That dratted groundhog saw his shadow this morning and predicted six more weeks of winter. My garbage cans are already buried in drifts, and my car is frozen in the garage. But compared to lots of people’s problems, my complaints are picayune. Good luck to everyone who is in bad shape due to weather. One way or another, spring is coming.
What happened last week besides the cold and snow? The stock and bond markets gyrated but ended up mostly unchanged. Precious metals fell sharply on the news that the president had chosen Kevin Warsh as his next Federal Reserve Chairman. Warsh, who is expected to provide the president with his desired rate cuts, previously served on the Fed and was considered hawkish – meaning more likely to raise than lower rates, as well as supportive of a strong dollar. The president has already “joked” that he will sue Warsh if he doesn’t lower interest rates. Warsh still has to be confirmed by the Senate, and if so, he will begin serving in May when current Chairman Jerome Powell’s term ends. If Warsh moves to strengthen the dollar (by raising rates and luring Treasury buyers), the attraction of alternatives like bitcoin and metals wanes.
And speaking of the Fed, the Open Market Committee met last week and decided not to change rates. In his press conference, Powell asserted that the job market was stable, if slow, and inflation was stable albeit above target, and therefore no cut or hike was called for. It was a widely expected outcome.
But Amazon has just announced that it will eliminate 16,000 jobs. This follows their cut of 14,000 jobs back in October. UPS is eliminating 30,000 jobs this year, after cutting 48,000 jobs last year. The U.S. manufacturing sector lost 63,000 jobs last year. And U.S. businesses are hiring at one of the slowest rates since 2013, per Business Insider.
Have you heard that the federal government is in a partial shutdown? The portion of the recent spending bill that related to Homeland Security and ICE did not have the support in Congress to pass. So, the Senate passed a stop-gap bill, allowing Congress two weeks to figure out a way forward. The House still has to pass it, and then the real work begins.
For the first time, in 30 years, foreign central banks own more gold than U.S. Treasuries. That’s part of what was driving gold higher right until the Warsh announcement scared money out of gold. International investors are unsure how to handle investments in the U.S. with tariffs and threats of tariffs changing every day. The European Union and India just announced a huge free-trade deal that covers two billion people. The deal is the largest for each of those economies.
Also trapped in the new safe-haven sell off is bitcoin, which fell 11% in January and now sits below $76,000 – down from its high of $126,200 set in October. Bitcoin does not move in step with stocks or bonds, nor does it move with gold, so it’s a little hard to know what investors are buying it for. Or in this case, selling it for. Bitcoin may still be operating under the “greater fool” theory which says that everyone who invests in it is counting on a greater fool to buy it from them later.
China is facing a deflationary threat as its consumers buy less and producers are making too much. Less money in the supply chain means loss of jobs, which in turns means less consumer spending. China is staying afloat on its exports while domestic spending slows, but it doesn’t help that U.S.-imposed tariffs are hurting its exports to the U.S.A.
Health-care stocks were lower last week as the Trump administration proposed only a nominal increase in federal payments to private Medicare plans – much lower than the insurers expected. According to Axios, “The rate is critical for insurers, whose margins have been squeezed by rising heath care costs and increased patient utilization.” It’s a little hard to feel badly for health-care insurers, which make so much money while pinching pennies on their benefits, but it’s the (bad) system we have, and we need it to work.
In the if-we-did-it-the government-would prosecute-us department, Elon Musk is considering merging his SpaceX company with either his xAI company or with Tesla ahead of the expected SpaceX IPO due this year. Tesla and SpaceX have BOTH INVESTED $2B IN xAI ALREADY. You may remember that the downfall of Enron was based in its loaning/giving money between subsidiaries and claiming both halves of the transaction as an asset. Tesla’s shareholders should have something to say about this proposal, but they wouldn’t be Tesla shareholders unless they believed in Musk and his plans. One analyst from Yahoo Finance said. “I believe Tesla should no longer be viewed as an automaker…. In fact, I think it’s reasonable to assume that in under three years, Tesla will no longer make cars and SUVs for passengers.” Wow.
For the week ending on January 30th, the Standard & Poor’s 500 finished at 6,939, the Dow Jones Industrial Average at 48,892, and the Nasdaq Composite Index at 23,461. The yield on the ten-year Treasury Note closed at 4.241%. U.S. crude oil cost $61.85 per barrel, N.Y. gold cost $4,903.85 per ounce, and one Euro was worth $1.18.
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, The Wall Street Journal, Bloomberg, Morning Brew, Axios, 1440 Digest, TechCrunch, CNN, USA Today, The Bureau of Labor Statistics, The Washington Post, Fortune, Business Insider, Reuters, CNBC, and The AP. If you have questions, please call Diastole at 203.458.5220, or write to me, Liz Cook, at ecook@dwinvest.com. Thanks for reading!
According to USA Today, “A San Francisco-based start-up called GRU Space plans to open lunar lodgings by 2032.” So, if you are sorry you missed flying on Jeff Bezos’s Blue Origin rocket, here’s your next chance to take to space. “The structure would be inflatable and house four guests for several days; a second version would be built in later years with more permanent local materials.” Local materials? Like rocks and dust? You can book your moon vacation now with a $1 million deposit. Actual cost for the stay is estimated at $416,667 per night (per person, double occupancy). No thanks. Waiting for the snow to melt is adventure enough for me.