FTC Adopts Final Rule Banning Employers From Entering Non-Competes

 On April 23rd the FTC voted to approve the Non-Compete Clause rule, which will prohibit almost all non-compete clauses.  A non-compete is a contractual agreement between an employee and an employer that prevents the employee from working for or creating a competing business after they no longer work for the original employer. These agreements often mean employees cannot work in a similar position for another company, even when they were laid off rather than quitting. The agreements are used for all levels of employment, including fast food workers and retail workers. The ruling will prohibit such agreements and requiring existing ones to be rescinded. The FTC claims that the ruling will result in worker earnings increasing by up to $488 billion over the next decade along with the creation of greater than 8,500 businesses yearly. The reason the FTC issued this ruling is because noncompetes limit worker's opportunities and also block them from changing jobs, which ultimately drives down wages. Those against the ruling claim the FTC is not able to issue such a ruling under federal law about anticompetitive practices. They also claim noncompetes are key to protecting trade secrets. If the ruling stays in place, it will be interesting to see how it effects the unemployment rate, as this action would make the labor market even tighter than it already is. 

https://www.reuters.com/world/us/us-agency-poised-ban-worker-noncompete-agreements-2024-04-23/

How far could America’s stockmarket fall?

This article discusses a recent downturn in the U.S. stock market after a period of significant gains, specifically noting a major drop in Nvidia's share price despite no immediate bad news. It attributes the market's nervousness to high stock valuations and the realization that interest rates are likely to remain elevated, which makes stocks less attractive compared to government bonds. The cyclically adjusted price-earnings (CAPE) ratio is highlighted as being exceptionally high, similar to levels seen before previous market crashes, suggesting low expected future returns for stocks. The gap between the earnings yield of stocks and real yields on government bonds is currently narrow, indicating a lower risk premium, which historically suggests a potential for significant market corrections. Despite some optimism that earnings could grow, possibly fueled by advancements in artificial intelligence, the article suggests caution, as historically low earnings yields have tended to predict poor returns.

Source: Link

US first-quarter auto sales grew 5.1% despite high interest rates, but EV growth slows further

 https://apnews.com/article/auto-sales-strong-electric-vehicle-sales-slow-70a663fbc0719ebda7a4ca814c2827d2

In the first quarter of 2024, U.S. auto sales experienced a notable increase of 5.1% despite high interest rates, with nearly 3.8 million vehicles sold, corresponding to an annual sales rate of 15.4 million. This growth occurred as inventories approached pre-pandemic levels, leading automakers to reduce prices to stimulate demand. According to J.D. Power, the average sales price in March dropped by 3.6% from the previous year to $44,186, marking the largest decline recorded for the month. Automaker discounts were significantly higher, with lease deals becoming increasingly available.

However, the growth in electric vehicle (EV) sales slowed considerably, increasing only by 3.3% to reach nearly 270,000 vehicles for the quarter. This slowdown was a departure from the previous year's 47% growth, suggesting that the early enthusiasm among adopters concerned about environmental impacts might be plateauing as mainstream buyers remain hesitant due to concerns about EV range and insufficient charging infrastructure. Notably, Tesla's sales dipped by nearly 9% globally, attributed to factory adjustments and logistical issues. This broader trend underscores the challenges facing the automotive industry as it navigates high interest rates and shifting consumer preferences amidst ongoing economic uncertainty.

U.S. Growth Slowed in First Quarter, but Inflation Remained a Bug

https://www.nytimes.com/2024/04/25/business/economy/us-economy-gdp-growth.html

The NY Times article on the U.S. economy in the first quarter of 2024 highlights several critical aspects of economic performance. Notably, the U.S. gross domestic product (GDP), adjusted for inflation, grew at a 1.6% annual rate during this period, marking a significant slowdown from the 3.4% growth rate recorded at the end of 2023 and falling below forecasters' expectations. This slowdown was largely attributed to shifts in business inventories and international trade, which are known to fluctuate. However, underlying demand indicators remained strong, suggesting a resilient economy.

A key concern emerging from the quarter's data is the acceleration of inflation. Consumer prices increased at a 3.4% annual rate, a substantial rise from 1.8% in the previous quarter, with core inflation (excluding food and energy) climbing to 3.7%. This acceleration indicates that inflation remains a persistent issue, complicating the Federal Reserve's efforts to stabilize prices.

The persistent inflation is likely to influence the Fed's monetary policy, with expectations now leaning towards maintaining or even increasing interest rates rather than cutting them. This scenario suggests a challenging period ahead as the Fed navigates high inflation and its impact on economic stability and consumer spending, which remains robust particularly among higher income groups despite broader financial strains across the economy.

Consensys Sues SEC over Ethereum Blockchain Regulations

Consensys, a cyrpto software firm based in Fort Worth, Texas has sued the SEC amid an SEC investigation into Ethereum. Consensys was founded in October of 2014 and now carries a valuation of over $7 billion and base most of their revenue off of the Ethereum blockchain. Over the past year the SEC has demanded information from many various crypto companies over Ethereum and how it acts. The SEC is trying to determine if Ethereum can be classified as a security which would then allow the agency to regulate the crypto currency and the blockchain Ethereum trades in. SEC Chair Gary Gensler has claimed that many cryptocurrencies are acting as unregistered securities that should be under SEC regulation. Ethereum, one of the most popular and valuable cryptocurrencies, has yet to be defined as a security or not by the SEC. Consensys believes that the SEC will take action against them. Joseph Lubin, Co-founder of Consensys, wrote adamantly in this statement to the press, "They’ve made (The SEC) extensive requests for documents and testimony regarding our involvement with the code and the asset... Absent any indication from the SEC otherwise, we have no reason but to believe an action against Consensys regarding Ether to be imminent.” SEC regulation of Ethereum may prove to be an imminent threat to companies like Consensys, who act as regulators and builders of the asset themselves. Consensys has been issued a Wells Notice by the SEC, which essentially draws out all the charges that the SEC plans to bring upon Consensys for not registering Ethereum as a security.

Consensys is arguing in their suit against the SEC in Federal Court that Ethereum is not a security and should not be regulated by the agency. If the court rules alongside Consensys it could be a groundbreaking victory for Ethereum and other cryptocurrencies that aim to be separate from generic securities such as stocks and bonds. On the other hand if the court sides with the SEC this could be catastrophic for the blockchain and cryptocurrencies that have been acting as unregulated, but freely traded assets/currencies.

Cryptocurrencies and the blockchain present a problem for the SEC, it is hard to determine if each one can be considered a security, an asset, or a shady investment. Cryptocurrencies have brought on much wealth to the few who can understand it, or those who got lucky, but for most people it remains a mysterious market that is widely misunderstood. 

https://finance.yahoo.com/news/crypto-firm-sues-sec-fend-194957126.html 

Balancing Act: The Fed's Rate Cuts and Inflation Targets in a Turbulent Economy

As the world's largest money manager, BlackRock's CEO Larry Fink has a unique perspective on the global financial landscape, and his recent comments provide valuable insights into the challenging road ahead for the U.S. Federal Reserve.

According to Fink, despite the widespread expectation earlier this year of multiple interest rate cuts by the Fed, he believes only two cuts are likely to occur. This prediction comes at a time when inflation remains stubbornly high, with recent reports indicating a 3.5% annual rate, well above the Fed's target of 2%.

The idea that the Fed might lower rates in the face of such inflation seems counterintuitive to traditional economic strategies. Typically, rate cuts are used to stimulate spending and investment but can also exacerbate inflation. Fink's comments suggest a cautious approach, aiming to balance the need for economic stimulation with the imperative to control inflation.

What's particularly interesting is Fink's notion of accepting a "stable inflation" rate slightly higher than the target—between 2.8% to 3%. This represents a pragmatic approach to monetary policy, recognizing that the ideal of 2% might not be feasible in the current economic climate. Such an admission implies that the Fed might have to recalibrate its expectations, setting a new, realistic goal that factors in global economic pressures, supply chain issues, and ongoing geopolitical tensions.

Moreover, Fink's commentary came on the heels of BlackRock's report of a record $10.5 trillion in assets under management, underscoring the significant influence his views have on market movements and investor sentiments.

As we look ahead, it's clear that the Federal Reserve faces a delicate balancing act. It must navigate the choppy waters of rate cuts and inflation management, aiming to foster economic growth while keeping price increases in check. Investors and policymakers alike will need to remain nimble, ready to adapt to a financial landscape that continues to evolve rapidly.

This scenario is a perfect illustration of why it's crucial to stay informed and understand the broader economic implications of such decisions. As Fink suggests, sometimes settling for a less-than-ideal but stable inflation rate might be the victory we need in uncertain times. 

CNBC article

Beyoncé bounce: Western boot sales jump more than 20% week over week since ‘Cowboy Carter’ launch

 Since Beyoncé dropped her new album "Cowboy Carter", western boot sales have increased over 20%. Between the drop of this country album and Taylor Swift's tour, western American boots saw major boosts in sales. This inspired Louis Vuitton to reveal an American Western line during Paris Fashion week. Retailers and industries have already taken notice of the trend. Williams trading analysts Sam Poser upgraded his rating on Boot Barn and raised his price target $33 to $113, a 12% increase. This shows why it is important to keep up with trends, even when it comes to fashion and music, because the celebrities influence on the public can effect the economy in many different ways. 

EU-Mercosur: So Much More Than a Dead Deal

This article discusses the EU-Mercosur Trade Agreement, negotiations for which began in 1999 and reached an agreement in principle 20 years later. However, almost five years after the agreement, it remains in limbo, with experts questioning its viability. The agreement is significant, as the EU represents 450 million people and Mercosur over 280 million. The new free trade area would account for around 20% of the world's GDP. 

The article also highlights challenges, including the EU's bilateral trade deficit, which presents a new obstacle. It also discusses the role of China and other external powers in the deal's strategic significance. Many Europeans believe cultural ties will maintain relations, but geopolitical competition requires more. The article notes opposition within both blocs and the broader strategic interests, especially for the United States.

It discusses the challenges within Mercosur, including Argentina's internal politics, Brazil's stance, and other member states' interests, like Bolivia and Paraguay. The EU's internal dynamics, especially concerning agriculture and trade, are also analyzed. The article concludes that the EU's commitment to trade and international integration is tested by the Mercosur deal's fate. If it fails, it could signal broader challenges for the EU's trade agenda and global influence.

Source: https://www.csis.org/analysis/eu-mercosur-so-much-more-dead-deal 

Paris Olympics: Rental Challenges Ahead

 https://www.ft.com/content/e8493911-7f29-4119-9cf8-6bafad313075?accessToken=zwAAAY-cZ7WJkdPoSTkRfylBGdOc-GuvrTEwdQE.MEQCICakV3ePtjBnSGwMzjmvWbvLP8XcM-G_edDK1qSIxJ-RAiBj-bJfR6MngOWox5cb92e5mO8clR5-_-EhCitkqp7yfA&segmentId=7d4bcc2e-e664-92ba-62e3-5590579f1902

https://open.spotify.com/episode/3n9deMMMMMsitZfd5nAzMf?si=1580eccd4a144536

As the Paris Olympics draw near, locals looking to rent out their apartments are facing unexpected hurdles. With a flood of listings hitting the market, prices are dropping, and only a third of available Airbnb rentals have been booked so far for the Games. This surge of listings, along with many residents leaving the city during the event, means there are more apartments available than people looking to rent them, leaving many hosts struggling to find renters.

One such host is Stefania, a banker in Paris, who usually rents out her studio on Airbnb. Despite raising her prices for the Olympic period, she's had trouble finding renters. Many hosts like her are reconsidering their pricing strategies, as the average prices for booked accommodations during the Olympics are much lower than what they initially asked for. With hotels also competing for guests, securing bookings has become a real challenge for Airbnb hosts.

While the short-term rental market faces uncertainties, some experts see a bright side. Short-term rentals offer more flexibility compared to building new hotels, but the current surplus of rentals could lead to disappointment for many hosts. As prices continue to drop and competition heats up, hosts will need to be flexible and plan strategically to navigate these changes in the rental landscape.

Powell Dials Back Expectations on Rate Cuts

     Fed Chairman Jerome Powell spoke out last week for the first time since the new inflation numbers came in higher than expected, for the third month in a row. 

    While the Fed had previously planned to cut interest rates this summer, the stronger-than anticipated inflation indicators have shaken up those plans. This is a clear shift in the outlook of the Fed, as they would like to see these numbers go down before cutting interest rates.

    According to Jerome Powell, they would like more time to see the restrictive policies work. The current state of the workforce is strong, and inflation is slowly coming down. Powell also said that there would be no plans of raising interest rates. If the economy were to take a sharp downturn, Powell did say they would lower interest rates.

    Most of the financial sector took a hit after the PCE and CPE numbers came out for the month. While Jerome Powell addressed the public, the S&P 500 fell slightly, and 2-year Treasury note yields briefly hit over 5% for the first time since November.

Link: Fed Chair Jerome Powell Dials Back Expectations on Interest-Rate Cuts - WSJ

Mexico Economy to Keep Growing Steadily After June Presidential Vote: Reuters Poll

 

A Reuters poll indicates Mexico's economy is poised for steady growth post-June's presidential election, aligning with favorable performance in the United States, despite upcoming fiscal challenges for the incoming government. The current administration's increased spending ahead of the election has made for concerns about inflation among some central bank policymakers. Leading the electoral race is Claudia Sheinbaum, the ruling party candidate, who has advocated for measures such as minimum wage hikes and support for state-owned energy firms, although detailed fiscal plans remain pending. Analysts project a GDP growth of 2.2% for 2024 and 1.9% for 2025, with the main drivers being robust macroeconomic indicators in the U.S. and increased remittance flows. However, uncertainties persist, compounded by recent volatility in the local currency market and Mexico's regulatory framework, which restricts investments. Despite the fiscal deficit being the highest since 2015, plans to reduce it by almost half by 2025 are contingent on meeting current economic team targets, though questions remain about addressing Pemex's debt. Moreover, elevated inflation and the U.S. Federal Reserve's policy shifts have led some central bank members to advocate for a cautious approach, with expectations of further rate cuts throughout 2024 and 2025, all while constrained by Fed actions.

https://money.usnews.com/investing/news/articles/2024-04-22/mexico-economy-to-keep-growing-steadily-after-june-presidential-vote-reuters-poll