Knightscope | September 16th, 2024

Today's insights are courtesy of Knightscope, their mission is to make the United States of America the safest country on the planet.

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GOOD MORNING

Here's everything you need to know this week: You guys, the Fed’s big moment is finally here! After months of market hand-wringing over inflation and unemployment, the Federal Reserve is gearing up for its first interest rate cut since 2020. Sure, inflation’s easing, but the job market is throwing mixed signals, and no one’s quite sure if we’re headed back to normal or something worse, but the Fed has pretty much promised some kind of cut. For a market that is still showing strong signs of an addiction to cheap money, the only question that remains is how much of a taste Jay Powell is going to give. Wednesday’s meeting could bring half a point, a quarter point, or some other middle-ground nonsense, no one knows, and that has investors looking about as calm as a squirrel eating on meth. It’s gonna be a fun week.

1. Workers Want Pensions, Boeing’s Headache Gets Worse

Things just keep getting worse for Boeing. Over 30,000 workers walked off the job, and union leader Jon Holden doesn’t seem optimistic about a quick resolution, telling NPR the strike "could go on for a while." The International Association of Machinists and Aerospace Workers (IAM) wants bigger raises and the return of a defined-benefit pension Boeing axed a decade ago. After 94% of workers rejected a contract Holden himself had endorsed, production lines for Boeing's top-selling 737 MAX and other jets are sitting idle. With the union feeling confident, it’s clear this fight won't end soon.

2. Israeli Inflation

Israel’s inflation just popped higher than expected, hitting 3.6% year-on-year, thanks to the government throwing cash at the ongoing, and spreading, war in Gaza. That’s up from 3.2% in July and well above the official inflation target of 1%-3%, catching analysts off guard, who had predicted it would hold steady. Month-on-month inflation also jumped to 0.9%, its highest in two years, with everything from travel costs to vegetables spiking. Foreign airlines don’t want to touch Israeli airspace, and shipping to the key port of Eilat is dropping off thanks to Houthi attacks in the Red Sea. Add to that the lack of Palestinian workers in agriculture and construction, and the rising costs make sense. The central bank’s worried, but don’t expect rate cuts anytime soon. War spending isn’t about to stop, and it might just be getting started.

3. KKR Only Wants to Keep Part of Axel Springer… Not the News Part

Axel Springer, the German media giant behind Politico and Business Insider, is getting sliced up like a corporate sausage platter. Billionaire CEO Mathias Döpfner and private equity overlords KKR are close to finalizing a breakup deal worth roughly $14.5 billion. KKR will snag the profitable classifieds business, finally freeing themselves from the PR nightmare that is Axel Springer's news division. Döpfner, who's run the show since 2002, keeps a minority stake in classifieds while dreaming of more English-language media takeovers because only billionaires seem to be interested in owning journalism these days.

4. JD Vance Lied About the Cat Eating Immigrants, Alleges JD Vance

In yet another episode of "JD Vance Does JD Vance Stuff," the Republican VP candidate casually admitted that he spread false and rather racist rumors about Haitian immigrants abducting and eating pets in Ohio. During a Sunday morning appearance on CNN, Vance defended his fib by claiming he had to “create stories so that the media actually pays attention to the suffering of the American people.” When pressed if his outlandish Springfield, Ohio, pet-eating claims were fabricated, Vance proudly said, “Yes!” Cool, cool, bro. 

Political and Market Sentiment

Kamala Harris might have just pulled ahead of Donald Trump on economic issues.  According to the latest FT-Michigan Ross poll, Harris holds a slim lead with 44% of voters trusting her over Trump’s 42%. Last month, it was 42% to 41%. And in case anyone still thinks last week’s debate didn’t matter, among the 67 million Americans who actually tuned in, Harris stretched that lead to 48% versus Trump’s 42%. But for those who skipped the debate, Trump’s still their guy, leading 41% to 35%. Clearly, talking about the economy on live TV does wonders for a candidate’s poll numbers, which is something the Trump campaign might want to muse on, considering the VP is admitting to lying on the Sunday shows while the top of the ticket spent the weekend tweeting about how much he hates Taylor Swift.

Global Markets Overview

Europe: The pan-European STOXX 600 closed the week up 1.85%, getting a nice boost from the European Central Bank’s latest interest rate cut. Germany’s DAX led the charge with a 2.17% gain, while France’s CAC 40 climbed 1.54%, and Italy’s FTSE MIB eked out a 0.83% increase. Even the UK’s FTSE 100 managed a 1.12% rise because, apparently, rate cuts are still good for business. The ECB, in its infinite wisdom, trimmed the deposit rate by another quarter-point to 3.5%, as expected. With economic growth sagging and inflation slowing across the eurozone, the central bank is playing it cautious.

Asia: Japan’s stock markets delivered a mixed bag this week: the Nikkei 225 edged up 0.5%, while the TOPIX slid 1.0% as exporters battled currency headwinds. The yen strengthened to the upper JPY 140 range against the USD, up from last week’s JPY 142.3. In China, weak inflation data hit hard, dragging both the Shanghai Composite and CSI 300 down 2.23%. Hong Kong’s Hang Seng Index fared a bit better, dropping only 0.43%. Expectations are growing that the Bank of Japan could raise rates again this year, with central bank officials hinting at more tightening. Looks like those yen gains might not be going away anytime soon.

The Week Ahead

Let’s keep this honest and simple: all eyes are on Jerome Powell and how deep he’ll slice rates on Wednesday. Forget every other headline, it’s all about how much the Fed is willing to ease up. After a year of inflation panic and mixed economic signals, this is the moment everyone’s been obsessing over. It doesn’t matter what else happens this week, the only story that matters is how much of a haircut J-Pow gives those rates.

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1. Boeing Faces Strike as Machinists Reject Contract

The International Association of Machinists overwhelmingly voted to reject Boeing's contract offer, setting the stage for a strike. This move could disrupt Boeing's production and impact its financial outlook amid increasing labor tensions.

2. Trump Media Faces Potential Sell-Off as Lockup Period Nears End

Trump Media & Technology Group is facing a potential stock sell-off as its lockup period for insiders comes to an end. Despite a recent rally, investors remain cautious about the selling pressure that could arise once insiders are free to trade shares.

3. Ford's EV Strategy Faces Pressure from China

Ford is re-evaluating its electric vehicle (EV) strategy as competitive pressures from China increase. The automaker has delayed the launch of some EVs, raising concerns that Ford may struggle to compete in the rapidly evolving global EV market.

4. S&P 500 Rebounds as Non-Tech Stocks Lead the Way

The S&P 500 has bounced back from its summer selloff, but unlike previous rallies, this recovery is being driven by stocks outside Big Tech. Investors are shifting focus to other sectors as non-tech companies post stronger earnings.

5. Norfolk Southern May Seek to Claw Back Fired CEO's Pay

Following the firing of CEO Alan Shaw over an inappropriate relationship, Norfolk Southern may attempt to recoup his compensation. The case highlights a broader trend of companies implementing policies to claw back executive pay in cases of misconduct.

6. Big Tech Lags as Broader Market Recovers

While the broader stock market has rebounded, Big Tech stocks have lagged behind. Investors are turning to other sectors as growth slows for the tech giants that have led the market for years, signaling a possible shift in market leadership.

7. Job Search Frustrations Grow Amid Cautious Hiring

Job seekers are facing increasing challenges as employers become more cautious in hiring. Many are encountering low response rates, fake listings, and extended timelines, reflecting uncertainties in the labor market.

8. Ford Faces 'Existential Threat' in EV Race

Ford is under intense pressure to compete in the global electric vehicle market, especially from Chinese automakers. While the company has delayed some EV launches, industry analysts view this as a strategic regrouping in response to competitive threats.

9. Norfolk Southern Faces Scrutiny Over CEO's Exit

Norfolk Southern is under scrutiny after the firing of CEO Alan Shaw due to a workplace misconduct scandal. The railroad company may now face financial and reputational challenges as it deals with the fallout.

10. Mastercard to Acquire Cybersecurity Firm Recorded Future for $2.6 Billion

Mastercard is acquiring threat intelligence company Recorded Future for $2.6 billion. The deal is aimed at strengthening Mastercard’s cybersecurity capabilities, enhancing its ability to protect global payment systems against evolving cyber threats.

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Today's insights are courtesy of Knightscope, their mission is to make the United States of America the safest country on the planet.

Learn More ➔