Stock prices fell last week, led by the tech-heavy NASDAQ. Sellers were listening to Goldman Sachs’ CEO David Solomon, who said, “It’s likely there’ll be a 10% to 20% drawdown in equity markets sometime in the next 12 to 24 months.” It’s pretty safe to say that at ANY TIME, but never popular. Still, sometimes a pullback is just the thing to consolidate gains. Kind of like when you’re on a diet and you plateau for a while, but in reverse. Kind of.
Last Wednesday, the Supreme Court heard the case of the Trump tariffs. Justices seemed skeptical of the authority the administration was claiming to impose “regulatory” tariffs as an adjunct to foreign policy. But we may have months to wait to hear what SCOTUS says. Kind of like waiting for Santa, but instead you’re just a Supreme Court nerd and you don’t know when Santa is supposed to come. Kind of.
There are lots of reasons for stock markets to move, and not all of them make sense at the time. For instance, more than 80% of the 446 Standard & Poor’s 500 companies that have reported, beat their third quarter results estimates, but the S&P has risen only 1.3% over the past month. Concerns about the government shutdown, the absence of SNAP benefits, chaos at U.S. airports, and the inability of grossly overpriced companies to monetize their AI efforts all worked against optimism last week.
Markets also responded to Federal Reserve Chairman Jerome Powell’s remarks in a late October press conference. He said, “What do you do if you’re driving in a fog? You slow down.” He was of course referring to the lack of current data due to the federal government shut down, and how that is hindering the Fed’s deliberations going into its final meeting of the year in December. In fact, we should have received an October jobs report on Friday, but of course it was not forthcoming. That’s now two months that we are behind.
According to an MIT analysis, cited by Axios, 95% of the companies studied by MIT got a zero return on their AI investments. If you’re like me, you find AI encroaching everywhere, and yet no one is asking you to pay for the help. Bad business model.
On Thursday, Tesla shareholders voted to approve Elon Musk’s trillion-dollar bonus plan by more than three to one. In actuality, the package is worth closer to $900 million, not actually a trillion, but if Musk meets the milestones set out in the plan, he could end up with as much as 25% of Tesla stock. And while Tesla automobiles are losing the competition with Chinese EVs, Musk’s efforts to transform Tesla into a robotics and AI company could be the path to his (almost) trillion-dollar payday. Musk is also considering building factories to produce chips for Tesla projects – and not the tasty, crispy kind.
Warren Buffett of Berkshire Hathaway fame is getting ready to retire at the end of the year, but he still has important things to say. What he said last week was that stocks are overvalued, based on his “Buffett Indicator”, which shows that total market capitalization of all U.S. stocks is now twice the size of the economy, at about $72 trillion. Of course, stocks are valued in the marketplace based in part on expectations of how companies will perform in the future, but still, yikes.
Real estate is a sore spot in the economy. It’s harder than ever for first-time buyers to get a home, with prices still high and mortgage rates falling very very slowly. Only 21% of home buyers in the twelve months through June of this year were first-timers – down from an average of 38% going back to 1981, and almost 50% in August of 2019 (before the pandemic.)
Private sector job growth, according to payroll-processing giant ADP, was 42,000 in October. That’s the first time in months that the number was positive. But corporations announced layoffs of 153,000 during the same month. If we had government job numbers, we could analyze things better, but five paragraphs later, we still don’t.
Caught up in the terrible Westchester to New York City commute? Take a helicopter! It’s only $125 for the 12-minute ride from Manhattan to the Westchester County airport. That’s just $250 per day. No brainer!
The Senate voted last night to reopen the government with a 60 to 40 vote and the promise to vote on a proposal to extend ACA assistance in the near future. The measure still must pass the House and be signed by the President.
For the week ending on November 7th, the S&P 500 closed at 6,728, the Nasdaq Composite Index at 23,004, and the Dow Jones Industrials at 46,987. The yield on the ten-year Treasury Note was lower at 4.093%. U.S. crude oil cost $60.19 per barrel, N.Y. gold cost $4,045.20 per ounce, and one Euro was worth $1.16.
Elizabeth E. Cook
Partner, Diastole Wealth Management
News and information presented here was gathered from sources believed, but not guaranteed, to be reliable, including (but not limited to): Barron’s, Yahoo Finance, Axios, The Wall Street Journal, 1440 Digest, CNBC, The Economist, USA Today, Bloomberg, CNN, Business Insider, The Associated Press, and Morning Brew. If you have questions or comments, please call Diastole at 203.458.5220, or reply to this email to reach me, Liz Cook.
I always say that a million dollars is the cost of a really nice house, and a billion dollars is one thousand of those houses. But can we picture a trillion dollars? Much harder. According to Jerry Pacheco of KRWG in New Mexico, if you spent $40 per second, around the clock, it would take 289 days to spend one billion dollars. But it would take 792.5 YEARS to spend a trillion. Nice try, but I still can’t picture it.