Monogram | August 27th, 2024

Today's insights are courtesy of Monogram, an AI robotics company revolutionizing orthopedic surgery.

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GOOD MORNING

Here's everything you need to know today: Jay Powell might be feeling a little lighter this week, what with all the goodwill about those rate cuts we’re getting, so we would hate to tell him about all this new sausage data. Yeah, that’s what we typed “sausage data.”

The latest Texas Manufacturing Outlook Survey suggests that the economy is in a rocky place in the Lone Star State, and likely beyond. But the indicator that really grabbed our eye was this: “As the economy weakens, we are seeing modest growth in our category of dinner sausage.” Why is that bad, you might be asking? Well, every economist and short-order cook knows that when people start turning to meat in tube form, things are looking bad. 

Sausage, in fact, might be the ultimate recession signal. As the Texas survey says so eloquently; it’s cheap, it’s versatile, and it’s the go-to protein when wallets are shrinking. It’s almost poetic: while the Fed’s out there scrambling to cut rates and calm the market,  So while J-Pow is out here trying to soothe the markets and the American eater with rate cuts and economic band-aids, the rise in dinner sausage sales is a snappy little reminder that there are no easy fixes… except, of course, a nice sausage.

Let’s Dive Into More Details Below…

BREAKING NEWS
Sports are a time-honored tradition packed with good times, cheers, and a dash of (mostly) innocent tribalism—unless you’re a West Ham United fan. Usually, sports bring together people from all walks of life, united by the shared thrill of getting a ball into a net, hole, or over a wall.

And the crowds are massive. In 2022, the FIFA World Cup in Qatar drew in around 5 billion viewers, with 1.5 billion tuning in for the final alone. For comparison, Super Bowl LVII in 2023 attracted about 113 million viewers according to Nielsen’s estimates.

Meanwhile, a new favorite has swept across local parks and pub backyards in the U.S.: pickleball, the boogie boarding of tennis. With fewer barriers than traditional tennis—no pricey equipment or exclusive courts—pickleball is straddling the line between a casual pastime and a rising sport that’s quickly making a name for itself.

WHAT HAPPENED
Pickleball has been around for decades, but it’s only recently that college kids and workmates have started to embrace it as a way to squeeze in some exercise—often with a pint in hand. The game was invented in the summer of 1965 on Bainbridge Island, Washington, by a congressman and a businessman looking to entertain their families with a mashup of badminton, ping-pong, and a perforated plastic ball.

The origin of the name “pickleball” is as quirky as the sport itself. Some say it was named after the Pritchard family’s dog, Pickles, who loved chasing the ball. Others claim it was inspired by the “pickle boat,” a rowing term for a mixed crew. But we like to imagine that Joel Pritchard and Bill Bell came up with the name over a few too many Dill Pickle Martinis one summer night.

No matter which story you believe, pickleball is hitting a sweet spot with the 35-to-44-year-old demographic. As of 2024, this age group boasts an average annual salary of around $70,000 and a median net worth of $97,740, putting them in their prime earning years with plenty of disposable income for sports and hobbies like pickleball, golf, tennis, and basketball.
A substantial majority—over 70%—of dedicated pickleball enthusiasts are between 18 and 44 years old, with an exceptionally high concentration in the 25-34 age bracket. Data from Statista proves this, showing clear signs that pickle has no intention of slowing down. From 2014 to 2023, numbers remained steady at 2.5 million players in 2014. Gradual increases began in 2016, reaching 3.5 million players by 2019. A significant acceleration occurred from 2020 onward. Player numbers jumped to 4.2 million in 2020, 4.8 million in 2021, then surged to 9.0 million in 2022. Today, there are an estimated 13.6 million pickleball players in 2023, representing a more than fivefold increase over the decade.

The social boom of pickleball is nothing to scoff at, but it isn't all that surprising as people become more comfortable outside after COVID-19. Plus, it's something new, unlike tennis, badminton, or table tennis, which, no offense to those players, can feel dated. The sport's accessibility—both financially and socially—combined with straightforward rules, makes it inviting to players of all ages and abilities. In a U.S. culture where inclusivity is more popular and necessary than ever, pickleball's vital communal aspect and sense of belonging make it clear why people gravitate toward the game.

Beyond its social appeal, pickleball offers physical health benefits, making it particularly attractive to those seeking an active lifestyle, including older adults who might prefer this to a night out at the bar. The sport also provides mental health benefits, with studies indicating reductions in depression among players who find joy in being outside and engaging in a shared activity.

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Robotic knee surgeries project to increase by 4X in volume by 2027. Monogram (Nasdaq: MGRM) just filed for FDA approval to commercialize their patented tech.

Preferred stock is often unavailable to the public, but they’re currently offering unlisted preferred stock with an 8% dividend.* 

BREAKING NEWS
Last week in Jackson Hole, Federal Reserve Chairman Powell signaled that a shift in monetary policy is on the horizon, saying, “Inflation has declined significantly. The time has come for policy to adjust.” The markets liked what they heard, with the S&P 500 and Nasdaq ticking upwards in response. Meanwhile, the Biden-Harris administration, though officially hands-off, seemed to ride this green wave with their “opportunity economy” proposal, which Harris highlighted during her acceptance speech at the Democratic National Convention.

However, Trump, leading Harris by 9 points in trust to handle the economy and inflation, isn’t buying Powell’s intentions. He’s accusing the Fed Chair of playing politics, suggesting Powell might cut rates to help Democrats in 2024. But in the grand scheme of the market, does all this political back-and-forth really matter?

WHAT HAPPENED
Historical data from Visual Capitalist, New York Life Investments, and Yahoo Finance indicate that the S&P 500 does not consistently favor one political party as being more bullish or bearish—a reassuring sign. This separation between politics and markets allows the natural ebb and flow of ideas to drive innovation and company growth, potentially shaping the country and the world without undue political influence. If these two spheres were closely intertwined, one might wonder whether the motivations behind IPOs would shift to serve governmental interests rather than the people's future. While it's hard to predict the outcomes of such a scenario, it's a question many would prefer not to explore, given the value placed on a genuinely free market.

Looking at the mean compounded average annual growth rate (CAGR) of the S&P 500 over the years, Dem presidents have the slightest of edges regarding the market, standing at 9.6%, compared to 6.2% under Republican presidents. This suggests that, on average, the stock market has experienced somewhat higher growth rates during Democratic administrations. But why? Democratic presidents may have coincidentally taken office during periods of economic recovery or expansion or, more often than the GOP, implemented more stimulative fiscal policies, including increased government spending and investment in public programs.

Now, let's consider the S&P 500 median CAGR. Here, Republican presidents come ahead, with a median S&P 500 CAGR of 10.2% versus 8.3% for Democrats. The higher median under Republican leadership indicates that there have been more instances of solid market performance during their terms, even if the overall average is lower.

And which presidents from the data have seen the most "gains"? Former President Clinton, the famed Democrat, saw a 15.2% CAGR during his tenure, whereas former President Trump, who achieved a 14.1% CAGR, was not far behind. And Trump appears to know it. Never one to cheer his victories, in a tweet from June 4, 2018, Trump stated, "In many ways, this is the greatest economy in the HISTORY of America." Copy-pasting the same sentiment, most recently on May 12th, stating on Tudor Dixon, "We had the strongest economy in the history of the world. There's never been an economy like we had pre-COVID."

Going down the list, Dwight D. Eisenhower's tenure saw a robust 8.0% CAGR, reflecting the post-war economic boom. John F. Kennedy's shorter term yielded a more modest 5.4%, while Lyndon B. Johnson oversaw a solid 7.6% growth, likely boosted by his "Great Society" programs. Nixon's presidency marked a stark contrast with a 4.0% CAGR, coinciding with economic challenges, including the oil crisis. Gerald Ford's brief term surprisingly rebounded with a strong 10.4% growth. Jimmy Carter faced economic headwinds, reflected in a 6.3% CAGR. The Reagan era then ushered in a period of significant growth at 10.2%, followed by George H.W. Bush's impressive 10.9%. George W. Bush's term saw a -6.2% CAGR, impacted by the dot-com bust and 2008 financial crisis.

Barack Obama's tenure, starting amid the Great Recession, achieved a remarkable 13.8% CAGR as markets recovered. Noting Trump's performance from before, let's move onto President Biden. Joe Biden's partial term shows a 9.0% CAGR, navigating post-pandemic recovery and inflation concerns.

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BREAKING NEWS
Welp, that rate cut euphoria was fun while it lasted. After briefly enjoying the idea of cheaper borrowing costs, oil prices jumped 3.5% early Monday, reminding everyone that geopolitics can harsh any market mellow.

Between production cuts, Middle East tensions, and the ever-present specter of supply disruptions, we’re getting a nice reminder that the Fed can’t completely drown out all noise by making money cheaper. So it’s time to ditch that Summer Friday optimism and realize that with missiles flying in what’s becoming a regional proxy war between Israel and Iran (and with some rogue governments posturing to get involved) markets might switch quickly from “cautiously optimistic” to “brace for impact.”

WHAT HAPPENED
Over the weekend, Israel and Hezbollah passed an inflection point in their simmering tension. Hezbollah fired hundreds of missiles and drones into Israel, prompting Israel to respond with 100 fighter jets targeting Lebanon. While neither country is a major oil player, the Middle East is a neighborhood, meaning neighbors like Saudi Arabia, Libya and Iran, who definitely are, are likely to react, which will send oil traders and other kinds of traders reaching for the Tums.

Making things worse are the Libyans. In a move that’s as bold as it is destabilizing, Libya’s eastern-based government just decided to throw a wrench into the global oil market by ordering all oilfields to shut down. With the country’s production already a key piece in the delicate global supply balance, so any sudden halt would be like yanking the tablecloth out from under an already wobbly market.

And in case that wasn’t enough, Iranian-backed Houthi rebels in Yemen upped the ante even further last week by firing rockets at a Greek oil tanker, which is reportedly now drifting ablaze and “not under command.” The attack adds a fresh layer of risk and could spark more concerns about the safety of critical shipping lanes in the Red Sea.

Oil prices reacted immediately. The U.S. standard West Texas Intermediate (WTI) spiked almost 3% early Monday, while the more global standard Brent crude climbed 2.5%.

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1. Asian stocks edge higher ahead of inflation data and potential Fed rate cuts

Markets in Asia rose cautiously as investors anticipate key inflation data from the U.S. and Europe. Hopes for rate cuts from the Federal Reserve and the European Central Bank are driving optimism, but concerns about the strength of the yen tempered gains.

2. XPeng CEO increases stake, signaling confidence

XPeng's co-founder and CEO, Xiaopeng He, raised his ownership stake in the company, reflecting strong confidence in the EV maker’s future. His additional investments span both Hong Kong and U.S. markets.

3. Nvidia earnings report stirs anticipation as AI market continues to boom

Nvidia is expected to announce a significant year-over-year earnings increase. Investors are keenly watching how the AI chipmaker will perform, as it continues to lead in artificial intelligence technology.

4. Kroger-Albertsons merger faces legal challenge from FTC

The Federal Trade Commission's trial against the $25 billion Kroger-Albertsons merger began, with regulators arguing that the deal would harm consumers and workers by reducing competition in the grocery sector.

5. Uber fined $324 million by Dutch watchdog over data privacy violations

Uber was hit with a record fine by Dutch authorities for transferring European drivers' sensitive data to the U.S. without proper safeguards. The €290 million penalty underscores the importance of data protection compliance.

6. Canada imposes 100% tariffs on Chinese-made electric vehicles

In a move mirroring U.S. trade policies, Canada announced new tariffs on Chinese electric vehicles, along with a 25% levy on Chinese steel and aluminum. The tariffs are part of efforts to protect domestic manufacturers.

7. Oil prices surge as Middle East tensions threaten supply chains

Oil prices rose sharply, driven by increasing geopolitical risks in the Middle East and supply disruptions from Libya. The conflict between Israel and Hezbollah has led to concerns over broader regional instability affecting oil flows.

8. PDD Holdings stock drops 30% following weak Q2 results

PDD Holdings, the parent company of e-commerce platform Temu, saw its shares plummet after missing revenue expectations for Q2. The company is also grappling with increased competition and regulatory pressures in China.

9. Red Lobster to close 23 more restaurants amid bankruptcy

Red Lobster announced it will shutter 23 additional locations across the U.S. as part of its ongoing bankruptcy restructuring. The closures are expected to occur by the end of the week, adding to the chain’s recent struggles.

10. Investors expect Powell pivot to benefit regional banks

With the Federal Reserve likely to lower interest rates, investors are optimistic that the policy shift will provide much-needed relief to U.S. regional banks, many of which have been under pressure from rising rates and loan defaults.

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Today's insights are courtesy of Monogram, they are known for their autonomous robotic surgical systems. They just filed for FDA approval to market and commercialize their patented tech.

Learn More Here ➔