US consumers have been spending like high rollers, and there's a good reason why. Plus, Cathie Wood sees Tesla's stock really revving up. Meanwhile, Goldman's been picking potential winners and losers from the US election. For that (and more) have a read at the recent Quick Takes.
US consumer resilience is like a blockbuster two-act drama. Act One saw pandemic-era savings prop up spending despite soaring inflation and rising interest rates. Act Two brought a massive market rally, spurred by the Fed's December hint at future rate cuts. This triggered record corporate bond demand, lowered borrowing costs, and boosted stock valuations. The result? A $15.7 trillion surge in market values, 83% of last year’s total consumer spending, enriching households and fueling spending, especially among the wealthy. And that helps explain why rising interest rates haven’t slowed the economy…
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Indian companies issued almost $30 billion in new shares during the first six months of 2024 – a new half-year record and a near-tripling from the same period last year. Investors have been more than happy to snap up the new supply, since buying into Indian stocks allows them to invest in the fastest-growing major economy. Local investors are driving some demand – but so are foreign ones, attracted by the country’s stable currency, strong corporate earnings, and better returns (compared to China, at least). In fact, the MSCI India index has outperformed its Chinese counterpart by more than 100% over the past three years.
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Tesla's been driving through a rough patch, with EV price wars and demand concerns dragging its share price down 5% over the past two years, while the rest of the "Magnificent Seven" has been racking up gains. But Cathie Wood from Ark Invest thinks that’s about to change. She’s betting big that Tesla’s stock will soar tenfold once their robotaxis hit the road. Wood argues Tesla’s value isn’t just about EVs but also its massive potential in the autonomous taxi market, which she pegs at $8-10 trillion, with Tesla capturing up to half of that. And Wood isn't just talking the talk: she's all-in, stashing a hefty 15% of her flagship Ark Innovation ETF in Tesla – by far its biggest position. Let’s hope Tesla’s robotaxi reveal this October hits the road running…
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Goldman Sachs doesn’t think the US election will shake up the overall stock market, but it does see potential winners and losers depending on the outcome. If Trump wins, government-sponsored enterprises like Fannie Mae and Freddie Mac could benefit from deregulation, domestic-focused firms might gain from protectionist policies, and the Russell 2000 could thrive on improved small business sentiment. On the flip side, renewable energy could suffer from reduced federal support, Chinese stocks might get hit by severe tariffs, and infrastructure stocks tied to the Inflation Reduction Act could face challenges with a shift to fossil fuels and deregulation. That said, the market will still be mainly driven by growth and inflation, so long-term investors might want to stay the course.
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Wall Street pros are getting excited about Apple and the AI smartphone era, because they know how this kind of thing usually plays out. When the replacement cycle gets shorter, Apple's share price gets bigger. Historically, the shorter the cycle, the better Apple’s stock does, relative to the overall S&P 500 index. The official launch of Apple Intelligence (“AI”, those clever devils) is expected to significantly speed up Edge AI development in smartphones and spur the development of more killer apps, which will have iPhone sales chirping in a way that typically only happens one to two years after a new tech breakthrough. What’s more, the increasing demand brought by this new AI functionality will likely also give Apple more pricing power, which could potentially make even the 15 Pro Max seem like a bargain.
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