Weekly Update 01/16/2024
Welcome to 2024!
Big bank earnings: Looking ahead to Goldman Sachs, Morgan Stanley
Surprise? Nvidia Rockets Higher!
Story: The Recession That Never Was
Bitcoin Tumbles After ETF Launch
US EV Market Grows 29% in 4th Quarter, Tesla Holds 56% Market Share
Weekly Meetings:
NO MEETINGS THIS WEEK!
Message from the Executive Team:
Welcome back waves!
We are thrilled to welcome you all back for an invigorating spring semester. We’re excited to announce that we’ll be hosting a series of talks with industry expert speakers in the realm of finance and investments. These sessions are curated to provide you with profound insights and firsthand wisdom from the very best in the business. Moreover, we are committed to fostering a community where connections are cultivated not just within our walls, but also beyond. Look forward to networking and building lasting relationships with peers and industry leaders.
Warm regards,
The Executive Team
Wavepool Investment Club
Message from the Investment Fund Team:
Hey Waves!
Big news! We are so happy to announce that the investment fund has attained a $10,000 donation—something we’ve been chasing since the fund’s inception, 2 years ago! This donation represents trust, belief, and the big things our team can attain. We’re stoked to see the long-term growth of this extraordinary investment in our vision. Special thanks to Scott Fellows for attaining this donation!
Cheers,
The Investment Fund Team
—Market Madness—
Big bank earnings: Looking ahead to Goldman Sachs, Morgan Stanley
Tuesday’s biggest earnings will come from Goldman Sachs Group and Morgan Stanley. Wednesday’s highlights will include Charles Schwab and Prologis, followed by Fastenal, J.B. Hunt Transport Services, and Truist Financial on Thursday. Schlumberger, State Street, and Travelers close the week on Friday.
The economic data calendar includes Wednesday morning’s retail sales data for December from the Census Bureau. That afternoon, the Federal Reserve will release its first beige book of 2024. On Friday, the University of Michigan will publish its Consumer Sentiment survey for January.
Other data out this week will be focused on the U.S. housing market. The National Association of Home Builders releases the Housing Market Index for January on Wednesday, the Census Bureau reports new residential construction statistics for December on Thursday, and The National Association of Realtors reports existing-home sales for December on Friday.
Today, Tuesday 1/16
Goldman Sachs Group, Morgan Stanley, and PNC Financial Services Group report quarterly results.
Wednesday 1/17
Charles Schwab, Citizens Financial Group, Discover Financial Services, Kinder Morgan, Prologis, and U.S. Bancorp release earnings.
The Census Bureau reports retail sales data for December. Consensus estimate is for U.S. retail and food services sales to increase 0.4% month over month, after a 0.3% rise in November. Excluding autos, retail sales are expected to gain 0.2%, matching the November figure. Consumer spending held up remarkably well in 2023, with a projected 3.1% increase compared with 2022.
The National Association of Home Builders releases the Housing Market Index for January. Economists forecast a 38 reading, one point more than in December. Home builders’ sentiment remains dour and the HMI is nearly 20 points below its July 2023 peak, as high mortgage rates have chilled the housing market.
The Federal Reserve releases the beige book for the first of eight times this year. The report gathers anecdotal information on current economic conditions from the 12 regional Federal Reserve Banks.
Thursday 1/18
Fastenal, J.B. Hunt Transport Services, KeyCorp, M&T Bank, Northern Trust, PPG Industries, and Truist Financial announce quarterly results.
The Census Bureau reports new residential construction statistics for December. The consensus call is for a seasonally adjusted annual rate of 1.45 million privately-owned housing starts, 110,000 less than in November.
Friday 1/19
Comerica, Fifth Third Bancorp, Huntington Bancshares, Regions Financial, Schlumberger, State Street, and Travelers report earnings.
The University of Michigan releases its Consumer Sentiment survey for January. Economists forecast a 67.8 reading, about two points less than in December. Consumers’ expectations for the year ahead inflation was 3.1% in December, the lowest level since March of 2021.
The National Association of Realtors reports existing-home sales for December. Expectations are for a seasonally adjusted annual rate of 3.82 million homes sold, about even with the November data. Existing-home sales are near their lowest level in the past decade and now account for a lower percentage of all home sales than they have historically.
How A College Dropout Built A $2.9 Billion Real Estate Empire | Forbes
Why The Most Widely Anticipated Recession in History Never Came
In the final Federal Reserve press conference of 2023, Fed chair Jerome Powell took a victory lap of sorts.
Economists — including those on the Fed’s own staff — had widely expected a recession this year as the central bank raised interest rates to bring down persistently high inflation.
The economic downturn never came, though.
“A very high proportion of forecasters predicted very weak growth or a recession,” Powell said. “Not only did that not happen, we actually had a very strong year.”
While that’s good news for businesses, consumers, and investors alike, the unexpected turn of events raises a question: How did forecasters get it so wildly wrong this time?
The answer lies in the unprecedented nature of the COVID pandemic and the historic $5 trillion fiscal stimulus the US government pumped into the economy in response, economists told Yahoo Finance in interviews.
“It’s been a tremendous challenge,” Deutsche Bank chief US economist Matthew Luzzetti said. “The nature of forecasting is that often you look back to history, either through your models, or through looking for historical parallels, and [try] to gauge how similar or different are things to the past and get historical average responses. … And when you don’t have an analogous period to look back to, it makes things incredibly difficult.”
The consumer spending surprise
The 2023 economic story will be remembered as one of a resilient US consumer as people opened their wallets more than economists had projected. That occurred largely because Americans entered the year with more money than many realized, backed by trillions of dollars sent into the economy during the pandemic.
This led to a massive increase in excess savings to an extent that is not normally seen around recessions, according to Luzzetti. This additional money in consumers’ wallets led to more spending than one would typically expect coming out of a recession, like the one that happened in the early stages of the pandemic in 2020.
Add to that the initial government estimate for savings was revised higher this year, and there’s a clear picture that consumers were simply coming from a stronger position in 2023 than many economists had modeled.
“Up until a few months ago, we thought households were going to run out of this excess liquidity by the end of this year,” Wells Fargo economist Shannon Seery said. “And then revisions of the data suggest that households have a bit more spending power in that capacity.”
These changes “made forecasting very challenging,” per Seery.
Households and businesses ‘insulated’ from rate increases
Economic teams at Wells Fargo, Deutsche Bank, Bank of America, EY, and Jefferies all recently told Yahoo Finance that they had expected higher interest rates to hit consumer wallets faster and more aggressively than they actually did.
Typically, a rising rate environment makes everything more expensive. It’s more costly for Americans to take out loans. Mortgage rates shoot higher. The cost of capital for businesses increases too. This means employers have to cut expenses in other areas like staffing in order to offset higher costs for borrowing.
U.S. EV Market Grows, Still Just 11% of Global EV Market
As the global automotive industry pivots towards a more sustainable future, the U.S. electric vehicle (EV) market has shown remarkable growth in 2023, a trend that analysts expect to continue in the coming years.
In 2023, U.S. EV sales saw a notable increase, reaching 1.6 million units, up from the 1.1 million sold in 2022. This uptrend is projected to persist into 2024, with sales forecasted to hit 1.9 million units, representing a significant 13% of the new-car market. Interestingly, this growth trajectory seems resilient, even in the face of stricter federal tax-credit rules.
Despite these positive national trends, the U.S. still trails behind on the global stage, accounting for just 11% of worldwide EV sales. The global market is anticipated to grow by 21% in 2024, with a staggering 70% of these sales expected to be all-electric vehicles.
China has been the primary driver of this global surge, with its EV sales jumping from 6.1 million in 2022 to 8.2 million in 2023. Meanwhile, Europe’s growth, though still positive, is predicted to be more modest. The variation in EV adoption across different economies highlights a diverse landscape of growth and opportunities.
Back in the U.S., the rising trend in EV sales is an encouraging sign of a slow but steady shift towards electrification. However, the increase in EV sales comes alongside the growth of the gasoline fleet, underscoring the complex and evolving nature of the automotive market.
As we move into 2024 and beyond, it will be interesting to see how the U.S. positions itself in this global shift towards electric vehicles and how it navigates the challenges and opportunities that lie ahead in the electrified era of transportation.
—CRYPTO CULTURE—
Why the launch of bitcoin ETFs threatens the market for gold
Gold has historically been an investor’s best friend when it comes to a store of value, but a certain digital currency is looking to elbow its way into the haven-asset mix with this week’s launch of spot bitcoin exchange-traded funds.
“The relevance of gold GC00, 0.05% GCG24, 0.05% and gold ETFs has already been threatened by bitcoin BTCUSD, -0.07%, ” said Alex Pickard, vice president of research at investment firm Research Affiliates. “The emergence of bitcoin ETFs threatens the market for gold as an investment further.”
The U.S. Securities and Exchange Commission on Wednesday approved the launch of 11 bitcoin exchange-traded funds, some of which began trading Thursday.
Read: Bitcoin ETFs finally approved after a chaotic, ‘embarrassing’ 24 hours for SEC
“History will remember” Jan. 10 and 11 — the day the spot bitcoin ETFs were approved and the day they started trading, said Yemu Xu, co-founder of crypto tokens and blockchain platforms ARPA and Bella Protocol. “Those dates mark the beginning of the digital era.”
Trading volume is already high
As of Jan. 11, pension funds, endowment funds, the general public and others could “freely and legally buy, hold and trade bitcoin and bitcoin-related assets with an affordable transaction cost,” said Xu, who is a former analyst for Fidelity.
The bitcoin ETFs are a sign that a new asset class is “emerging into the public’s investable category in a compliant way, just like what gold did about 20 years ago,” he told MarketWatch.
However, it will probably take much less time for their trading volume to reach where gold ETFs are today, Xu said, as high volatility in bitcoin ETFs are likely to “attract speculative capital, which will bring active trading activities.”
On Thursday, the trading volume for the world’s largest gold-backed ETF, SPDR Gold Shares GLD, was 6.83 million, with the value of those shares at $1.28 billion, according to Dow Jones Market Data. That same day, over $4.6 billion worth of shares traded among the 11 spot bitcoin ETFs.