- Chakkani's Newsletter
- Posts
- Wall Street Whispers: Your Weekly Financial Briefing & Part 9 (final) of "Credit Alchemy" Series
Wall Street Whispers: Your Weekly Financial Briefing & Part 9 (final) of "Credit Alchemy" Series
Chakkani Newsletter
June 15, 2024
Hey Chakkani Fam! Welcome to Your Weekly Financial Briefing! We've got bite sized market moves, big tech bets, and whispers of change from all over the world. Grab a cup of joe (or your preferred drink) and let's dive:
Bears & Bulls: Markets Notes & Numbers
S&P 500: 5,431.60 -2.14 (-0.04%)
NASDAQ: 17,688.88 +21.32 (+0.12%)
Dow Jones: 38,589.16 -57.94 (-0.15%)
10-Year Treasury Yield: 4.221 (-0.019)
Bitcoin: $65,922.46 -752.08 (-1.13%)
All data as of last trading day's market close time read more…
Market Bites::
1. Market Highlights - June 14, 2024: The Nasdaq achieved its fifth consecutive record closing high, driven by gains in technology-related shares, including Adobe. Meanwhile, the S&P 500 and Dow closed slightly lower.
Despite ending its streak of record highs, the S&P 500 still posted a weekly gain of over 1%.
Notably, the S&P 500 technology sector reached another record high, rising 0.5%, while the communication services sector led gains with a 0.6% increase.
Adobe’s shares surged by 14.5% after the company raised its annual revenue forecast due to strong demand for its artificial intelligence-powered software.
Beneath the surface, some areas of the market showed weakness, according to Adam Sarhan, CEO of 50 Park Investments.
The Russell small-cap index declined by 1.6%, contributing to recent losses, and the S&P 500 industrials sector was down 1%.
Key indices: Dow Jones Industrial Average fell 0.15% to 38,589.16, S&P 500 lost 0.04% at 5,431.6, and Nasdaq Composite added 0.12% to 17,688.88.
Investors remain uncertain about the timing of potential interest rate cuts by the Federal Reserve.
Additional Insights:
Fed Bank of Chicago President Austan Goolsbee expressed relief over cooling inflation in May but emphasized the need for more consistent data before considering rate cuts.
Fed policymakers recently revised their projections, now anticipating only one rate cut this year instead of the previously expected three.
The University of Michigan’s Consumer Sentiment Index dropped to 65.6 in June, significantly below expectations.
Nvidia’s shares rose 1.8%, briefly surpassing Apple as the world’s second-most valuable company.
U.S. value stock funds experienced $2.6 billion in outflows, while U.S. growth stock funds attracted $1.8 billion during the week.
Trading volume on U.S. exchanges reached 10.12 billion shares, slightly below the 20-day average of 12.10 billion.
Declining issues outnumbered advancers on both the NYSE and Nasdaq.
Remember, financial markets are dynamic, and these trends may evolve rapidly. Stay informed! 📈📉💡
2. Tesla Shareholders Approve Elon Musk’s $56 Billion Pay Package: Tesla shareholders have given the green light to CEO Elon Musk’s $56 billion pay package. This approval demonstrates confidence in Musk’s leadership and provides an incentive for him to maintain focus on the company’s success.
Despite opposition from some institutional investors and proxy firms, the proposal passed, highlighting the strong support Musk enjoys from Tesla’s retail investor base.
Musk, known for his optimism, emphasized that he delivers results. However, legal battles persist. A Delaware court invalidated the pay package earlier this year, calling it “unfathomable.”
Fresh lawsuits may arise, considering that this pay package is the largest in U.S. corporate history. The Delaware judge will scrutinize the vote and assess whether the process was influenced by Musk.
Shareholders also approved moving Tesla’s legal home to Texas and re-elected board members Kimbal Musk (Elon’s brother) and James Murdoch (son of media mogul Rupert Murdoch).
The compensation approval serves as an endorsement of Musk’s tenure and acknowledges investors’ desire to safeguard Tesla’s future.
Remember, the situation may evolve further, so stay informed! 🚀🔍📈
3. U.S. Equity Funds Outflows: In the seven days leading up to June 12, U.S. equity funds experienced significant outflows.
Investors withdrew a net total of $21.93 billion, marking the largest weekly net disposal since mid-December 2022.
Despite the Federal Reserve keeping interest rates unchanged and moderating expectations for rate cuts this year, both the S&P 500 and Nasdaq Composite reached record closing highs for the third consecutive session.
Large-cap equity funds saw the most substantial outflow, with $14.94 billion leaving these funds—the largest weekly outflow since December 21, 2022.
Conversely, investors sought safety in U.S. bond funds and money market funds, adding $1.72 billion and $20 billion, respectively.
U.S. sectoral equity funds, particularly in the technology sector, enjoyed their second consecutive week of inflows, totaling about $1.85 billion.
U.S. bond funds also attracted inflows, with a net total of $4.82 billion, marking their second consecutive week of positive flows.
Remember, market dynamics can change rapidly, so staying informed is crucial! 📊📉📈
4. U.S. Home Sales Decline Amid High Mortgage Rates and Record Prices: U.S. home sales in May reached one of the lowest levels in the past decade, according to real estate brokerage Redfin.
Housing affordability is currently at an all-time low due to soaring median home prices and a 30-year fixed-mortgage rate hovering around 7%.
The number of homes available for sale remains approximately 25% below pre-pandemic levels.
Home sellers are holding onto properties with lower fixed mortgage rates, despite the current environment of higher rates.
In May, 407,959 homes were sold, marking the lowest sales figures for that month in the past decade.
The median home sale price rose to a record high of $439,716, reflecting a 1.6% month-over-month increase and a 5.1% year-over-year rise.
Although new listings increased by 0.3% month-over-month (seasonally adjusted), they were still about 20% below pre-pandemic levels (May 2019).
Key Insight:
Redfin’s Senior Economist, Elijah de la Campa, attributes sluggish sales to high homebuying costs, which make both buyers and sellers cautious. Bidding wars in some markets are contributing to record-high home prices.
Market Reaction:
Homebuilder stocks initially surged due to tighter supply, but the rally has since lost momentum.
Remember, market dynamics can change rapidly, so staying informed is crucial! 🏡📉📈
5. The Rise of External Allocations in Hedge Funds: Hedge funds, especially multimanager firms, are allocating significant capital to other hedge funds.
The industry has bifurcated into the “haves” (top-performing managers) and the “have-nots.”
The top 20 hedge-fund managers account for 83% of industry gains over the past three years.
Firms managing over $5 billion represent nearly 73% of hedge-fund assets.
Multimanager hedge funds, like Millennium and Point72, distribute capital across various investment teams.
Approximately 61% of multimanager firms now allocate some capital to external managers.
Historically, hedge-fund managers occasionally outsourced funds to others, but the practice has evolved.
Many multimanager firms use separately managed accounts to provide financing and control risk.
Seeding new hedge-fund firms allows multimanager firms to profit from talented portfolio managers.
Investors prefer compensation costs for outside managers over separate fees on top of multimanager fees.
Some hedge-fund firms, like Millennium, actively engage in external allocations.
Remember, market dynamics can change rapidly, so staying informed is crucial! 📊📉📈
6. How Amazon blew Alexa’s shot to dominate AI: The development and rollout of Amazon’s new generative AI-powered Alexa has faced significant challenges, according to former employees who worked on the project. Despite a promising demo in September 2023, the new Alexa has not yet been fully launched, and the existing Alexa voice remains unchanged on the half-a-billion devices sold globally. Here are some key points from their insights:
Demo vs. Reality:
The September 2023 demo showcased a more natural and conversational voice for Alexa, but it was only a demonstration.
The new Alexa, powered by the large language model (LLM), was not ready for widespread use and still isn’t.
Amazon positioned the LLM as a competitor to OpenAI’s ChatGPT, but it falls short of being state-of-the-art.
Data and Hardware Challenges:
Research scientists working on the LLM revealed that Amazon lacks sufficient data and access to specialized computer chips needed to run LLMs effectively.
Competing efforts at companies like OpenAI have an advantage in terms of data and resources.
Prioritization Issues:
Amazon has repeatedly deprioritized the new Alexa in favor of building generative AI for its cloud computing unit, AWS.
The company’s focus on other projects has hindered the timely rollout of the new Alexa.
Missed Opportunities:
Despite investing in AI startup Anthropic and its competitive LLM model Claude, Amazon has struggled to capitalize on its potential.
The company lags behind Big Tech rivals like Google, Microsoft, and Meta in the race to launch AI chatbots and agents.
In summary, Amazon faces organizational and technological hurdles in its quest to dominate AI with Alexa, leaving it trailing behind its competitors. The road to success remains challenging, but the company continues to work toward improving its voice assistant technology.
7. Consumer sentiment in the US: Consumer sentiment in the US has declined to its lowest level in seven months, despite the economy’s overall resilience. The University of Michigan’s consumer sentiment survey for June revealed an index reading of 65.6, down from May’s 69.1 and below economists’ expectations of 72. Concerns over high prices and weakening incomes contributed to this decline. Although year-ahead inflation expectations remained flat at 3.3%, consumers are still grappling with the impact of elevated consumer prices and higher interest rates. Federal Reserve Chair Jerome Powell acknowledged the disconnect between economic data and people’s experiences, emphasizing the central bank’s efforts to restore price stability and confidence in the economy
8. Apple Has $230 Billion Week on Bet AI:Apple’s use of artificial intelligence (AI) and its impact on the stock:
AI Optimism Boosts Apple’s Stock:
Apple investors responded positively to the company’s roadmap for AI usage, pushing the stock to a record high.
Wall Street believes that new iPhone AI features, including integration with OpenAI’s ChatGPT, will drive a massive upgrade cycle among users holding older devices.
Investors have gained confidence in Apple’s competitive position and anticipate re-accelerated growth due to the large installed base of phones that will need to upgrade to leverage the new AI technology.
Recent Stock Performance:
Despite a slight decline on Friday, Apple’s shares closed the week with nearly an 8% advance, the best performance since May.
The rally added approximately $239 billion in market value, propelling Apple back into record territory for the first time since December.
AI Strategy and Market Capitalization:
Apple’s recent event eased concerns about its lack of an AI strategy.
The company overtook Microsoft as the largest company by market capitalization, signaling renewed investor confidence.
While revenue fell in Apple’s fiscal second quarter, the stock still trades at a premium valuation compared to its long-term average.
iPhone Business and AI Potential:
The iPhone remains Apple’s dominant business, accounting for over half of its fiscal 2023 revenue.
However, iPhone revenue declined last year as users held onto their phones for longer.
Bulls argue that AI features will drive the next cycle of iPhone sales, potentially making the stock look cheap.
Upgrade Opportunity:
A significant pool of users may be in the market for an upgrade.
Bloomberg Intelligence data indicates that over 40% of Apple’s smartphone devices are iPhone 12 or older, and fewer than 10% of current users have phones compatible with the new AI software.
In summary, Apple’s focus on AI and the potential for AI-driven features to spur iPhone upgrades have contributed to the recent stock rally. Investors are optimistic about the company’s growth prospects in this area .
9. Consumer Price Index (CPI) for May: The Consumer Price Index (CPI) for May showed a cooling of consumer price increases in the US. Here are the key points from the report:
Headline CPI:
Remained flat over the previous month.
Rose 3.3% over the prior year in May.
Decelerated from April’s 0.3% month-over-month increase and 3.4% annual gain.
Lowest monthly headline reading since July 2022.
Energy prices declined, led by a drop in gas prices.
Core CPI (Excluding Food and Gas):
Climbed 0.2% over the prior month.
Rose 3.4% over last year.
Lowest monthly core reading since June 2023.
Cooler than April’s data and lower than economist estimates.
Market Impact:
Markets rose after the report, with the 10-year Treasury yield falling.
Investors anticipate one to two 25-basis-point rate cuts in 2024, down from initial expectations.
Fed’s preferred inflation gauge, core PCE price index, remained sticky at 2.8% year-over-year in April.
Shelter Prices and Sticky Inflation:
Shelter index rose 5.4% annually, contributing to higher core inflation.
Sticky shelter inflation remains a concern.
CPI for rent of shelter expected to downshift eventually due to rising rental vacancy rates.
10. Wall St Week Ahead: The retail sector is navigating the impact of elevated U.S. interest rates, with some companies facing challenges while others thrive. Here’s a breakdown of the situation:
Mixed Performance:
The S&P 500 Consumer Discretionary Distribution & Retail index has risen nearly 14% this year, in line with the broader S&P 500.
However, this strength is concentrated in select stocks, including Amazon, which has surged nearly 21%.
Struggles for Lower-Income Consumers:
Companies catering to lower-income consumers have faced difficulties due to elevated interest rates.
Shares of Dollar Tree and Dollar General have declined significantly year-to-date.
Pressure on Retail Stocks:
The retail sector, along with real estate and consumer staples, has been impacted by higher rates.
Gas prices and groceries are squeezing the lower to mid-income segment.
Focus on Consumer Resilience:
Investors are honing in on companies whose consumers can withstand higher rates or offer discounts on essential items.
Warehouse club company Costco Wholesale is one such example.
Emphasizing Value for Consumers:
Funds are buying shares of companies like Walmart, Costco, and TJX Companies, emphasizing value for consumers.
Urban Outfitters has weathered inflation due to its fashion merchandising strength.
Online Shopping Resilience:
Online shopping companies like Carvana and DoorDash continue to thrive, even in an elevated rate environment.
Phew, that's a lot to unpack! Remember, this is just a snapshot of the complex and ever-evolving financial landscape. So, stay informed, diversify your investments, and don't forget to have a little fun along the way!
Bonus Tip: Want to dig deeper into any of these stories? Let me know in the comments below, and I'll be happy to share some additional resources!
And there you have it, folks! Remember, folks, the financial world is like a game of Monopoly—sometimes you’re the banker, sometimes you’re stuck in jail, and occasionally you land on Boardwalk and buy a hotel. Happy investing! 📈💰
P.S. Did we miss anything major? Hit us up via an email with your hot takes and financial insights!
Your Credit’s Role in Life’s Big Moments
Introduction
Welcome to the ninth and final chapter of our credit journey! Today, we’re exploring how credit impacts major life milestones. From buying a home to jet-setting across the globe, your creditworthiness plays a starring role. Let’s dive in! 🌟
1. Buying a Home: The Real Estate Quest
The Scene
Dream House: You’ve found it—the perfect abode.
The Challenge: Mortgage lenders scrutinize your credit.
The Goal: A stellar credit score unlocks favorable rates.
2. Financing Your Education: Student Loans
The Scene
College Dreams: Higher education awaits.
The Deal: Student loans bridge the gap.
The Strategy: Good credit = better loan terms.
3. Jet-Setting Adventures: Travel Credit Cards
The Scene
Wanderlust: You crave new horizons.
The Tool: Travel credit cards offer perks—points, lounge access, and more.
The Catch: Excellent credit unlocks these benefits.
4. Entrepreneurial Dreams: Business Loans
The Scene
Startup Fever: Your business idea is brewing.
The Fuel: Business loans provide capital.
The Pitch: Lenders assess your creditworthiness.
5. The Circle of Life: Credit and Beyond
Retirement: Good credit = lower insurance premiums.
Family Planning: Mortgages, car loans, and more.
Legacy: Passing on financial wisdom to the next generation.
—
Conclusion
Congratulations! You’ve completed the credit saga. Remember, credit isn’t just digits—it’s woven into life’s tapestry. Keep it healthy, and your financial story will be one for the ages. Thank you for joining us! 🌟
—
So, there you have it! With a little guidance and the right tools, you'll be a master in understanding (and hopefully master it) financial concepts in no time. Go forth, plant your seeds, and watch your wealth garden flourish!
This is the FINAL part in this comprehensive series on “Credit Alchemy: Transforming Your Worth into Wealth” ( we want to get you ready for the next step in your life, whatever it may be).
If you liked this, check out other series including, a 9 part extensive series on “All Things Tax Related” and 5 Part series on Investing and all our previous articles here.
So, whether you are crawling and sprinting, let's do this together!
We will bring the next series to you in the next week episode.
Until next time, wishing a very happy wealthness (you see what we did there 😃) to you!
📚 Bonus Resources:
Investopedia: Investopedia provides comprehensive information on creditworthiness, including factors that impact it, how to check your credit report, and steps to enhance your creditworthiness. Remember that your creditworthiness affects loan approvals, interest rates, and more.
The Balance: The Balance explains creditworthiness and emphasizes the importance of monitoring your credit score. You can access your credit score for free through services like Credit Karma, Credit Sesame, or WalletHub.
SuperMoney: SuperMoney offers practical steps for managing creditworthiness. You can obtain a free annual credit report from AnnualCreditReport.com or use free credit monitoring services like Credit Karma or Credit Sesame.
Remember to stay informed, check your credit score regularly, and make timely payments to maintain a strong credit profile. 🌟📊💳
Your Wealth Journey Awaits!
Call-to-Action and Community Engagement
📧 Subscribe for Exclusive Insights:
If you have not yet done, please ensure you don't miss out on all things wealth related insights. Subscribe Now & Share with others that you care (just forward this email - it is good karma).
🤝 Join the Conversation:
Have questions or insights to share? Join our community forum (coming soon!)and connect with fellow wealth enthusiasts. Your financial journey is unique, and we're here to support and learn from each other.
Feedback and Sponsorship
😎 Your Feedback Matters
Love what you read? Have suggestions for future topics? Share your thoughts by replying to this email. Your feedback shapes our content and ensures we're delivering exactly what you need.
Are you a brand looking to connect with our financially savvy community? Explore sponsorship opportunities to showcase your products or services to our engaged audience.
Your Brand + Our Community = Unlimited Opportunities. Boost My Brand!
📌 Disclaimer: The information provided is for general informational purposes only and should not be considered as personalized investment advice. Please consult with a qualified financial advisor before making any investment decisions.