September 3, 2023

Resilient U.S. Economy Defies Expectations

📰 News Organizations

  • Resilient U.S. Economy Defies Expectations. Steady hiring and robust consumer spending are the latest evidence of the economy's resiliency against the Fed’s rate increases. Employers added 3.1 million jobs over the past 12 months and a rise in real incomes is fueling consumer spending.

  • US Payrolls Rise by More Than Forecast While Wage Growth Cools. U.S. employers added 187,000 jobs last month, while payrolls in June and July were revised down a combined 110,000. The report keeps the Federal Reserve on track to hold rates steady at its meeting this month.

  • Tesla Slashes Prices of Top-End Cars. Tesla Inc. revamped the Model 3 sedan with sleeker looks and longer range while slashing prices of its premium vehicles in an all-out push to boost sales. The Model S and X now start at $74,990 and $79,990 in the US.

  • FTC Allows Amgen To Move Forward With Horizon Therapeutics Acquisition. The Federal Trade Commission has reached a deal with drug giant Amgen to allow the company’s $27.8 billion purchase of Horizon Therapeutics to move forward.

  • Saudi Arabia’s Aramco Considers Selling $50 Billion in Shares. After monthslong consultations with advisers, the kingdom has decided to host any new Aramco offering on the Riyadh exchange to avoid legal risks associated with an international listing.

  • SoftBank Lines Up Apple, Nvidia as Strategic Arm IPO Backers. Softbank has lined up some of Arm Ltd.’s biggest customers as strategic investors for the chip company’s initial public offering, including Apple Inc., Nvidia Corp., Intel Corp., and Samsung Electronics Co.

🐦 Twitter

  • It's not the inversion that signals recession but the steeping that typically marks the start. The Fed's anchoring of the short-end increases the likelihood steepening process moves faster than expected. Source.

  • There were 597,000 new entrants in the labor market - people looking for work for the first time - and the highest level since October 2019. Savings have run out and credit cards are maxed out. Source.

  • Leading economic indicators have declined for 16 straight reports. This is exceeded only by 1973-1975 and by 2007-2009, when it fell 22 times in a row and 24 times in a row, respectively. Source.

  • Markets seem to be expressing the view that inflation concerns are carrying a heavier weighting to growth concerns. Given positioning within Treasuries, yields are likely to move lower from here. If so, this recent bid for stocks is likely to continue. Source.

  • More Americans are falling behind on their car loan and credit card payments than at any time in more than a decade, a troubling signal of consumer stress as higher prices and rising borrowing costs are squeezing household budgets. Source.

  • Oil prices rising to $85 coincides with the 4 consecutive weeks of growth in the US SPRs. Inflationary forces remain entrenched in the economy and the government is now having to walk back its erratic policy of depleting its SPRs at an extremely sensitive juncture. Source.

The rise of deglobalization and challenges in housing affordability are likely to further drive the need for infrastructure development, ultimately creating upward pressure on the demand for materials and natural resources to meet these evolving requirements.

Tavi Costa

📓 Online Publications

  • Homebuyer Mortgage Demand Picks Up For 1st Time In 6 Weeks. Homebuyer demand for purchase mortgages picked up for the first time in six weeks as mortgage rates retreated from 2023 highs on encouraging inflation data. Applications to refinance were up 3% week over week.

  • ISM® Manufacturing Index Increased to 47.6% in August. The August Manufacturing PMI® registered 47.6 percent, 1.2 percentage points higher than the 46.4 percent recorded in July. This figure indicates a ninth month of contraction after a 30-month period of expansion.

  • CVS to Commercialize Biosimilar Medicines. Given that the company is a major distributor of primary healthcare, it's well-positioned to make the most out of its biosimilar segment. It will likely be able to take advantage of economies of scale in manufacturing as well as distribution.

  • Fed Will Likely Be On Hold. Not only did U3 unemployment tick up 0.3%, wage data continued to decelerate. Perhaps most intriguing is total employment: After collapsing during the pandemic, and then spiking upwards as we re-opened, this report shows it has returned to its long-term trend.

  • Construction Spending Increased 0.7% in July. Construction spending during July 2023 increased 0.7% above the revised June estimate. On a year-over-year basis, private residential construction spending is down 5.4%. Non-residential spending is up 19.8% year-over-year.

🎧 Podcasts

  • High Mortgage Rates Continue to Challenge Housing Market's Resilience. The mortgage rate still remains relatively high at 7.18%, as of the week ending August 31st. This is a significant contrast to the 5.6-6% rate from the same period last year and has been impacting the housing market. Source(5:48)

  • Long-Term Bet On Apple. Scott Galloway says Apple is well-established with a strong track record. Apple has been in business for a long time and has consistently generated strong profits. This makes it a difficult company to bet against, as investors are likely to be confident in its ability to continue to succeed. Source(5:30)

  • US Loses Spot as Top Corn Exporter. Brazil has overtaken the United States in corn exports, shipping 32% of the world's supply compared to the U.S.'s 23%. This shift is attributed to factors such as a strong U.S. dollar, trade disputes with China, rising labor costs, and increased domestic corn consumption. Source(21:00)

  • BRICS to Dominate Oil and Food Production. The group now produces 54% of global oil production. If BRICS adds Venezuela, Algeria, and Kazakhstan, it may control as much as 90% of all oil and gas traded globally. 5 of the world's biggest food producers are also part of BRICS. Source(32:03)