Should I wish that you have lots of Halloween candy left, or none at all? I never get Trick-or-Treaters (could be the witch costume I wear), and I have stopped stocking the candy bowl, but I miss it.
And sometimes I miss the much-simpler markets we had before AI started to suck all the oxygen out of the room. I have no doubt that AI is going to perform miracles before it comes for my job, and some companies are going to explode in value. But which AI agents will survive, and which companies? Anyway, the beginning of last week saw markets higher, based on AI optimism, while at the end of the week, markets fell because AI is very expensive, and the companies who are chasing it have not figured out how to successfully monetize it yet. It’s not just that AI is expensive (picture all those data centers) but also that it drains funds from some companies’ main businesses.
On Wednesday, Oracle predicted that its free cash flow will return to positive by the second half of 2028, and investors were happy. Alphabet announced earnings after the close the same day, which investors were less happy about. And even though Microsoft had a good quarter, stocks fell hard on Friday, and Alphabet lost 13%. Investors are worried that Google (whose parent company is Alphabet) will put all its money into AI and forget about its primary business which is selling ads.
Putting stock prices in perspective is Binance, the cryptocurrency exchange. Binance announced that it had been hacked and lost approximately $6.3 BILLION worth of customers’ crypto coins. Everyone assumes that it was the North Koreans who did the hacking, while it was Binance which did the not-quite-good-enough security planning. It is saying it will replace all of the stolen tokens.
Of course, last week was also Fed week, and the Federal Reserve Open Market Committee did exactly as everyone expected, which was nothing. The Fed-funds rate remains between 3.75% and 4.00%. But it was not a unanimous decision. Two of the governors favored a rate increase. And at this point it appears likely that we will see a rate increase at the December meeting. According to Fortune magazine, Fed Chair Kevin Warsh is more interested in managing U.S. debt costs than in bringing inflation down. The first requires lower rates, while the second requires higher. How fast will Warsh’s hair turn white?
As Kevin Warsh was probably the first to know, American federal debt just hit 100% of our GDP. This is the highest level since 1946 – the first year after World War II. Wars are expensive, as we now see with the war in Iran. The Pentagon has just informed Congress that this war has cost approximately $47.1 billion so far.
Speaking of inflation, we got a reading of the Personal Consumption Expenditures Index (PCE) last week, and it showed that inflation climbed 3.6% in the year ending in September. In August, the rate had been 3.4%. And our GDP grew at a 3.4% annualized rate in the third quarter. That’s a strong read which will do nothing to bring inflation down..
We’ve been talking every week about the housing market and how it is Baby Boomers, sitting in their houses, who are causing a shortage of available homes. But J.P. Morgan’s Chief Global Strategist David Kelly has a different take. He thinks that demand for housing is the more pressing problem. With his expectation that U.S. population growth will only be 800,000 per year for the next few years, the demand for housing will be 320,000 homes per year compared with more than one million annually in the beginning decades of this century. If Kelly is correct, house prices are due to slide.
As skilled workers disappear from our cities, the trades are turning to a not-so-surprising place to fill jobs: women. Currently female participation stands at 4.4% of construction, installation, and repair jobs. But that’s up from 2.9% from ten years ago. Good pay and good benefits are drawing women from traditional jobs, or from unemployment.
For the week ending on October 30th, the S&P 500 finished at 7,580, the Nasdaq Composite at 25,437, and the Dow Jones Industrials at 51,770. The yield on the ten-year Treasury Note closed at 4.929%. U.S. crude oil cost $99.35 per barrel – down after rumors that Iran peace talks are taking place again. N.Y. gold cost $3,897.11 per ounce, and one Euro was worth $1.12.
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) Yahoo Finance, Business Insider, Barron’s, The Wall Street Journal, Fortune, Axios, USA Today, the AP, Bloomberg, The New York Times, CNBC, and Reuters. If you have questions or comments, please call Diastole at 203.458.5220, or write to me, Liz Cook, at ecook@dwinvest.com.
Have you ever stayed at an Airbnb? I have not, because I never go anywhere. But people who have, say that departing is ridiculous because of the chore sheets they get from owners. Wash the dishes, do the laundry, touch up the entry-hall paint? All check. But Airbnb is changing what owners can require, since guests are already paying a cleaning fee. Yay, I guess. But don’t you dare forget the little mints for the pillows.