GraniteShares | August 12th, 2024

Today's insights are provided by GraniteShares. Learn more about their 2X leveraged long (TSLR) and short (TSDD) Exchange-Traded Funds to get exposure to Tesla.

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GOOD MORNING

Here's everything you need to know this week: Markets may have recovered last week, but if you shake hands with a professional investor on Monday, you can expect their hands to shake. Because after months of inflation and rate hike obsession, no one’s really calm. Stocks are up, sure, but are you feeling confident about it? What we’re saying is, the rally may be real, but the confidence? Not so much. This upcoming data-heavy week will be huge in giving investors some actual clarity (if that’s even still a thing).

1. All Eyes on Jay

Next week’s economic data will be dropping like it’s hot, dropping like it’s hot, but will Fed Chair Jay Powell and the FOMC be givin’ it [an emergency rate cut] to us? After last month’s hiring slowdown had the markets throwing a tantrum, everyone’s now sweating over inflation. Tuesday’s Producer Price Index is just the appetizer because if producers are paying more, consumers are next on the chopping block. The main course? Wednesday’s Consumer Price Index could keep Powell calm or push him to break out the rate hike hammer. Thursday wraps up with Retail Sales and Jobless Claims, giving us a peek at how much people spend and whether they’re still employed. But let’s be honest: the only thing that really matters is how Powell interprets these numbers with his economic crystal ball, and if he’s too busy following Dead & Co. on his summer vacation.

2. Starbucks Is Feeling The Wrong Kind of Active

Starboard Value just grabbed a stake in Starbucks, which means America’s favorite caffeine dealer is now facing down two of the world’s most infamous activist investors simultaneously. Elliott Management’s Paul Singer has already cast his dark shadow over Starbucks, but the inclusion of Starboard should be giving the coffee chain’s c-suite, already juggling union issues and a post-pandemic inflationary environment, an ulcer. Singer is his own dogged nightmare but Starboard is also well-known for digging deep into its activist campaigns. After taking a position in Darden Restaurants in 2014, the firm released a 294-page document on Olive Garden’s finances that went into such picayune detail it broke down how the Italian eatery could save $5 million by being more frugal with its breadstick offerings. So, RIP your $4.15 venti latte.

3. Hindenburg Vs Adani Group: Round Two

Hindenburg Research is back at it, and by “it” we mean taking another swing at Adani Group. The hottest new short seller on the scene is now dragging India’s market regulator into the feud. After going after Adani in January 2023, Hindenburg’s latest claim is that the regulator’s chief was cozy with some personal investments in Adani’s companies which, if our math is correct, would be a pretty massive conflict of interest. Hindenburg’s never been one to pull punches, and this move could crank up the heat on Adani while also throwing India’s regulatory credibility into question.

4. Saudi Arabia Is Open for Business*

Saudi Arabia is rolling out the red green carpet for foreign investors via a new investment law aimed at making The Kingdom more attractive to global money. Crown Prince Mohammed bin Salman is tweaking the rules to ease restrictions, streamline processes, and sweeten the deal for international businesses. It’s all part of his Vision 2030 plan to diversify Saudi Arabia’s economy away from oil and turn it into a global business hub (that’s why it’s buying all those sports teams/leagues). But while the incentives are shiny, investors will still be eyeing the fine print, particularly around governance and political risks because it’s not great to not be the king when you’re investing billions. 

Political and Market Sentiment

Vice President Kamala Harris is now inching ahead of Donald Trump on economic trust, according to the latest Financial Times/Michigan Ross poll at least. Harris snagged 42% of voter confidence on economic issues, a whole one percentage point more than Trump, or what data experts call a coin flip. The new polling should raise some eyebrows in the Trump campaign since other surveys still show Trump crushing Harris on economic issues (CNBC’s latest gave The Donald a 2-to-1 edge). But many of those polls were asking about “Bidenomics,” and with Biden bowing out and Harris stepping in, the Democratic ticket appears to be getting an economic makeover, and Trump will have to update his attacks with a new buzzword.

Global Markets Overview

Europe: The STOXX 600 Index managed a 0.27% gain on the week, clawing back earlier losses, while major stock indexes were all over the place. Germany’s DAX inched up 0.35%, France’s CAC 40 added 0.25%, and the UK’s FTSE 100 barely moved. Italy’s FTSE MIB, though, took a 0.74% hit. Eurozone bond yields climbed after a global market scare about economic growth, partly soothed by a dip in U.S. jobless claims. Meanwhile, eurozone retail sales dropped 0.3% in June, with consumers clearly still feeling the inflation pinch. The takeaway? Europe’s markets are trying to rally, but consumers are struggling to keep up.

Asia: Japan’s stock markets started the week with their worst sell-off in decades as the yen surged after the Bank of Japan’s unexpected hawkish pivot. The BoJ’s rate hike and bond tapering plans sent investors scrambling to unwind the yen carry trade, fearing a narrower U.S.-Japan rate differential. By week’s end, Japan’s markets had recovered some ground, with the Nikkei 225 and TOPIX down 2.5% and 2.1%. Meanwhile, Chinese stocks slipped despite a stronger-than-expected inflation bump, with the Shanghai Composite down 1.48% and the CSI 300 off 1.56%. Hong Kong’s Hang Seng Index was the outlier, gaining 0.85%, though deflation concerns lingered.

The Week Ahead

Walmart’s Thursday numbers will be closely watched after the retail giant shocked everyone with 6% revenue growth last quarter. Meanwhile, Home Depot’s likely wishing inflation would give their customers a break, as they brace for a dip in sales and profits. Across the Pacific, Alibaba and JD.com will spill the beans on whether Chinese e-commerce is still booming. Cisco’s Tuesday report might give us clues on tech spending trends, while SunLife and UBS will chime in with their financials. But let’s be honest, everyone’s really just here for the retail soap opera.

Let’s Dive Into More Details Below…

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Eli Lilly just posted some mind-bending 457% growth in its neuroscience segment.

Yes, you read that right: 457%. It’s the kind of number that makes you wonder if someone fat-fingered the keyboard over at HQ, but nope, it’s real. Meanwhile, diabetes revenue hit an all-time high up 50%, which would be the headline on any other day, but today it’s just a footnote.

So what’s behind this neuroscience surge? Lilly’s new Alzheimer’s drug, Donanemab, has been making serious waves, pushing the company’s neuroscience revenue from $0.4 billion to $2.2 billion in just over a year. That’s the kind of growth that not only turns heads but also sets off a few alarms in Big Pharma boardrooms everywhere.

What about diabetes and weight loss? Don’t worry, it’s still the cash cow pulling in $7.5 billion, but it’s like being the lead guitarist in a band where the drummer just spontaneously combusted on stage, they can still hear you but nobody’s watching.

CONTINUE READING ➔

BREAKING NEWS
Ah, Stellantis. You know, the plucky little global automaker with more brands than anyone can count and a penchant for drama? Well, they’ve outdone themselves this week. Layoffs? Check. Ending production of an iconic vehicle? Double check. Suing a dealership over $180 million worth of fleet vehicles? You better believe it.

If you thought the auto industry was all about EVs and self-driving cars, Stellantis is here to remind you that old-school corporate gas-powered drama is alive and kicking.

WHAT HAPPENED
First up, let's address the layoffs because nothing says “Good news” like a tsunami of pink slips. Stellantis announced that later this year, it will indefinitely lay off up to 2,450 U.S. factory workers, starting with 386 jobs at its Warren Truck Assembly Plant in Michigan.

Why? They’re pulling the plug on the Ram 1500 Classic, a truck that’s been hanging around since 2019 like that college buddy who never quite left town. The Ram 1500 Classic was a reliable moneymaker, but with Stellantis now focused on an electric future, it’s been deemed surplus to requirements. So, they’re pulling the plug, and with it, thousands of jobs across multiple plants.

But hold on, there’s more. Stellantis is also embroiled in a $180 million legal battle with a North Carolina dealership. The dealership claims that under state law, Stellantis is required to buy back a fleet of vehicles. Stellantis, not surprisingly, disagrees and is taking the fight to court. It’s a classic standoff, with one side saying “Pay up,” and the other side saying “I will not! I have a classic truck to kill!”

It’s the kind of weekly trifecta that would make any executive wonder if they’re being pranked by the universe.

CONTINUE READING ➔

Today's insights are provided by GraniteShares. Learn more about their 2X leveraged long (TSLR) and short (TSDD) Exchange-Traded Funds to get exposure to Tesla.

Learn More Now ➔