Happy Monday, Folks.
Spring has sprung and I hope you had a wonderful, long holiday weekend.
Last week was packed full of excitement. From Elon Musk’s Twitter takeover attempt, to the U.S. CPI (consumer price index) finding its way to 8.5% – a 40-year-inflation high. As well as, the continued horrors of war in Ukraine.
Below are some comments on all three. As well as, your Weekly Market & Economic Update.
Interested in learning more? Schedule a call with me HERE
Warmly,
Mark Sauer
info@AllOneWealth.com
+1(310)355-8286
Elon Musk – A Hostile Takeover
Elon Musk’s attempt to purchase Twitter via a ‘hostile takeover’ seems to have spurred further ways to polarize political parties. The man who was once the left’s climate action leader, and science’s torch bearer, is now their arch nemesis – whom they now referred to an ‘Oligarch’. Meanwhile, the right now praising him as a free speech pioneer – apparently Trump’s ‘Truth Social’ platform isn’t working out in that respect.
At TED2022 Musk said in regard to Twitter “this is not a way to sort of make money… it’s just that I think my strong, intuitive sense is that having a public platform that is maximally trusted and broadly inclusive, is extremely important to the future of civilization.”
Well intended or not, it does appear to me that Musk strategized this takeover from the beginning when he made his initial 9% ownership bid. After making his initial investment he was invited to join Twitter’s board of directors – shortly thereafter, declining the offer, he cited his concerns of poor management by Twitter’s Board. Musk then made his 100% buyout offer for $54.20/Share – a 54% premium over the day before he made his initial investment in twitter and a 38% premium over the day his investment was announced publicly.
In his SEC filing for the buyout Musk said, “My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder. Twitter has extraordinary potential. I will unlock it.”
Twitter’s board used the ‘Poison Pill’ strategy to deter Musk from continuing his takeover pursuit. It does seem likely that Musk has a Plan B which will be revealed shortly.
Inflation – The Fed
Inflation continues its hot streak. March’s 8.5% increase was the sharpest increase – of the CPI (Consumer Price Index) – since December 1981. Investors are pinning their hopes on the Fed to engineer a “soft landing” by slowing demand via interest rate hikes. However, some inflationary pressures remain beyond the scope of the Fed’s control, namely the continuing COVID lockdowns in China. Lockdowns continue to complicate supply chains, spurring a vicious inflationary cycle as consumers buy more amidst product shortages – causing further upward pressure on inflation.
Market odds of a 50-basis point hike have increased to above 90%, per CME Group. New York Fed President John Williams added his voice to the conversation this week, suggesting a 50-basis point hike would be “a very reasonable option” for May.
Investors brace for impact – markets sell off bringing prices back in range of their January lows.
War in Ukraine
In a letter to the pope, an official in the Ukrainian city of Mariupol said that what they’re experiencing is literal hell on earth.
“The time has come when praying is not enough,” Volyna said. “Help to save them. After the bombing of the drama theater, no one believes the Russian occupiers. Bring the truth to the world, evacuate people and save their lives from the hand of Satan, who wants to burn all living things.”
The City has been without humanitarian aid since near the beginning of the Russian invasion.
If you’re able to donate I would suggest supporting World Central Kitchen HERE – who provides millions of meals served to families across Ukraine, Poland, Romania, Moldova and Hungary.
Market & Economic Update:
Weekly Market Update
- Global Equities: Markets were pressured by more data showing persistently high inflation, pushing domestic equity indices to weekly losses as earnings season commenced. The S&P 500 dipped -2.1%, the Nasdaq Composite fell -2.6%, and the Dow Jones Industrial Average declined -0.8%. The S&P is sitting at a key technical support level, around the 50-day moving average, retesting this level for the first time since breaking out in early March. Developed International markets were also lower on the week, down -1.2%, while Emerging Markets lost -1.6%.
- Fixed Income: 10-Year Treasury yields were once again volatile, surging above 2.8% early in the week, then falling back to 2.6%, but rising again on Thursday to finish back above 2.8%. High yield bonds were flat in weekly trading
- Commodities: Oil prices popped back above $100 after several weeks of declining prices, hitting $105.67 before the long weekend. US drillers added 4 active oil and gas rigs during the week, bringing the total count to 693, according to Baker Hughes
Weekly Economic Update
- Inflation Still Hot: Consumer Price Index data showed an 8.5% year-on-year increase in March, a 40-year high. Markets sold off on the news, despite some optimism that perhaps inflation was peaking, as the reading ex-energy was more in line with expectations and presumably energy costs will ease as strategic oil reserves work their way into the economy. Producer Price Index data showed that businesses are also feeling the heat, up a whopping 11.2% for the yearly period.
- May Rate Hike Expectations: Markets have increasingly been leaning into a likely 50 basis point rate hike in May, double the Fed’s typical 25 basis point move. Market odds of a 50 basis point hike have increased to above 90 percent, per CME Group. New York Fed President John Williams added his voice to the conversation this week, suggesting a 50 basis point hike would be “a very reasonable option” for May.
- Earnings Kickoff: Banks began reporting their first quarter earnings this week, with mixed results. JPMorgan (JPM) reported disappointing results, with net income declining 42%. Wells Fargo (WFC) also slipped as mortgage lending declined, causing revenue to miss estimates. On the positive side, Morgan Stanley (MS) and Goldman Sachs (GS) both outperformed estimates thanks to higher trading revenue.
