I hope your team won the World Series, but I understand that given how many teams DIDN’T win, it’s unlikely. Sorry for your loss.
But if you were predicting that the Federal Reserve Open Market Committee (FOMC) would cut rates last week, you’re a winner! Only 99% of experts polled were expecting the cut, so that’s some rarefied company right there.
The most important thing that happened during Chairman Powell’s rate-cut press conference on Wednesday was that he affirmed strongly that a December rate cut was not guaranteed. And a review of the minutes of the FOMC revealed that two of the members had voted for no cut last week, while one had preferred a bigger cut. As JPow himself always says, “It’s like herding cats.” (He doesn’t really say that but would be forgiven if he did.) The Fed-funds rate is now at a three year low of 3.75%-4.00%.
Stocks just kept climbing last week, and last month, and for months before that. The Standard & Poor’s 500 and Dow Jones Industrials just finished their sixth winning months in a row, and the Nasdaq has been higher during the last seven months. It is said in financial circles (original author unknown) that bull markets climb a wall of worry. And there is plenty of worry to go around.
The government is still shut down, limiting the data that investors (and the FOMC) receive about the economy we’re in. SNAP benefits (food stamps) have been cut off for 42 million people, and while a judge has ordered emergency funds to be used to pay for SNAP, it hasn’t happened yet. It is also the time of year (known as Open Enrollment) when we are inundated with Medicare supplement policy ads – and health insurance costs for everybody are about to balloon. Also, air traffic controllers are working without pay. And calling in sick.
Big companies are continuing to lay off workers, including Amazon, which just announced that it was cutting 14,000 corporate jobs. Amazon is planning to spend more on the development of artificial intelligence products, although AI still doesn’t pay for the corporations that have pioneered it. UPS is laying off 48,000 workers just before the holiday delivery season – that’s going to hurt.
In a related story, law school applications are 73% higher than two years ago. As the Wall Street Journal says, “seeking a professional degree has long been an option for riding out a soft patch . . .[but] aspiring lawyers are among the most exposed to being replaced by AI.” Ouch.
While Elon Musk’s trillion-dollar Tesla compensation deal is up for a shareholder vote this week, Bank of America analysts took a look at Tesla, and determined that “well over half of the stock’s value lies in products that either don’t yet exist or don’t exist at scale.” (CNN) Tesla’s core automobile industry makes up only 12% of the company’s total value. Ouch again.
Meanwhile Nvidia, maker of AI chips, was the first stock to reach a $5 trillion market capitalization. Nvidia is not in the AI business itself, just in the AI-chip business. In other words, it isn’t panning for gold in California, it’s selling pans to the miners.
Affordability in housing is an ongoing concern, with rents and home prices high, and American families strapped for cash. More are turning to an old-fashioned idea: the adjustable-rate mortgage. In exchange for a mortgage rate just above 5%, borrowers are risking much higher rates after their ARM rolls over after 3-5 years. It’s a great choice for people who know they’ll be moving again shortly, but not such a great idea for people looking for their forever home. If their rate ends up much higher, it will likely be at just the same point when refinancing is probably not an option because of high rates.
As stocks rise, bonds are falling slightly – pushing their yields up. Bitcoin and gold have also fallen in value recently, probably as money flows into stocks.
For the week ending on October 31st, the S&P closed at 6,840, the Dow at 47,562, and the Nasdaq at 23,724. The yield on the ten-year Treasury Note finished at 4.101%. U.S. crude oil cost $60.88 per barrel (OPEC+ plus will increase production again in December, but will then wait and see.) N.Y. gold cost $3,931.00 per ounce, and one Euro was worth $1.15.
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, Business Insider, BusinessWeek, CNN, CNBC, The Economist, Axios, Bloomberg, USA Today, The Washington Post, Reuters, The Associated Press, Morning Brew, and The Hustle. If you have questions, please call us at 203.458.5220, or reply to this email to reach me, Liz Cook.
Finally, a way to purchase luxury goods at affordable prices! Hermes’ Birkin bags are the classic women’s handbags that cost up to $2 million when new. But you can now buy a “gently loved” version on Amazon. Price tag – slightly more than $23,000. Yay! I’ll work on that second mortgage now. Adjustable, of course.