Tag: U.S.

Posted on

China’s exports and imports came in less than expected in September 2024 – missing targets

China exports and imports

China’s exports increased by 2.4% in September 2024 compared to the previous year when measured in U.S. dollars, and imports saw a rise of 0.3%, customs data showed Monday 14th October 2024

The figures fell short of expectations. China’s exports were predicted to rise by 6% year-on-year in September 2024, measured in U.S. dollars, as per reported analysts’ data. This increase would be less than the 8.7% rise seen in August 2024.

Imports were also projected to grow by 0.9% in September from the previous year, based on analysts’ data, which would be a slight uptick from the 0.5% growth in August 2024.

Exports have been a highlight for China’s economy amidst subdued consumer spending and a downturn in real estate.

According to reported analysis of the official data, China’s exports to the U.S., its biggest trading partner, went up by 2.2% in September year-on-year, while imports from the U.S. saw a 6.7% increase.

Posted on

U.S. consumer prices rose by 0.2% in September 2024 – higher than expected at 2.4%

U.S. CPI

Over the past year, the rate of U.S. price increases accelerated unexpectedly in September 2024, as policymakers considered their decision on interest rates, as indicated in a U.S. Labor Department report on Thursday 10th October 2024.

Sticky U.S. inflation

The consumer price index (CPI), which measures the cost of goods and services throughout the U.S. economy, rose by 0.2% for the month, resulting in an annual inflation rate of 2.4%. Both figures were 0.1% than ‘forecast’.

When food and energy are excluded, the core prices saw a 0.3% increase for the month, leading to an annual rate of 3.3%. These core figures were also 0.1% above the ‘forecast’.

The report from the Bureau of Labor Statistics noted that the majority of the inflation rise – over three quarters of the increase was due to a 0.4% surge in food prices and a 0.2% rise in shelter costs.

Posted on

The Fed says smaller rate cuts not bigger to come

Federal Reserve

Federal Reserve Chair Jerome Powell recently stated that the latest half-percent reduction in interest rates should not be interpreted as a sign that future measures will be equally as aggressive.

The Fed suggests that subsequent adjustments will likely be more ‘modest’.

In his address, the central bank’s chief highlighted their goal to balance curbing inflation with maintaining a robust labour market, basing future decisions on data insights.

‘Moving forward, should the economy evolve as widely expected, our policy stance will progressively adjust towards neutrality. Yet, we are not bound to a fixed course,‘ he clarified during in his statement. ‘Risks are two-way, and our resolutions will be determined one meeting at a time.‘

The Federal Reserve believe, as noted in a recent update, that they are just millimetres away from that ‘elusive’ economic soft landing.

Posted on

The U.S. modern economy is number one in the world by GDP

U.S. economy number one

The U.S. economy, often considered the largest globally, is characterised by a dynamic mix of sectors. It is propelled by strong industrial production and a vibrant service sector, offering a varied economic environment

The United States possesses a highly developed mixed economy. It stands as the world’s largest economy by nominal GDP and the second largest by purchasing power parity (PPP), following China. As of 2024, it holds the sixth highest per capita GDP (nominal) and the eighth highest per capita GDP (PPP) globally.

In 2023, the U.S. constituted 26% of the world’s economy in nominal terms and approximately 15.5% in PPP terms.

The U.S. dollar, the most utilised currency in international transactions, serves as the global reserve currency, supported by the extensive U.S. treasuries market, its pivotal role in the petrodollar system, and its connection to the eurodollar.

It is the official currency of several countries and the de facto currency in many others. Following World War II, the U.S. economy has seen consistent growth, maintained low unemployment and inflation rates, and experienced rapid technological advancements.

Manufacture

Manufacturing, traditionally fundamental, has transformed with technological advancements. While the automotive and aerospace industries continue to be important, there has been a significant shift toward advanced manufacturing, such as semiconductors and renewable technologies. This change mirrors the wider trend of innovation, which is synonymous with the U.S. economy.

Service

The service sector, which includes finance, healthcare, and information technology, is critical. The financial markets, with New York City at their core, are vital to global finance. Silicon Valley remains the hub of tech innovation, pushing the boundaries in artificial intelligence, cybersecurity, and financial technology.

Nonetheless, the U.S. economy faces challenges. Income disparity persists, a situation worsened by the COVID-19 pandemic, which exposed weaknesses in healthcare and social support systems. The pandemic hastened the shift to digital, underscoring the necessity for investments in digital infrastructure and education to close the digital gap.

Policy

Fiscal and monetary policies are key to navigating the economy. The Federal Reserve aims to manage inflation and unemployment through interest rate adjustments and quantitative easing. Government spending and tax policies are also instrumental in ensuring economic stability and expansion.

Future

Looking to the future, the emphasis on sustainability is increasing. Investment in green energy and eco-friendly practices are not only environmental mandates but also avenues for economic growth. As international competition grows, the U.S. economy’s capacity for innovation and adaptation will be vital.

Fundamentally, the U.S. economy is a multifaceted and dynamic system. Its robustness stems from its ability to innovate and adapt, despite facing systemic obstacles and shifts in the global landscape.

Posted on

Failed crypto firm FTX set to pay customer refunds

Crypto exchange desk workser

Creditors of the disgraced cryptocurrency exchange FTX are set to receive up to $16.5 billion (£12.6 billion) following a bankruptcy plan sanctioned in the U.S. on Monday

This settlement concludes a tumultuous period that began with the company’s bankruptcy in November 2022, which left millions of customers without access to their funds.

Last year, the exchange’s former chief, Sam Bankman-Fried, was found guilty of misappropriating customer funds before the collapse and was subsequently sentenced to 25 years in prison.

Under the terms of the agreement, former clients will be able to reclaim approximately 119% of the value held in their accounts at the time of the bankruptcy, as per FTX’s statement.

Creditors expect to receive their compensation within 60 days after the plan becomes operative, although the exact date remains to be determined.

Posted on

U.S. non-farm payrolls surged by 254,000 in September 2024

U.S. non-farm payroll data

In September 2024, the U.S. economy saw a significant increase in job additions, substantially surpassing expectations and contributing to a robust employment landscape as the unemployment rate declined, according to the U.S. Labor Department’s report issues Friday 4th October 2024.

U.S. Non-farm payroll numbers rose by 254,000 in September 2024, a jump from the revised figure of 159,000 in August and exceeding the forecast of 150,000.

The unemployment rate dropped to 4.1%, a decrease of 0.1 percentage point, while the household employment survey reported a substantial increase of 430,000 jobs.

Average hourly earnings grew by 0.4% for the month and saw a 4% rise compared to the previous year, outpacing the projected estimates.

U.S. Bureau of Labor Statistics

U.S. Bureau of Labor Statistics
Posted on

What is China’s equivalent to Nvidia?

AI microchips

Chinese firms are reportedly intensifying their efforts to develop a competitive alternative to Nvidia’s AI chips, as part of Beijing’s ongoing initiative to reduce its reliance on U.S. technology.

China faces several challenges that are impeding its technological progress, including U.S. export restrictions that limit domestic semiconductor production. The lack of technical expertise is also reported to be a problem.

Analysts have identified companies including Huawei as the principal competitors to Nvidia in China

China’s counterparts to Nvidia, such as Huawei, Alibaba, and Baidu, are actively developing AI chips to compete in the same market. Huawei’s HiSilicon division is known for its Ascend series of data centre processors.

Huawei’s HiSilicon division is known for its Ascend series of data centre processors, and Alibaba’s T-Head has produced the Hanguang 800 AI inference chip. Other significant players include Biren Technology and Cambricon Technologies.

Alibaba’s T-Head has developed the Hanguang 800 AI inference chip. Other significant players include Biren Technology and Cambricon Technologies.

These Chinese firms are intensifying their efforts to create alternatives to Nvidia’s AI-powering chips. This is a big part of Beijing’s broader initiative to reduce its reliance on U.S. technology.

Nvidia’s surge in growth is attributed to the demand from major cloud computing companies for its server products, which incorporate graphics processing units, or GPUs.

These GPUs are crucial for entities like OpenAI, the creator of ChatGPT, which requires substantial computational power to train extensive AI models on large datasets.

AI models are crucial for chatbots and other AI applications

Since 2022, the U.S. has limited the export of Nvidia’s top-tier chips to China, with further restrictions imposed last year.

The U.S. sanctions and Nvidia’s market dominance pose significant obstacles to China’s ambitions, particularly in the short term, according to analysts. The U.S. has curbed the export of Nvidia’s most sophisticated chips to China since 2022, with increased restrictions implemented last year.

China’s GPU designers rely on external manufacturers for chip production. Traditionally, this role was filled by Taiwan Semiconductor Manufacturing Co. (TSMC). However, due to U.S. restrictions, many Chinese firms are now unable to procure chips from TSMC.

As a result, they have shifted to using SMIC, China’s largest chipmaker, which is technologically several generations behind TSMC. This gap is partly due to Washington’s limitations on SMIC’s access to essential machinery from the Dutch company ASML, necessary for producing the most advanced chips.

Huawei is driving the development of more sophisticated chips for its smartphones and AI, which occupies a significant portion of SMIC’s capacity.

Nvidia has achieved success not only through its advanced semiconductors but also via its CUDA software platform. The system enables developers to build applications for Nvidia’s hardware. This has fostered an ecosystem around Nvidia’s designs, which will be challenging for competitors to emulate.

Huawei leading the pack for China

Huawei is at the forefront as a leading force in China for its Ascend series of data centre processors. The current generation, named Ascend 910B, is soon to be succeeded by the Ascend 910C. This new chip may come to rival Nvidia’s H100.

Posted on

U.S. Fed preferred inflation measure came in at 2.2% in August 2024

U.S. Core PCE inflation measure

In August 2024, U.S. inflation edged closer to the Federal Reserve’s target, potentially paving the way for future reductions in interest rates, according to a report from the U.S. Commerce Department released Friday 27th September 2024

The personal consumption expenditures price index (PCE), which is the Fed’s preferred gauge for assessing the cost of goods and services in the U.S. economy, increased by 0.1% for the month. This increment set the annual inflation rate at 2.2%.

Economists had anticipated a 0.1% monthly increase in the PCE inflation figure and a 2.3% rise from the previous year.

When food and energy are excluded, the core PCE, which rose by 0.1% in August 2024, showed a 2.7% increase from the same period last year.

Federal Reserve officials often give more weight to the core PCE as a more accurate indicator of long-term inflationary trends. The projections were 0.2% monthly and 2.7% annually.

Posted on

U.S. consumer confidence falls the most in three years

U.S. consumer

In September 2024, consumer sentiment plummeted, marking the most significant drop in over three years, driven by escalating concerns over employment and business conditions, according to a report by the Conference Board released on Tuesday 24th September 2024.

The consumer confidence index reportedly fell to 98.7 from 105.6 in August 2024, marking the largest one-month drop since August 2021. This was contrary to the forecast of 104 and a stark contrast to the 132.6 reading in February 2020, just before the Covid pandemic’s onset.

All five components surveyed by the organisation declined this month, with the most significant decrease observed in the age bracket of 35-54 with incomes under $50,000.

Concerning

“Consumer evaluations of the present business conditions have turned negative, and the outlook on the current labour market has further weakened. There is also a growing pessimism about future labour market conditions, business conditions, and income prospects,” the Conference Board’s chief economist reportedly commented.

This significant dip in the confidence index last occurred as inflation began its ascent to the highest point in over four decades.

Following the announcement, stocks experienced temporary declines, and Treasury yields decreased.

Posted on

U.S. cuts interest rate aggressively by 0.50% bringing the Fed rate range to 4.75% – 5.0%

U.S. interest rate

The Federal Open Market Committee (FOMC) has voted to reduce the interest rate by 0.50% after having maintained its benchmark rate within the range of 5.25% to 5.50% since July 2023

The previous rate was the highest seen for 23 years and remained unchanged even though the Fed’s favoured inflation gauge has decreased from 3.3% to 2.5%, and the unemployment rate has climbed from 3.5% to 4.2% during this period.

Following the interest rate cut today, 18th September 2024 of 0.50%, the new rate now stands at 4.75% to 5.0%.

Posted on

U.S. PPI wholesale prices rose 0.2% in August 2024

U.S. PPI data

In August 2024, wholesale prices saw an increase that was roughly in line with expectations, marking the final inflation data point before the Federal Reserve’s anticipated interest rate cut due on 18th September 2024

The Bureau of Labor Statistics announced on Thursday 12th September 2024 that the producer price index (PPI), which measures the prices received by producers for goods and services for final demand, increased by 0.2% for the month, matching the consensus estimate.

Excluding food and energy, the PPI experienced a 0.3% increase, slightly above the 0.2% consensus estimate. This core increase persisted even when trade services were removed from the calculation.

Posted on

The AI Race between China and the U.S.

AI development in China and U.S.

Artificial Intelligence (AI) has become a pivotal battleground in the technological race between China and the United States.

“AI is expected to become a crucial component of economic and military power in the near future,” Stanford University’s Artificial Intelligence Index Report 2023 stated.

Both countries are significantly investing in AI research and development, striving to achieve a leading role in this revolutionary sector. This post looks at the major figures in China’s AI scene, their progress, and their comparison with their American counterparts.

China’s AI Landscape

China’s AI aspirations are propelled by a number of significant technology firms, each forging their own AI models and applications.

Baidu: Often referred to as the ‘Google of China,’ Baidu leads in AI development. Its premier AI model, ERNIE (Enhanced Representation through Knowledge Integration), fuels the Ernie Bot, a chatbot aimed to compete with OpenAI’s ChatGPT. Baidu asserts that ERNIE 4.0 matches GPT-4’s capabilities, demonstrating sophisticated understanding and reasoning abilities.

Alibaba: Alibaba’s AI model, Tongyi Qianwen (commonly known as Qwen), is a comprehensive set of foundational models adept at a range of tasks, from generating content to solving mathematical problems. Select versions of Qwen are open-source, enabling developers to utilize and modify them for various uses. Alibaba has announced that Qwen models are in use by over 90,000 enterprise clients.

Tencent: The Hunyuan model from Tencent is a prominent component of China’s AI landscape. Offered through Tencent’s cloud computing division, Hunyuan is tailored to facilitate a broad spectrum of applications, encompassing natural language processing and computer vision.

Huawei: In spite of considerable obstacles stemming from U.S. sanctions, Huawei persists in AI innovation. The firm has created its own AI processors, like the Kunlun series, to diminish dependence on international technology. Huawei’s AI features are incorporated into a diverse array of products, including smartphones and cloud solutions.

Comparison to the U.S.

The U.S. continues to be a dominant force in AI, with leading companies such as OpenAI, Microsoft, Google, Anthropic and Meta spearheading advancements.

Generative AI: U.S. firms have advanced significantly in generative AI, with OpenAI’s GPT-4 and Google’s Gemini at the forefront. These models excel in creating text, images, and videos from user inputs. Although Chinese models like ERNIE and Qwen are strong contenders, the U.S. maintains a slight lead in capabilities and market penetration.

Semiconductor Design: The U.S. leads the semiconductor design industry, vital for AI progress. U.S. companies command an 85% global market share in chip design, crucial for AI model training and system operation. China’s dependence on imported semiconductors is a notable obstacle, but there are ongoing efforts to create homegrown solutions.

Research and Innovation: Both nations boast strong AI research sectors, yet the U.S. edges out slightly in generating state-of-the-art AI products. U.S. tech giants frequently introduce AI breakthroughs to the market, with Chinese firms quickly gaining ground.

Government Support: The Chinese government ardently backs AI advancement, enacting strategies to spur innovation and lessen foreign tech reliance. Such support has spurred China’s AI industry’s rapid expansion, positioning it as a strong rival to the U.S.

Conclusion

The competition in AI development between China and the U.S. is escalating, as both countries achieve significant breakthroughs. Although the U.S. maintains a marginal lead in some respects, China’s swift advancement and state backing indicate that the disparity might keep closing. The quest for AI dominance by these nations is set to influence the worldwide technological and innovative landscape profoundly.

As of September 2024, it is estimated that China’s AI development is approximately nine months behind that of the U.S.

Posted on

In August 2024 – U.S. consumer prices increased by 0.2% with core inflation exceeding expectations

U.S. CPI statistics

As anticipated in the U.S., prices rose in August 2024, while the annual inflation rate fell to its lowest point since February 2021, according to a Labor Department report on Wednesday 11th September 2024.

This development likely now paves the way for a Federal Reserve interest rate reduction next week but maybe by only 0.25% and not the 0.50% some pundits have predicted.

The consumer price index, which measures a wide array of goods and services costs throughout the U.S. economy, rose by 0.2% for the month, matching the consensus, as reported by the Bureau of Labor Statistics.

This increase brought the year-on-year inflation rate to 2.5%, a decrease of 0.4 percentage points from July 2024 and slightly below the 2.6% prediction.

Nevertheless, the core CPI, which omits the more fluctuating food and energy prices, saw a 0.3% rise for the month, just above the 0.2% projection. The annual core inflation rate stood at 3.2%, consistent with expectations.

Data: U.S. Bureau of Labor Statistics
Posted on

Google’s advertising business goes on trial

Google

The U.S. government is targeting the heart of Google’s vast wealth – its highly profitable monopolising advertising technology business

A trial scheduled to begin on Monday 9th September 2024 will scrutinise the Department of Justice’s (DoJ) claims that Alphabet, the parent company of Google, is unlawfully sustaining a monopoly in the marketplace.

In the previous year, the firm amassed over $200 billion (£152 billion) through the placement and sale of online advertisements.

Alphabet attributes its success to the ‘effectiveness’ of its business. Conversely, prosecutors contend that the company has leveraged its market control to stifle competition.

The legal action, launched by the Department of Justice (DoJ) and several states in 2023, charges Google with dominating the digital advertising market and employing its influence to obstruct innovation and competition.

Google asserts that it is simply one of numerous companies that arrange digital advertisement placements for consumers.

The corporation argues that the digital advertising industry is increasingly competitive, citing the growing advertising revenues of entities like Apple, Amazon, and TikTok as proof, as mentioned in a blog post responding to the DoJ’s lawsuit in 2023.

The contentions will be laid out before the U.S. District Judge who is expected to deliver a verdict.

This trial comes on the heels of a notable decision in a separate antitrust lawsuit against Google by the Justice Department last month. Judge Amit Mehta ruled that Google had illegally stifled competition in its online search services.

He reportedly stated that, “Google is a monopolist and has acted as such to maintain its monopoly.”

Alphabet one year chart

Alphabet one year chart
Posted on

Does the stock market reflect the state of the U.S. economy?

Stock market health monitor

The stock market is often seen as a barometer of economic health, but its relationship with the broader U.S. economy is more nuanced than it might appear.

Although there are links between the two, they do not always correlate. The intricacies of this relationship and its implications for investors and the general public are multifaceted.

The stock market – A snapshot of investor sentiment

The stock market is largely a reflection of investor sentiment and their expectations for future economic performance. When investors feel optimistic, stock prices generally increase. On the other hand, when they are pessimistic, stock prices are likely to decrease. Because the market is driven by sentiment, it can react to factors that don’t immediately affect the real economy, like geopolitical events, interest rate changes, or corporate earnings announcements.

Economic indicators: The real economy

The well-being of the U.S. economy is often assessed using various indicators such as Gross Domestic Product (GDP) growth, unemployment rates, consumer spending, and inflation. These metrics offer a broader perspective on the economic climate. For example, an expanding GDP coupled with low unemployment usually indicates a robust economy, despite any fluctuations in the stock market.

Divergence between the stock market and the economy

Occasionally, the stock market and the economy may move in different directions. For instance, during the COVID-19 pandemic, the stock market swiftly recovered from an initial downturn due to extraordinary fiscal and monetary stimulus measures. In contrast, the wider economy’s recovery was more protracted, marked by persistent high unemployment and substantial disruptions across numerous industries.

Likewise, the stock market might fall even amidst positive economic indicators. This occurs when investors foresee impending difficulties, such as possible increases in interest rates or geopolitical conflicts, that could affect corporate earnings.

Short-term vs. long-term perspectives

The stock market frequently responds to short-term factors and investor behaviours, such as speculation and market sentiment, leading to volatility that may not align with the underlying economic fundamentals. Conversely, economic indicators generally offer a more long-term perspective on the economy’s health.

The broader impact of the stock market

Although the stock market’s performance can influence the economy via wealth effects and corporate investments, it is not the only indicator of economic vitality. The performance of the stock market is significant to many U.S. citizens, especially those with investments through retirement plans.

However, the real economy, as measured by employment, production, and consumption, often has a more direct impact on people’s daily lives.

Conclusion

In conclusion, although the stock market is linked to the U.S. economy, they do not always move in tandem. The stock market reflects investor sentiment and anticipations for the future, yet it may not fully represent the present economic conditions.

Hence, for a thorough assessment of economic health, it is crucial to evaluate various economic indicators in addition to the performance of the stock market.

Posted on

U.S. introduces new microchip-related export controls

U.S. chip rules

The Biden administration is reportedly implementing new export controls on essential technologies, such as quantum computing and semiconductor materials, in response to China’s progress in the global chip market

These controls encompass quantum computers and their components, sophisticated chipmaking tools, semiconductor technologies, certain metal and metal alloy components and software, and high-bandwidth chips, which are vital for AI applications.

While the U.S. intensifies its measures to curb China’s expansion, there is noticeable hesitancy within the global industry.

The U.S. Department of Commerce issued new regulations on Friday, 6th September 2024, encompassing quantum computers and their components, sophisticated chipmaking tools, certain metal and metal alloy components and software, as well as high-bandwidth chips, which are vital for AI applications.

See report details here

Posted on

Is the ‘eagerly anticipated’ Fed interest rate cut (due in September 2024) – too little too late?

Federal Reserve

Is the U.S. economy already weaker than the headline data suggests and should the U.S. Federal Reserve already be easing?

In the U.S. recent data (Friday 30th August 2024) showed the personal consumption expenditures (PCE) price index, the Federal Reserve’s favored measure of inflation, ticked up 0.2% last month, as expected. The data seems to back a smaller rate cut.

The question of whether the economy is weaker than headline data suggests and if the U.S. Federal Reserve should already be easing is complex.

The gross domestic product (GDP) increased at an annual rate of 3% in Q2 of 2024, which is a positive indicator. However, the U.S. current-account deficit widened, and personal income and outlays show mixed signals with a slight increase in personal income but a higher increase in personal outlays.

Inflation remains above the Federal Reserve’s 2% target but well below the pandemic-era peak. These factors suggest that while there are positive aspects to the U.S. economy, there are also challenges that may warrant caution from the Federal Reserve.

Is the market too focused on forecasting the size of any possible upcoming cut? “The question no one has asked yet is why is the policy rate is still at 5.5% when inflation is down to almost 2.5%? It would most likely be an error to do a ‘bigger’ rate cut in this kind of environment with all the uncertainty that the U.S. economy is facing.

Jobs data trends are also an important factor and play a major role in decision making. Company performance and future performance predictions are critical to help judge policy direction.

Decisions on monetary policy easing would be based on a comprehensive analysis of all economic indicators and trends.

If the FED go BIG on a rate cut some say it could be very dangerous and spook the markets.

Posted on

U.S. AI Safety Institute to evaluate OpenAI and Anthropic new AI models before release to the general public

U.S. AI Safety Inspection

On Thursday 29th August 2024, the U.S. AI Safety Institute announced a testing and evaluation agreement with OpenAI and Anthropic

This agreement reportedly grants the institute access to significant new AI models from each company before and after their public release.

Recently, several AI developers and researchers have voiced concerns regarding safety and ethics within the growing profit-driven AI industry.

Posted on

What evidence is there that the U.S. stock market is overvalued right now?

U.S. overvalued stocks

High Price-to-Earnings (P/E) ratio

The P/E ratio of the market is a common measure of valuation. Currently, the P/E ratio is significantly higher than historical averages, indicating that stocks are priced much higher relative to their earnings.

Rapid price increases without corresponding earnings growth

When stock prices rise rapidly without a corresponding increase in earnings, it often signals overvaluation. This has been observed recently, especially with some of the major tech stocks.

Comparison to historical market tops

The current market valuations are almost as high as they were at the peak in January 2022, which was followed by a significant correction.

Buffet valuation metric

Metrics like the Buffett Indicator (market capitalisation to GDP ratio) and Tobin’s Q (market value of assets divided by replacement cost) also suggest that the market is overvalued.

While these indicators point towards overvaluation, it’s important to note that markets can remain overvalued for extended periods, and other factors like strong earnings growth can sustain high valuations for some time

U.S. stock market could be overvalued by as much as 68%

The U.S. stock market, according to some analysts suggests that the current market appears to be overvalued by around 68%.

By comparison, at the peak of the Dot-com bubble, on 24th March 2000, the market was 89.5% overvalued. When the market bottomed out 2.5 years later, it had dropped around 50% from its previous all-time high and was undervalued by nearly 21%.

The fact that the market currently appears overvalued does not necessarily mean it will correct any time soon. The forces pulling the market toward the long-run equilibrium are relatively weak and allow the market to stay over or undervalued for extended periods of time.

From 1954 to 1970, the market stayed continuously overvalued for over some 15 years, and from 1973 until 1987, it stayed undervalued for about 14 years.

The analysis clearly suggests that U.S. stocks are overvalued – but that doesn’t necessarily mean a downturn any time soon – but it will, in time, adjust.

Posted on

Dow Jones hits new record high

The Dow Jones Industrial Average (DJIA) reached a new record high on Monday 26th August 2024, closing at 41240. 

Investors have responded positively to the Federal Reserve’s recent indications that interest rate cuts are highly probable to commence in September 2024.

Market dynamics and sentiment

The rise of the DJIA was propelled by advances in sectors like materials, utilities, and energy. Conversely, the broader market exhibited mixed outcomes. The S&P 500 declined by 0.3%, and the Nasdaq Composite dropped by 0.8%, contrasting with the Dow’s notable performance. This disparity is largely due to the lagging of technology stocks, especially with significant drops in firms such as Nvidia and Tesla.

Federal Reserve

Federal Reserve Chair Jerome Powell’s recent address at the Jackson Hole Economic Symposium was pivotal in bolstering investor confidence. Powell’s remarks indicated that the Fed is ready to cut interest rates, which many investors believe will foster economic growth and stabilise the markets. The expectation of rate cuts has played a significant role in the recent market rally, with predictions of potential reductions up to 1% by the end of 2024.

Dow Jones one day chart at record high

Dow Jones 1 day chart

Despite varied performances across sectors, the Dow reaching a new high signals a wider optimism in the market. As the year unfolds, the dynamics among Federal Reserve policies, corporate earnings, and economic indicators will continue to influence market directions.

Posted on

U.S. jobs data revision creates economic concern and political argument

U.S> jobs data revision

Job growth in the US last year was weaker than previously believed, according to a statement from the Labor Department on Wednesday 21st August 2024.

This revelation has intensified the ongoing debate regarding the health of the U.S. economy. The department’s updated figures indicate that there were approximately 818,000 fewer jobs added over the 12 months leading up to March than initially estimated.

This preliminary revision suggests a 30% decrease in the total number of jobs created during that period, marking the most significant adjustment since 2009.

The revised data points to an average monthly job increase of about 174,000, a reduction from the previously estimated 240,000.

Downward revisions affected most sectors, including information, media, technology, retail, manufacturing, and the broad category of professional and business services.

Analysis by Oxford Economics noted that this indicates the job growth for the period relied more heavily on government and education/healthcare sectors than previously understood.

Despite the revisions, hiring remained robust, albeit not at levels sufficient to match the growth of the working-age population.

The U.S. Labor Department issues monthly job creation estimates based on employer surveys and regularly updates these figures as more data becomes available, with an annual reset at the beginning of each year.

The report from Wednesday offered a glimpse into this process, incorporating data from county-level unemployment insurance tax records. This year’s revision is notably larger than those of previous years.

The Biden administration has highlighted strong job growth as evidence that its policies have positioned the U.S. as the world’s leading economy post-pandemic.

However, Republicans have used the latest figures to contend that the Democrats have misled the public about the economic situation. The Republican Party took to social media to announce: “BREAKING: 818,000 jobs that the Biden-Harris administration claimed to have ‘created’ do not actually exist.”

Over the past year, the U.S. has consistently reported robust job growth, defying both economists’ expectations and public sentiment. These gains have been particularly surprising given the highest borrowing costs in a generation, which typically hinder economic growth.

The recent revisions have lent weight to the argument that the labour market is less stable than previously thought, as highlighted by the Republican response.

Analysts believe these new figures will reinforce the case for the U.S. Federal Reserve to lower interest rates at its upcoming September 2024 meeting, a move that is widely anticipated to prevent further weakening of the job market.

These revisions have not caused widespread concern

Despite earlier economic anxieties this month, financial markets have largely absorbed the latest data without significant turmoil.

But that doesn’t mean there will be zero fallout – turmoil may follow. The data believed to be correct is incorrect – so, can we believe the data? Are there cracks appearing in the U.S labour market?

This data helped the U.S. economy – but it wasn’t right?

Posted on

All roads lead to Fed rate cut as minutes point to ‘likely’ September 2024 reduction

Fed prediction

No surprise here then as the Fed have been signalling a cut for some time now

The Fed summary stated: “The vast majority” of participants at the July 30-31 meeting “observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting.”

Markets have fully factored in a rate cut for September, marking the first such move since the initial emergency reductions during the early stages of the Covid crisis.

See more about Fed rate cut signals here

Posted on

U.S. stocks extend gains as S&P 500 and Nasdaq post eighth positive day

U.S. stocks

Highs and lows of one volatile week in the U.S. stock market

U.S. stocks climbed on Monday 19th August 2024, continuing the market’s rebound as investors prepared for the highly anticipated Federal Reserve symposium at Jackson Hole later in the week.

The S&P 500 ended the day at 5608

The S&P 500 ended the day at 5608

The Nasdaq Composite surged to finish at 17876

Both the S&P 500 and Nasdaq achieved their eighth consecutive day of gains, a record for 2024

The Dow Jones Industrial Average gained 236 points closing at 40896.

The day’s activity extended the recent rally, signalling another twist in what has been a volatile period for stocks. Last week saw the largest gains of the year for the three major indexes.

August began shakily with disappointing data igniting recession fears and intensifying concerns that the Federal Reserve was lagging in interest rate reductions. This led to a worldwide sell-off, culminating in the S&P 500’s worst day since 2022 on 5th August.

However, encouraging data last week appeared to calm the markets and raised hopes for a ‘soft landing’ of the economy. Positive figures in retail sales and initial jobless claims, along with robust earnings from Walmart, contributed to this optimism. Additionally, the annual inflation rate for July’s consumer price index reached its lowest point in over three years.

Posted on

U.S. and China reportedly reach agreement to cooperate on financial stability

U.S. & China flags

The U.S. and China recently signed an agreement to cooperate on financial stability. This agreement was part of a meeting of the U.S. – China Financial Working Group held in Shanghai. 

The discussions were reportedly described as professional, pragmatic, candid, and constructive.

The agreement includes measures for both countries to collaborate on capital markets, cross-border payments, and monetary policy. Representatives from various financial institutions and regulatory bodies from both nations participated in the meeting.

This cooperation aims to enhance financial stability and address potential financial risks more effectively. It’s a significant step towards fostering economic collaboration between the two largest economies in the world.

See full report here

Posted on

Comeback rally gains steam – Nasdaq, S&P 500 and Dow up

U.S. stocks rally

U.S. stocks surged on Thursday, buoyed by investor confidence bolstered by positive consumer and labour data, which alleviated fears of a recession.

The Dow Jones Industrial Average soared 554 points to close at 40563 – one year chart

The S&P 500 ended up 1.61% at 5,543.22, marking its sixth consecutive gain. The S&P 500 index has risen approximately 8% from its intraday low on 5th August 2024 – one year chart

The Nasdaq Composite escalated 2.34% to 17594 – one year chart

Positive U.S. economic data

Retail sales saw a 1% increase in July 2024, significantly exceeding the prediction of a 0.3% rise. Additionally, the number of weekly jobless claims dropped. This data provided a boost to investors and the broader market, which is recovering from an August downturn linked to worries over a slowing economy, sparked by a disappointing U.S. jobs report on 2nd August 2024.

With over a 3% increase this week, the S&P 500 is now just about 2% shy of its record high. All three major U.S. indexes are trading above their 2nd August closing levels, which preceded the global stock market plunge on 5th August.

Posted on

U.S. consumer spending improved in July 2024 as retail sales increased by 1% – better than forecast

U.S. retail

In July 2024, U.S. consumer spending exceeded expectations, and inflation pressures continued to ease, as reported by the U.S. Department of Commerce on Thursday 15th August 2024.

Retail sales in the U.S. rose by 1% for the month, with advanced figures adjusted for seasonality but not for inflation. This surpassed the 0.3% increase anticipated. The initially flat reported sales for June 2024 were revised to a 0.2% decrease.

Removing auto-related items, sales saw a 0.4% rise, which was substantially more favourable than the predicted 0.1%.

The number of weekly jobless claims fell to 227,000, a drop of 7,000 from the preceding week, and was below the forecasted 235,000.

Markets have responded positively to all this good news, and together with other favourable developments, it appears increasingly likely that the Federal Reserve will have no reason other than to cut rates in September 2024.