YOUR QUIVER | February 23, 2023
Today's Rundown
CIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets.
GDP Stats
Real GDP was revised downward slightly (from 2.9% to 2.7%) due to higher inflation figures.
Labor of Love
Labor is still fairly strong, with initial unemployment claims down by 3k to 192k last week (below estimates). Continuing claims also declined by 37k, the greatest decline since Dec for the prior week’s data. While we keep hearing of many layoffs, especially in tech land, overall the labor market has remained resilient during this period of greater economic uncertainty.
Something's Gotta Give
As per a note by JPM today, bonds are pricing in a lot more inflation volatility than equities are. I’ll spare you reading about regressions and give my quick take. If bonds are right, then we’d expect more downside for equities. If bonds are wrong, then and vol circles back to pre-pandemic levels, then yields are too high. JPM estimates it at 70bps too high for the 10yr UST.
EZ Inflation
Eurozone inflation reached a record in Jan, per revised data. Thus, it gives more ammo to the ECB to keep targeting inflation with a potential additional 50bps hike next mo.
AI Computing
That’s what $NVDA touted, along with data center relative strength, as the driver of its beat and positive guidance. The co has chips that can handle the parallel processing needed to deal with large data sets and decision-making s/w.
The Overdraft Shaft
JPM collected $1.25bn (with a b) in overdraft fee revenue in 2022, up 3% y/y, even though they said their trying to make improvements. This compares to drops for peers—down -65% for BofA and -9.3% for WF. They say that new customers and an increase in card spending fueled the increase, but obviously they will have to sharpen their pencils to come up with some better rules for clients.
Natl Security or Home Advantage?
Maybe a little bit of both. Companies are lining up to get a piece of the gov’s $39bn in funding for US microchip production, including a supplier ecosystem and R&D efforts after supply chain disruptions during the pandemic. The gov is going to release selection criteria next week, and officials are stressing that they are focused on shoring up national security, not just helping US companies weather the economic downturn.
Ta-Dum
Netflix slashed prices in over 30 countries, per the WSJ—sometimes cutting them in half. Competition in the streaming wars is driving these cuts, which are at odds with the increased prices customers are seeing in other countries and account-sharing limits.
What We're Watching
Any initiatives coming out of the discussions between Russia and China could impact global markets. To-date, China has offered financial assistance to Russia (e.g., buying cheap oil) but stopped short of providing military assistance (e.g., supplying weapons). With US/China relations strained post luft-balloons-gate, both sides are flexing their muscles. China is publicly cozying up to Russia but doesn’t want to be sanctioned any more. The US wants to improve relations but is waying about China’s intentions for Taiwan, Russia and tech inside the US.
Table Talk
Google is asking for “real estate efficiency” by requesting Google Cloud employees to shift to alternate schedules to share desk space in NY, CA and WA, calling the initiative Cloud Office Evolution, or CLOE.
Baba Boey
$BABA reported strong profits (1st growth since 2020) with cost cuts reflected in the figures. With an improved regulatory climate and China’s reopening, now growth will focus on the competitive environment from a tech and price perspective.
