Canadian Unemployment rises to 5.8%

 Firms within Canada are cutting down employees, which had caused Canadian unemployment to be the highest it has been within 22 months. While beating some expectations within job gains, the Canadian markets are seeing losses due to higher competition within financial services and real estate. 

Canada may also see higher unemployment rates than the USA due to most of their industry being seasonal. Those industries being mostly within lumber and farming. There may also be a bloated rate due to a large minority of Canada's population being in more remote areas that have less jobs than cities like Ontario. The government of Canada also has more relaxed immigration policies, so there is a larger influx if immigrants than there would typically be. 

https://www.bloomberg.com/news/articles/2023-12-01/canada-unemployment-rate-rises-to-5-8-job-gains-top-forecast

https://sustainablesociety.com/236-why-unemployment-persists/#:~:text=Canada's%20unemployment%20rate%20in%20Canada,match%20up%20with%20potential%20workers

Canada Squeaks by a Recession

    Earlier today, Canada released their Quarter Three report for their GDP. In the report, it was revealed that the nation narrowly squeezed by a recession when their GDP unexpectedly shrunk by 1.1%. Initially, it was reported that Canada's GDP had seen a 0.2% decline in Quarter Two, which would have currently put them into a recession. However, that number was later revised to a 1.4% growth. It is expected that their GDP will continue to grow at a slow rate while interest rates at at a relativity high level. This is to combat the high inflation felt around the world. 

    The good news is that interest rates are expected to be at their peak, due to the excess demand for the supply of money seeming to nearly be diminished. Within Quarter Three, Canada's economy saw a decrease in exports while also seeing a slower accumulation of inventory. However, it is slightly offset by an increase in government spending and a increase in investments. Particularly the housing market. 

Source:

https://www.reuters.com/markets/canadas-economy-shrinks-11-q3-growth-seen-october-2023-11-30/

Dutch's Economy deteriorates further in November

According to the CBS Business Cycle Tracer, the economic climate was more negative this month as CBS reports that ten out of thirteen indicators were performing below their long-term trend. 

Confidence

Dutch consumers were less negative than in the previous month. However, confidence was still far below the long-term average over the past two decades. Producers were also less negative than in October, with confidence remaining below the twenty-year average as well.

Using September's data, the numbers and percentages seem to be linear downward sloping.

In September, the total volume of goods exports was down by 4.8% year on year. Furthermore, households spent 1.9% less year on year adjusting for price changes. This led to fewer services and fewer goods being bought. The volume of investments in tangible fixed assets was also down by 1.6% year on year. This is mainly due to lower investments in aircraft and residential property while more was invested in passenger cars. The average daily output of the Dutch manufacturing industry was 10.3% lower than in September of last year. Output also contracted year on year in the preceding months of 2023, falling by 0.9%. 

On average over the past three months, the number of unemployed remained roughly the same, ending at 361 thousand in October.

Overall, the economy seems to be falling ever more consecutively over the years. 

Article: https://www.cbs.nl/en-gb/news/2023/48/economic-outlook-deteriorates-further-in-november

Are we headed towards recession or soft landing?

 After recent performance in the market investors believe that the economy may be headed towards a "soft landing" rather than a recession as previously imagined. The Fed still indicates that there is a 56% chance of recession, but this is down from 66% in August. Another indicator that points towards a recession is that the yield curve is still inverted. Some experts believe a recession is just being delayed. While inflation has dropped significantly it still remains much higher than the Fed hopes. The continuous rise in interest rates this year (leading to the highest level in 22 years) are another indicator experts believe still points towards a recession.

Unemployment rates are current at a historically low rate (3.8%) which is a lead indicator for experts to believe we could be headed towards a soft landing. Experts believe if the market can stay between decreasing inflation and a still growing economy than we have a real chance of the soft landing. Ultimately, we will have to see how the market plays out over the next month and heading into 2024.  

Duggan, Wayne. “Recession or Soft Landing: What’s next for the U.S. Economy?” Forbes, October 17, 2023. https://www.forbes.com/advisor/investing/is-a-recession-coming/#:~:text=GDP%20grew%20at%20an%20annual,there’s%20no%20recession%20in%20sight.

The Job Market and A Possible Recession Approaching

 Link to article: Here's where the jobs are for October 2023 — in one chart

CNBC released an article titled “Here’s Where the Jobs Are for October” which showed a distribution of newly added jobs from the previous month. 

The report stated that the labor market may be cooling off with many job sectors seeing little to no growth, or even negative growth. Healthcare and social assistance saw 77,000 added jobs to their sector. Another large sector in which many jobs were added was the private education sector, given that 89,0000 jobs were added to that group. 

However, given that many students are studying economics, finance, accounting, or some business-related degree in this course, financial activity jobs decreased by 2,000. Whereas, the professional business services sector added 15000 jobs. 

One positive thing to take away from the article was that government employment has now returned to its pre-pandemic level of employment. One negative takeaway is that many trucking workers are losing jobs and looking for work but are finding it very difficult to do so. 

As we know, when recessionary times come, employers lay off workers and begin hiring workers for lower wages than previously offered. Therefore, given the low amount of added jobs, an increase in workers being laid off, and seeing job markets decreasing, this may be an indicator of a recessionary period approaching. 

• Kiley Hardyman

Good Month for Stocks and Inflation - Interest rates set to drop early-mid 2024

The past month has been great for the stock market as the S&P 500(8.9%), NASDAQ(10.9%), and Dow Jones have all had their best month this year. Even lagging industries had very good months. Inflation has also hit a low since 2021. Consumer spending expenditure (CPE) grew 3% this month slowing down from 3.4% last month. Along with CPI, CPE is a leading indicator of inflation. This has led to the likeliness of cuts in the interest rates by June next year to increase 32% from last month. Making it a 92% chance currently. These go against last years forecasts of a possible recession, showing that the predictions are not always accurate. Therefore the predictions for next year are not guaranteed. 

https://finance.yahoo.com/news/stocks-post-best-month-since-2022-as-investors-look-ahead-to-rate-cuts-211309899.html

https://finance.yahoo.com/news/inflation-hits-lowest-level-since-2021-feds-preferred-gauge-shows-133230834.html

Lithium Mines in North Carolina Revived

  In terms of the future of our world, the EV industry must develop a competitive market to create a cleaner alternative to gas powered vehicles which damage the environment. In order to do this lithium must be in possession to create the batteries for cars. Usually China dominates this market and has a majority of mines worldwide. In this article it is talked about how North Carolina has lithium mines to offer and how they had been mainly dormant since the 1980’s. It is also talked about how the demand for lithium has rocketed in the EV market and since Joe Biden has made the initiative for more of an EV market the demand is high. China is usually the main supplier of lithium and for North Carolina to have the biggest deposit in the US means the US can now supply their own lithium instead of helping to fuel China’s economy. 

In terms of what this all means is that the US can compete with China in manufacturing things with lithium as they have their own supply. This also means that the market for EV’s will increase. Another effect that this will have is that there will be more jobs available for low income workers in North Carolina which will help to fuel the economy. 

https://www.nytimes.com/2023/11/30/business/electric-vehicle-north-carolina-lithium-mining.html

Federal Reserve’s preferred inflation gauge shows price pressures continuing to cool

 The preferred inflation gauge of the Federal Reserve was steady, indicating a reduction in price pressure. Consumer prices increased by 3% in October, down from 3.4% in September. This indicates that the benchmark rate will probably remain steady at the next Fed meeting. Grocery prices have increased slightly, although overall inflation is declining and is in line with the Fed's objectives. It is anticipated that high borrowing prices will impede US economic growth, tempering the 5.2% recorded. The drop in spending, especially when it comes to credit-based goods like furniture and cars, suggests that the Federal Reserve's rate hikes are having an impact on consumer behavior and may even result in price reductions. As indicated by a prominent official, the Fed, which has raised rates eleven times since March 2022, would contemplate lowering rates by spring if inflation keeps declining. 

The post-pandemic general price level is still much higher, despite a slowdown in inflation, which has an impact on Americans' economic prospects. Because the PCE index takes inflation-related changes in consumer purchasing behavior into account, the Fed supports it. It takes into consideration the switch from pricey national brands to more reasonably priced store brands.

https://apnews.com/article/inflation-prices-federal-reserve-rates-economy-spending-7556d8c45993a0fee9dedb3765407468

Is Fed ready to stave inflation?

Two members of the Federal Reserve Board of Governor's spoke to two separate audiences about the reduction of inflation. Both governors have been known to be "hawkish" in the interest of combatting raising inflation with higher rate hikes. The target goal of 2% is definitely manageable in the near future according to both governors. How the U.S. gets to 2% is where the two diverge into separates courses of action. 

Federal Reserve Board of Governor's member Christopher Waller is typically known for favoring higher rates to battle inflation. However, he sees a cut in rates from the central bank as long a price increases can also keep lowering. Meaning as long as the market sees a stable increase of production and consumption then the central bank will be incentivized by lower exceeding rates. 

Federal Reserve Board of Governor's member Michelle Bowman's take on the subject infers the fed will need to further raise rates in order to reach the 2% goal. Bowman urges the dangers in inflation and also does not trust the market or the workforce to continue Waller's thought processes. 

Christopher Waller hedged his statements on reaching their two percent goal by not estimating a time of achievement. Waller explains level of uncertainty the market presents and the belief that the FMOC did enough to achieve price stability. 

https://finance.yahoo.com/news/fed-governors-bowman-waller-clash-on-direction-of-interest-rates-155221195.html

Consumer Spending Decrease

The Wall Street Journal has just put out a statement that the October consumer spending numbers are down from where they were in September. The article says that this new number is the lowest it has been since May of this year. This decrease in spending is not shocking to me. It honestly is to be expected at this time of year. People are preparing for the holiday season and student loans are starting back during this time of the year. The average consumer is spending to spend more later on. This is normal for the average American to want to save only to spend more in the future. 

Some economists speculate that this dip in consumer spending and slowing inflation will lead to the Fed finally slowing the increases in interest rates. It will be interesting since even though these numbers are decreasing the overall economy is still growing. The new GDP numbers that came out support this statement. It will be interesting to see how the Fed responds to these new numbers. 

Article:

https://www.wsj.com/economy/consumers/inflation-consumer-spending-personal-income-october-2023-6a1ecb1d?mod=economy_lead_story 

The Strategical Changes in Private Equity

 As technology and interest rates are changing through the corporate world, private equity starts to contain more advantages than public market investing when it comes to large-scale companies. The predicted time ahead of us that will have slower economic growth, and higher inflation. Because of this higher interest rates which will serve as trouble for operators and investors. Even with a higher cost of capital, private equity should be able to create attractive values for investors, but to do this they will have to change their strategical strategy. In the past, private equity uses control-oriented ownership, which allows partners to have more of say in the plans of companies. By doing this they have generated 15% of internal rates of returns over the past 20 years. 

The different ways to buyout investment vary, but the drivers of return can be distinguished into four categories. These are revenue growth, margin expansion, changes in valuation, and financial structuring and leveraging. As time goes on private equity is still predicted to succeed, however, margin expansion and revenue growth are now more than ever supposed to be the main successes while financial structuring and leveraging are becoming less important. 

Focusing on boosting revenue, private equity strategies are to prioritize organic growth, for it is believed to increase value creations. To achieve this growth, it is needed to fix broken business models, and super charge healthy but slower growing business models. 

For margin expansion the key shift is going from growth to efficiency because capital cost has risen it is needed to rely on optimizing processes, enhancing supply chains and explaining the reality of new technological impacts to companies face to face, highlighting opportunistical advantages for the future. 

With private equity flipping the value creation playbook it will continue the trend of private equity having an advantage over the public market.

Sources: How private equity strategies are changing amid higher-for-longer rates (goldmansachs.com)

Economic Technology's Impact on the US in the Past 20 Years

    Economic technology, or financial technology, has dramatically changed the financial and business scene in the United States throughout the last 20 years. The widespread use of mobile financial apps, online banking, and digital payment systems has completely changed how people and businesses handle their money.

    The rise of massive online retailers like Amazon has influenced consumer behavior and has contributed to the demise of conventional storefronts. Additionally, traditional views of money and finance have been reshaped by the rise of cryptocurrencies and other technological currencies. 

    In addition to improving productivity, these advances have created rules and regulations that have forced a look of the current financial structures. The future of the US economy will be greatly influenced by how innovation and regulation interact as the country continues to adopt economic technologies.

Sources-

https://www.weforum.org/agenda/2020/11/heres-how-technology-has-changed-and-changed-us-over-the-past-20-years/

How much have the Hawaii fires have affected the economy?

    

       Studies have showed that the fires that ravaged Hawaii in August of this year has caused between $4 billion and $6 billion in losses. Losses show up not only in the land that has been destroyed but it also has an effect on the businesses that are still there. When it comes to the land itself, it is estimated that more than 2,170 acres, or 3.4 miles have been damaged due to these fires More than 100 people have been confirmed dead as a result of the catastrophe, while more than 1,000 remain unaccounted for.

    The state's economic losses using building-level damage assessments from multiple sources, in addition to damage maps from the Maui Emergency Management Agency. The estimate of Hawaii's economic losses does not factor in the blaze's effect on the state's gross domestic product; government spending on the response to the catastrophe or the social cost of the fires, as the daily lives of families and communities are forever changed.

        With the fires comes rebuild which will is estimated to cost around 5.5 billion dollars at the moment. Insurance is expected to pay up to 75% of this cost, but funds will still be needed to raise to complete the rebuild. The businesses however that were able to avoid the fire have been seeing a decline in sales due to the effect the fire has had on tourism. With tourism down businesses will need to find a way to survive until the rebuild is complete and tourism rises again. 

Sources: Hawaii's economic toll from wildfires is up to $6 billion, Moody's estimates - CBS News

What it will take for the Fed to start slashing interest rates in 2024

 It is likely that the Fed will start cutting aggressively in 2024 against a backdrop of a slowing economy and rising unemployment, resulting in lower inflation.

It is unlikely that central bank policymakers will cut simply for the sake of cutting. The Fed will need a compelling reason to start easing, and even then, rate decreases are likely to be gradual unless something breaks, forcing it into an aggressive response.

“The market keeps trying to front-run these rate cuts, only to be disappointed,” said Kathy Jones, chief fixed income strategist at Charles Schwab. “In a different cycle, when inflation hadn’t spiked so much, I think the Fed would have been cutting rates already. This is a very different cycle. There is going to be much more caution on their part.” 

According to the CME Group, Fed funds futures now anticipate five quarter-percentage-point rate cuts next year, one more than before the latest speeches. In anticipation of lower interest rates, stocks have rallied since then.

New AI Chip Announced by Amazon

 New AI Chip Announced by Amazon

In seeking to remain a big, if not the leading, name in the cloud service market, Amazon Web Services has revealed big news for the future. Amazon’s AWS cloud operations unit just announced brand new chips for clients to create, build, and operate AI applications on, as well as steps taken to offer customers access to various Nvidia’s latest chips. This latest Amazon Cloud will offer a variety of top-of-the-line GPUs from AI chipmaking giant Nvidia and highly sought-after products from different companies. 

Nvidia’s GPUs experienced significantly increased demand after the launch of OpenAI’s groundbreaking ChatGpt chatbot around a year ago. Following ChatGPT’s release, Nvidia started experiencing shortages due to companies seeking to implement similar generative AI technologies into their own products. Within this situation, Amazon saw an opportunity and has begun an approach that includes both allowing consumers access to Nvidia’s products and building its own chips. Amazon’s top competitor, Microsoft, similarly announced its inaugural chip, the Maia 100, and plans to give clients access to Nvidia H200 GPUs. 

Amazon made this announcement on Tuesday in Las Vegas at the Reinvent conference. AWS said it will now offer access to Nvidia’s new h200 AI GPUs, as well as its new Trainium2 AI chip and the general-purpose Graviton4 processor. Amazon’s Trainium2 chips are designed and built for training AI models, models similar to OpenAI’s ChatGPT. Amazon-backed OpenAI competitor Anthropic and startup Databricks intend to construct models utilizing the new Trainium2 chips, which reportedly boast four times improved performance. 

The Graviton4 processors are based on Arm systems and use less energy than chips from AMD or Intel. Graviton4 ensures 30% improved performance compared to previous Graviton3 chips, allowing for what AWS says is better output for the price. As a result of increasing inflation rates, organizations that wish to remain with AWS and, at the same time, lower cloud expenses will most likely move to Graviton. This movement is seen as Amazon reported over 50,000 AWS customers have quickly moved to using Graviton chips. 

Amazon opened up early access to customers who want to test Graviton4 virtual machine instances before they become commercially accessible within the upcoming months. Amazon is a highly competitive company that is constantly developing, and this announcement is another example of that. 

Mark Cuban is selling majority stake in the Dallas Mavericks to the Adelson family

 Mark Cuban, a multi billionaire recently announced he is selling his majority share in the Dallas Mavericks, hours after speculation coming that Cuban may be leaving shark tank soon. Cuban however will still own a stake in the team, and keep control of all basketball operations. 

Cuban will be selling his majority stake to the Adelson family. The Adelson's who are worth billions, reported they are selling $2 billion of LVS stock to free up money to buy majority ownership of the Mavericks. Along with cash on hand, and the proceeds form the sale of LVS stock, they will have enough money to buy the majority stake.

Cuban will remain governor of the team, and keep control of basketball operations even though he is selling majority stake. Cuban bought the Mavericks for $285 million in 2000, and even though the finalized amount of the sale is not published the Phoenix Suns, another basketball team, were recently sold for $4 billion. 

Cuban is known as one of the most exciting owners in all of the NBA, with a passion and love for the game of basketball. Cuban was also one of the most fined owners, racking up just over $4 million in fines. As well, Cuban has led the Mavericks too two finals appearances, including a finals win in 2011 over the Miami Heat.

The Fed's Impact On Stock Prices

 With The Fed continuing to increase interest rates it has shown an effect on stock prices. These companies, especially tech companies, run off credit. When interest rates increase, it slows investment and therefore slows the growth of these companies. In addition to companies slowing down borrowing, savers (or investors in finance terms) receive a higher rate of return through bonds. Many savers would rather receive the high rate of return on the bonds instead of taking chances on the stock market. With the large hikes in the federal funds rate, savers do not know when it will stop so many would rather put their money into something with a guaranteed return like a bond. 

Looking at the stock prices as of November 27th, the S&P 500 is down .19%. NASDAQ is also down .07%. These are not huge changes although when your portfolio gets to a high amount, these drops could be considered detrimental. Although there is not a direct link to the federal funds rate and the stock prices, there is a trend, specifically a negative relationship. In times like these when the yield on a 6 month treasury bond is 5.466%, many savers are stepping away from the stock market to get these guaranteed returns. 

CNBC. (n.d.). Check out 6 month US Treasury last Price’s stock price (US6M) in Real time. CNBC. https://www.cnbc.com/quotes/US6M 

How do rising interest rates affect the stock market?. U.S. Bank. (2022, February 16). https://www.usbank.com/investing/financial-perspectives/market-news/how-do-rising-interest-rates-affect-the-stock-market.html 

Yahoo! (n.d.). Yahoo Finance - Stock Market Live, quotes, Business & Finance News. Yahoo! Finance. https://finance.yahoo.com/ 

Investors Are Hungry for Risk- and Holding Record Cash Sums

 There is currently a record setting $5.7 Trillion in money market assets from both investors and institutions combined. This, combined with a very bullish month, the Nasdaq being up 11% and the S&P 500 up 8.7% respectively, is leaving analysts confused as to what the current trajectory of the market is. 

    On one hand, there are analysts who view the current growth as unsustainable, and view the market as rapidly approaching a contraction. Part of the reason that there is so much money in money market funds is because the current yields are currently above 5% for many of them. These analysists think these rates are due to tick down and subsequently cause people to move their money to other investments. On the other hand, there are analysts who the large supply of money in the market as a bullish signal.

Firms are also trying to stay competitive in the current money market as it is easy for people to decide to move their money elsewhere due to the high rates currently being paid. For example, the brokerage webull just began offering 5% to all funds that are being held within a brokerage account. Webull claims that there was a large inflow of cash into their brokerage over the last 6 months, and much of it began to be invested this month as the stock market turned around. 

Article: https://www.wsj.com/finance/stocks/investors-are-hungry-for-riskand-holding-record-cash-sums-6fe43275? imod=hp_lead_pos1

How do elections affect the stock market?

 Every four years, the U.S. presidential election can have a substantial impact on monetary and fiscal policy. The markets are significantly affected as well so how does this affect the common shareholder?

Over the past 90 years, it has been detected that both equity and bond markets had more stagnant performance in the year leading up to the election. For example, in a typical 12-month period there is generally a 8-8.5% return on the S&P 500, but in the year leading up to a presidential election, gains are only around 6% on average. Bond markets yield around 6.5% leading up to the election whereas 7.5% in a typical 12-month period.

It is important to pay close attention to specific market sectors in election years. Government healthcare policy seems subject to change depending on the party in power as well the energy sector.

There is reason to be wary about your portfolio, but returns are made over a a full business cycle rather than a single presidential term. The biggest advice is to pay attention to how certain policies enacted may affect your portfolio in a positive or negative way.