With CPI coming in higher than anticipated and retail sales missing, there is some concern of slower economic growth with elevated inflation, leading to the Fed keeping rates high during a period of economic decline.

The Whitworth Student Investment Group will meet next on Tuesday, April 2nd, 2024.

By: Nicholas Henning

The S&P 500 declined 0.25% this past week. This was mainly due to the majority of the Magnificent 7 declining, unexpected labor data released last Friday, and the anticipated consumer and producer price data to be released this Tuesday.

Notable Movers

Tesla, Inc. (TSLA)

During the past couple weeks, investment banks have lowered their expectations for Tesla’s first quarter and year end results. Deutsche Bank estimated that deliveries for the first quarter would come in around 427,000 vehicles versus their previous estimation of 476,000, and for the year deliveries would be 1.96 million compared to the previous expectation of 2.1 million. Morgan Stanley also cut volume targets to under 2 million, and lowered estimates for EPS to $1.51 from $2.04. Tesla’s recent price cuts in China and Europe, low production of its Model 3 vehicles in the US, and low EV demand overall are the reasons for these lower outlooks. Additionally, Tesla’s profit margin is expected to decline due to the price cuts and costs related to the arson attack in Berlin.

Moderna, Inc. (MRNA)

Modern is up 17.39% since last week, jumping 8.7% on Monday. The biotechnology company announced that it is moving forward with a Phase 2/3 study on the combination of its mRNA vaccine, V940, and Merck’s drug, Keytruda, for the treatment of skin cancer and lung cancer. The study will begin next month and end by 2029. Investment bank Jefferies Group said that the initiation of Phase 2 is a sign of confidence in the program, providing the main reason for the stock’s rally on Monday.

Additionally, Moderna is also moving into phase 3 clinical trials on its mRNA vaccine for CMV, Cytomegalovirus. CMV is a common virus but is not cause for much concern, except for pregnant mothers and their babies, as it causes birth defects and brain damage.

By: Maria Pollack

The job market reported mixed signals last week, with a higher-than-expected 275,000 jobs being added. 73% of jobs added in February came from the healthcare, leisure and hospitality, social assistance, and government segments. Despite these strong numbers, unemployment rose from 3.7% in January to 3.9% last month and wage growth seems to be cooling.

CPI data was released this morning, coming out hotter than anticipated. February CPI was reported at 3.2% year over year for February, exceeding estimates of 3.1%. Core CPI, which excludes food and energy segments, was up 3.8% versus expectations of 3.7%. This inflation data will likely set back the Fed’s plan to cut rates, as inflation data continues to come in well above the 2% goal.

Spirit and Jet Blue officially ended their merger plans last week. They decided it was unlikely that they would be able to navigate the legal issues and withdrew their plans to combine. Following this news, Jet Blue gained 4% and Spirit fell 11%. In other news, Target beat earnings and saw a gain of 11% last Tuesday after reporting net income of $1.38 billion.

The Whitworth Student Investment Group will meet next on Tuesday, March 19th, 2024.

By: Nicholas Henning

Coming off of four straight months of gains, technology stocks fell when the market opened on Monday leading to a drop in all three indexes. The S&P 500 fell 0.1%, the NASDAQ fell 0.4%, and the DJIA fell 0.2%. This drop was fueled by investors having doubts about the current high valuations and future earnings forecasts of large cap technology companies including Alphabet, Amazon, Apple, Meta, Microsoft, and Tesla. The tech stumble included Tesla dropping 7.2%, Apple 2.5%, and Alphabet 2.8%. One large cap tech stock that did not take a hit was Nvidia, which gained 3.6%. Despite technology having a negative influence on the markets, 6 of the 11 sectors in the S&P 500 saw gains, with utilities leading the pack with a gain of 1.6%.

Many companies reported strong earnings last week, most notably Dominos, Macy’s, and Zoom. Macy’s reported they were dropping over 100 stores that are underperforming, however they beat earnings and have a buyout offer from Arkhouse and Brigade Capital Management for $24 per share, representing a valuation of about $6.6 billion. This offer is up from the original offer of $21 per share that Macy’s declined. Following this news, shares of Macy’s stock jumped over 13.5%. Dominos beat their Q4 expectations and raised their quarterly dividend 25% leading shares to jump 5.8% Monday. Additionally, Zoom reported strong forecasts for the company which led to a share price increase of over 8%.

In other news, Reddit is looking go public, with an expected valuation of between $6-$6.5 billion, down from estimates of $10 billion in August 2021. In the last three months of 2023, Reddit posted net income of $18.5 million, despite having an overall net loss of just over $90 million for the year. The target share price for Reddit will be between $31-$34 dollars per share, however, this is subject to change.

The Whitworth Student Investment Group will meet next on Tuesday, March 12th, 2024.

By: Nicholas Henning

The market rallied last week following Nvidia earnings which beat expectations. This led to an overall tech rally as people are becoming more optimistic about the future of Artificial Intelligence (AI). UBS estimates that the AI industry will see extreme growth with revenue increasing more than 70% per year until 2027. Nvidia rose 17% following their widely anticipated earnings leading to the company touching a record valuation of $2 trillion. The S&P 500 and NASDAQ both rose over 1.5% following this news, producing gains for both indexes of over 7% for the year. All three indexes are expected to finish positive in February with many touching record highs. Overall, investors appear optimistic as the market rallies seem to be driven by guidance instead of strong earnings alone.

In other economic news, in January, new home sales rose 1.8% from a year ago and 1.5% compared to December. The median home price was $420,700 and there were 661,000 homes sold in the month. On the other hand, existing home sales declined in January, mainly due to people holding onto their lower mortgage rates instead of looking to move and paying higher interest.

According to Fed statements, it is almost certain that interest rates will not be lowered at the next meeting in late March and that until inflation and the economy continues to cool, the Fed will maintain a “no need to rush” mentality when it comes to easing rates. As it appears now, investors can expect rate cuts to come closer to late spring/early summer.

The Whitworth Student Investment Group will meet next on Tuesday, March 5th, 2024.

By: Nicholas Henning

Inflation data released last week led the 2024 market rally to a pause. Following the CPI release, on Friday, February 16th, wholesale prices data were higher than anticipated leading the NASDAQ to fall 0.8%, the S&P 500 to decline 0.5%, and the DJIA to fall 0.4%. This dip ultimately led to one of the worst weeks in 2024 for US markets, tallying the first weekly decline since early January. This hotter than anticipated inflation data will likely result in rate cuts being postponed at the upcoming Fed meeting in late March.

In other economic news, new housing starts declined 14.8% from December to January, impacting real estate stocks. This decline is the lowest level for housing starts since August 2023, and the sharpest drop in new starts since April 2020. More specifically, multi-family construction is down 36% in the past year and down 7.6% month over month. Single-family building permits however, saw growth, rising 1.6% last month.

Major earnings are being reported this week, with Nvidia, Walmart, and Home Depot all releasing. Walmart and Home Depot exceeded expectations with their earnings and Nvidia is set to release after the market closes on Wednesday. Currently Nvidia is one of the largest companies in the S&P 500 in terms of market cap, so a disruption in their earnings could affect the market as a whole. The largest five stocks in the S&P 500 are responsible for 75% of the gains made by the index in 2024, so there is a focus placed on Nvidia’s upcoming release.

The Whitworth Student Investment Group will meet next on Tuesday, February 27th, 2024.

By: Nicholas Henning

Following the Federal Reserve’s meeting on January 30th, the consensus is that interest rates will remain unchanged. Powell has stated that inflation will need to show consistency at the 2% target before rate cuts are in play. Currently, according to the Wall Street Journal, regarding the next Fed meeting, there is now a 15% chance of rates being reduced versus the previous estimates of 52%. The next meeting will be held on Wednesday March 20th, roughly a month following the CPI report being released on Tuesday February 13th.

In other economic news, for the month of January, the United States job market surpassed expectations, reporting 353,000 new jobs versus expectations of 187,000. Wages grew as well, with hourly wages increasing 0.6% for the month and 4.5% for the year. The large technology companies including Meta, Microsoft, Amazon, Alphabet and Apple released their earnings reports last week with mixed results. Meta saw success reporting a 25% gain in sales and a tripling in their profits compared to last quarter. This success led to a share price jump of over 15%. Amazon reported online sales thriving, seeing their best quarter since the pandemic, leading to an impressive $170 billion in revenue. On the other hand, Apple had a 12.9% revenue drop after facing competition and demand issues and Alphabet reported advertisement revenue was below what it should be. Due to the underperformance of various large tech companies, the NASDAQ saw a steep decline on January 30th compared to gains in the S&P 500 and DJIA gains.

​By: Nicholas Henning

• Fed Continues Interest Rate Pause:

Last Wednesday the fed voted unanimously to leave interest rates where they are. ​Continued expectation to leave rates unchanged in December. (WSJ)​

• US Job Hiring Slowing​:

Employers added 150,000 jobs during October.​ Unemployment increased 0.5% since April.​ Just three sectors added to job growth this year, net zero from the rest. (WSJ)​

•Supply Chain Recovery :

After shortages and overstocking during past 2 years, it seems as if supply will be back to normal. Shipping from China to US now takes approx.. 50 days vs. 80 days in late 2021.​ Open container shipping rates from China to US West coast are down. (WSJ)​

​By: Nicholas Henning & Maria Pollack​

• Tech Stocks Rally​:

After falling with the market last week, tech stocks rallied on Monday. Big tech outperformed the S&P 500 and the DJIA. ​Alphabet fell 10% last week after earnings. ​Meta fell after earnings due to issuing a wide range for advertising market, showing uncertainty.​

• Oil Prices Falling :

Fears of oil supply chain issues are calming as Israel-Hamas conflict has not become a regional conflict yet.​ On Monday U.S. crude fell to $82.31 per barrel, a drop of 3.8%. ​Oil Stocks such as Exxon and Chevron are falling.​

• Israel War​:

Israel is now allowing some food, medicine, and aid into Gaza. ​Air strikes are disrupting medical care, hitting close to hospitals.​

By: Nicholas Henning & Maria Pollack​

• Despite expectations for an economic slowdown, inflation adjusted GDP growth for Q3 in the United States is now estimated to be at a 4%-4.6% growth rate, as many analysts are raising their estimates.

• Goldman Sachs raised GDP estimates from 3.7% to 4.0% and High Frequency Economics raised from 4.4% to 4.6%.

• The labor market continued to strengthen in September adding 336,000 jobs compared to 227,000 and 236,000 in August and July respectively.

Home and Rent Prices

• Mortgage payments are now 52% higher on average compared to renting a home.

• This is the largest spread since 1996. Even in 2008, the spread was only 33%.

• Mortgage payments have risen 60% and rent has risen 22% in the past 3 years.