Marriott | August 30th, 2024

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GOOD MORNING

Here's everything you need to know this week: Welcome to September, or as we’re calling it: “International Interest Rate Cut Awareness Month.” As the leaves begin to turn, so too will the dials at central banks around the world. The Fed, alongside its global peers like the ECB and Bank of England, are gearing up to slash rates in unison. After Jay Powell’s Jackson Hole signaling, the market’s got its bets placed on three cuts before year’s end. Europe’s central banks are expected to follow suit with their own trims… but using a different metric that they’re pretty certain is superior and less tacky. Cheap(er) money is back, y’all! Time to get weird again!

1. Wonder drugs getting woundrous-er

What can’t these weight-loss drugs pull off? Semaglutide (aka the secret sauce in Ozempic and Wegovy) isn’t just melting pounds and curing diabetes; now it’s slashing Covid-19 death rates by 33%. Yeah, you read that right. According to a new study that tracked over 17,600 overweight or obese folks with heart conditions, it turns out semaglutide isn’t just a one-trick pony. These patients weren’t just dodging heart attacks, they had a 29% lower risk of dying from anything else too. So now we’ve got weight loss, heart health, and pandemic survival all wrapped up in one shot. With semaglutide flexing like this, don’t be surprised when pharma stocks start popping off at this week’s delayed opening bell

2. Unfathomable tragedy not stopping HP from staying litigious

Hewlett Packard is not letting a little thing like Mike Lynch’s recent tragic death get in the way of continuing to sue him for billions of dollars. Still fuming over the $11.1 billion Autonomy deal that turned into an accounting scandal nightmare, allegedly masterminded by Lynch himself, the tech giant announced on Monday that it’s going after up to $4 billion from his estate. With a 2022 civil win already under its belt (though with less-than-hoped-for damages), HP’s appetite for revenge remains unsatisfied, so it’s politely telling his widow that once she’s done mourning the loss of her husband and daughter in a boating accident of Sicily that she barely survived herself, it will see her in court.  

3. Warren Buffet ‘bout to divest from Bank of America in private

Warren Buffett is close to keeping to himself about how much faith he’s lost in Brian Moynihan. After steadily offloading Bank of America stock, Buffett’s Berkshire Hathaway is now down to an 11.4% stake, putting it just a nice little equity garage sale away from the 10% mark. Once he crosses that line, The Oracle won’t have to publicly disclose his moves immediately, allowing him to keep his dwindling confidence in BofA’s CEO under wraps. Since mid-July, Buffett’s been quietly cashing out, with $6.2 billion already pocketed and another $848 million just last week. As if BriMo wasn’t already the saddest big bank CEO.

4. Stranded in Space? Thanks, Boeing

Volkswagen is teetering on the edge of closing factories in Germany for the first time ever, and CEO Oliver Blume (who’s been more consensus-builder than his combative predecessor Herbert Diess) now has to face off against the formidable IG Metall union. With VW shares down 30% over the last five years and Asian competitors breathing down its neck, something had to give, even for the Germans. But telling that to the unions, who’ve already promised “fierce resistance,” is another story. Factor in the nation’s wider economic struggles and the far-right getting an actual foothold with their first regional electoral win over the weekend, and the weltschmerz is hanging heavy over Germany these days.

Political and Market Sentiment

Vice President Kamala Harris put the labor into Labor Day with a full-court press for union votes. Tearing through Michigan, Pennsylvania, and Wisconsin with Minnesota Governor Tim Walz in tow, Harris kicked things off in Detroit, dropping the line: “Unions built this country, and they deserve recognition.” Translation: Democrats need labor in their corner, and they’re not about to let Trump’s MAGA populism ruin an old relationship. 

But the real action was in Pittsburgh, where Harris teamed up with Biden to take a swing at the proposed sale of U.S. Steel to Japan’s Nippon Steel. Nothing says “we care about American jobs” like blocking a foreign takeover right before an election in key swing states. But here’s the rub: union membership is down to 1 in 10 workers, and Harris and Biden know they’re walking a tightrope. They need labor’s loyalty, but Trump’s out there, pitching his populist message like a guy with nothing to lose. If the unions start to wobble, the Democrats could find themselves scrambling to keep the house from collapsing. And they could use a real nice jobs number on Friday.

Global Markets Overview

Europe: Last week, the pan-European STOXX 600 was living its best life, popping 1.34% to a record high as the ECB toyed with the idea of rate cuts amid cooler inflation. Germany’s DAX led the charge, notching a 1.47% gain, while Italy’s FTSE MIB and France’s CAC 40 also flexed. The UK’s FTSE 100? Well, it managed a respectable 0.59% bump. But Monday brought everyone back to reality. Eurozone inflation flirted with the ECB’s 2% target, leaving stocks in a holding pattern. The Stoxx 600 dipped 0.04%, with retailers taking a hit while telecoms had themselves a moment.

Asia: Japan’s markets found their footing after a rocky start to August, with the Nikkei 225 and TOPIX shaking off early losses to close the month up 0.7% and 1.0%, respectively. The initial panic over the BoJ’s July rate hike gave way to cautious optimism as inflation data out of Tokyo hinted that the central bank might not be done tightening just yet. Meanwhile, China’s markets stumbled as disappointing earnings and gloomy PMI data took the wind out of investors’ sails. The Shanghai Composite dipped 0.43%, while the CSI 300 edged down 0.17%. Hong Kong’s Hang Seng, you ask? A surprising 2.14% pop.

The Week Ahead

After the market’s whiplash rollercoaster ride post-NVIDIA’s way-too-important earnings last week, all eyes are locked on the upcoming US employment report because, let’s face it, that’s the next big market mover. Despite the recent drama, US consumer spending is still chugging along, thanks to solid household income and wealth. The virtuous cycle is staying virtuous, but this job report is the last litmus test for everyone looking forward to going ahead and celebrating “International Interest Rate Cut Awareness Month” in style.

Let’s Dive Into More Details Below…

BREAKING NEWS
Welcome to the latest episode of “Survival of the Fittest: Retail Edition,” where the U.S. economy decides who sinks and who swims.

Dollar General, once the budget-friendly hero of the stock market, just hit an iceberg, slashing its outlook and watching its shares tank by a brutal 20%. Meanwhile, Best Buy and American Eagle are riding high on their decidedly more upscale models despite persistent inflation and proving that in today’s market, catering to the wealthy (or, at the very least, those not scraping by) is the way to go.

What we’re saying is that if you’re looking for a sign of how the wealth gap is reshaping America, you need look no further than your nearest strip mall.

WHAT HAPPENED
Dollar General, a once-formidable force in super discount retail, is finding out the hard way that even the lowest prices can’t save you from the kerosene that is the widening wealth gap fanning the economic fire of inflation. The Tennessee-based retailer just cut its full-year outlook for the second time in three months, citing (wait for it) its “financially constrained customers.” In plain English: the very people who rely on Dollar General to make ends meet are so strapped for cash they can’t even afford to shop there anymore.

Dollar General’s numbers look pretty brutal. Same-store sales eked out a measly 3.2% increase, while earnings per share dropped from $2.98 last year to a dismal $1.89. The stock responded with a 20% plunge, leaving it down more than 65% from its all-time high in late 2022 and forcing investors to scramble. But somehow, wealthier consumers have been less affected.

Over at Best Buy, for instance, it’s all sunshine and high-def profits. The electronics giant just crushed Wall Street’s expectations with $1.22 per share on $8.6 billion in revenue, all thanks to a sharp focus on higher-margin products and services for customers who aren’t feeling the pinch. In a bifurcated economy where the wealthy still splurge on the latest tech while everyone else scrambles for bargains, Best Buy has smartly positioned itself as the go-to retailer for the affluent and tech-savvy (it’s like Amazon, but you can touch stuff!). It’s retail Darwinism in action: cater to the top or get left behind with the masses. And guess what? It’s working.

Then there’s American Eagle, the Goldilocks of this retail inequality fairy tale, somehow striking that just-right balance between budget and style. It reported $0.25 per share on $1.2 billion in revenue, beating expectations and proving there’s still room for middle-market brands, at least for now. American Eagle’s tightrope walk is impressive, appealing to both budget-conscious teens and young adults willing to splurge a little. But let’s talk like adults who wear J.Crew; this is a precarious position. With inflation and interest rates tightening the screws on consumers, their middle-class core is under serious pressure. If spending pulls back, American Eagle could find itself looking like Dollar Lieutenant.

CONTINUE READING ➔

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BREAKING NEWS
The Supreme Court has been making waves with its recent rulings, each carrying significant political and legal weight. In Trump v. United States, the Court ruled that former presidents, including Donald Trump, have immunity from prosecution for official acts, extending the same immunity to future presidents—a decision sparking intense debate among political analysts and historians.

In another landmark ruling, the Court overturned the Chevron doctrine, sharply curbing the power of federal agencies to interpret ambiguous laws. This move drastically changes the playing field for agencies like the EPA, likely opening the floodgates for legal challenges against federal regulations.

Adding to the drama, the Supreme Court recently maintained a temporary stay on President Biden’s plan to cancel billions in student debt, blocking the initiative in a 6-3 decision. This follows the Court’s earlier strike-down of a broader $400 billion loan forgiveness plan, further complicating the administration’s efforts to tackle the student debt crisis.

WHAT HAPPENED
The Biden administration’s SAVE plan, introduced in July 2023, has quickly become a flashpoint as courts and states scrutinize its provisions. Designed to make student loan payments more manageable, the plan calculates payments based on income and family size rather than loan balance. Key features include reducing monthly payments from 10% to 5% of discretionary income and exempting borrowers earning less than 225% of the federal poverty line—$32,800 annually for a single person—from making payments. Additionally, the SAVE plan prevents unpaid interest from accumulating, ensuring balances don’t grow as long as required payments are made.

For those holding out hope that the Supreme Court might finally side with student loan forgiveness, disappointment has struck again. Last year, the Court struck down another of Biden’s student loan forgiveness initiatives, ruling that a 2003 federal law did not authorize the program to cancel nearly half a trillion dollars in debt. This 6-3 decision, carried by the conservative majority, effectively torpedoed Biden’s campaign promise, denying relief to roughly 40 million Americans who could have seen up to $20,000 in student debt wiped out.

Biden responded to the setback with resolve, stating, “I will stop at nothing to find other ways to deliver relief to hard-working middle-class families. My administration will continue to work to bring the promise of higher education to every American.” But for now, the latest decision deals another blow to the Biden-Harris administration, leaving borrowers to continue facing mounting debt and interest in an uncertain job market.

CONTINUE READING ➔

BREAKING NEWS
Anyone familiar with tech history, especially Apple’s, knows Steve Wozniak has always pointed out that Steve Jobs neither coded nor did original design work. Woz emphasizes that while Jobs wasn’t an engineer or programmer, he was savvy enough to contribute meaningfully to design discussions.

Jobs’ real strengths? Two things: his uncanny ability to link humanity’s creative drive with products that prioritize user experience, aesthetics, and simplicity, and his unmatched marketing genius, a key factor in customer retention, a battlefield where Apple, Samsung, and Google fiercely compete.

WHAT HAPPENED
In January 2007, at MacWorld, Steve Jobs—wearing his now-iconic white sneakers, dark blue jeans, and black turtleneck—unveiled the iPhone, a device that would revolutionize the tech industry by combining three products into one: a widescreen iPod, a mobile phone, and a groundbreaking internet communicator. Watching that presentation, you could sense that Jobs grasped the gravity of this innovation. He knew that markets, businesses, and consumer behavior would pivot dramatically towards Apple’s product, just as they had with the iPod.

This moment wasn’t just pivotal for Apple; it marked a defining chapter for Generation Z, the first generation born into the internet age. For them, the iPhone was more than just a new gadget; it was a portal to a fully integrated digital experience and their first taste of “new age” technology that would shape their world.

Recent data from a Statista survey highlights the lasting impact of Jobs, the iPhone, and Apple across generations. The survey shows that 67% of those born between 1995 and 2016 use an iPhone as their primary smartphone, compared to only 16% who prefer Samsung. Among that 16%, those who lean toward Android and Samsung often cite the platform’s flexibility, innovation, and its alignment with Gen Z values, such as the less restrictive nature of Apple’s ecosystem.

Interestingly, Apple’s dominance wanes among older generations, where Samsung gains ground. Among millennials, about 50% use an iPhone, while 30% opt for Samsung. This suggests that older consumers may appreciate the customization and choices that Samsung offers, in contrast to Gen Z’s clear preference for iPhones. Business Insider and other outlets have pointed out that features like camera quality, screen layouts, and compatibility with apps like Facebook, Snapchat, Instagram, YouTube, and TikTok drive Gen Z’s loyalty to Apple.

Despite its innovations, Google remains a niche player across all generational demographics. The Pixel series, though innovative, hasn’t achieved the widespread adoption of Apple or Samsung.

In 2023, Apple’s market leadership was further solidified, maintaining its lead in iPhone shipments. Data from IDC, sourced by Statista, shows that Apple and Samsung together accounted for 40% of global smartphone shipments, totaling 1.2 billion units. Apple, however, edged out Samsung by 8 million devices—a historic first in the mobile phone segment.

This is particularly impressive given Apple’s premium pricing strategy and the economic challenges facing American consumers. It underscores the iPhone’s strong brand appeal and its ability to hold market share among Gen Z, who, according to the data, aren’t letting go of their iPhones anytime soon.

CONTINUE READING ➔

1. Nvidia's Earnings Beat Expectations but Share Price Drops

Nvidia reported better-than-expected second-quarter earnings, with revenues reaching $30 billion, driven by strong AI chip demand. However, investors were disappointed by a perceived slowdown in growth, leading to a 7% drop in Nvidia's stock price despite the positive earnings report.

2. Warren Buffett’s Berkshire Hathaway Hits $1 Trillion Market Cap

Berkshire Hathaway, led by Warren Buffett, has reached a $1 trillion market capitalization, making it the first U.S. company outside the tech sector to achieve this milestone. This reflects the company's significant growth and strong financial performance over the years.

3. Best Buy Raises Profit Guidance as Sales Stabilize

Best Buy reported a stabilization in sales after consecutive declines, prompting the retailer to raise its annual profit guidance. The improvement is attributed to better-than-expected demand for electronics, particularly computers and tablets.

4. Gap Resumes Trading After Early Q2 Results Show Sales Growth

Gap's stock was temporarily halted after the early release of its Q2 results, which showed unexpected sales growth. The positive results suggest that the retailer's turnaround efforts under its new CEO are beginning to pay off.

5. OpenAI in Talks for $100 Billion Valuation Deal

OpenAI, the company behind ChatGPT, is reportedly in discussions for a new funding deal that would value the company at $100 billion. This comes as the AI industry continues to attract significant investment amid rapid technological advancements.

6. American Eagle Profits Surge Despite Sales Miss

American Eagle Outfitters reported a 60% increase in profits for Q2, driven by lower inflationary costs, despite missing sales targets for the second consecutive quarter. The company is navigating a challenging retail environment by focusing on cost control.

7. US Economy Grows at 3% in Q2, Beating Expectations

The U.S. economy grew at an annual rate of 3% in the second quarter of 2024, surpassing initial estimates. The growth was primarily driven by strong consumer spending, indicating resilience in the economy despite concerns about inflation and interest rates.

8. Dollar General Slashes Outlook as Low-Income Shoppers Cut Back

Dollar General reduced its sales and profit outlook for the year, citing weaker-than-expected spending by its low-income customer base. The retailer's struggles reflect broader economic pressures affecting budget-conscious consumers.

9. Apple and Nvidia Reportedly in Talks to Invest in OpenAI

Apple and Nvidia are reportedly in discussions to invest in OpenAI, potentially valuing the AI startup at over $100 billion. This move aligns with Apple's plans to integrate AI into its products and Nvidia's continued focus on AI technology.

10. Salesforce Shares Jump After Strong Earnings Report

Salesforce's stock surged following the release of its latest earnings report, which exceeded Wall Street expectations. The company reported robust revenue growth, driven by increased demand for its cloud-based software solutions.

CONTINUE READING ➔

Today's insights are provided by Homes & Villas by Marriott Bonvoy. Book your next getaway by August 31, 2024 and receive 24K Bonus Points Plus 10% off.

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