And I Will Wait, I Will Wait for News

This week was relatively calm, something that we’ve come to miss this summer. While Thursday was the most volatile day of the week, we had few major movements, with markets in a ‘wait and see’ state. What are they waiting for? Well:

DNC

The Democratic National Convention ended yesterday, with Kamala Harris formally accepting the presidential nomination. Mrs. Harris is the first woman of Black and Asian heritage to be nominated as a Presidential candidate for either party. Guest speakers at the week long convention included current President Joe Biden on Monday, former President Barrack Obama on Tuesday, former President Bill Clinton on Wednesday and the nominee herself, on Thursday. The campaign has been described as ‘heavy on vibes, light on policy’, which is not entirely surprising considering how only a few weeks ago President Biden bowed out of the race. We do have signs as to what a potential Harris Presidency would focus on and as Bloomberg put it, the Harris camp is choosing to be ‘universal rather than cut people out’.

What that means is she can make statements about opposing price gouging and invite the United Auto Worker’s Union leader Shawn Fain to the DNC while also having former American Express CEO Ken Chenault tout her as pro-business at the very same DNC event. Mrs. Harris has stated on multiple occasions that she has evolved from her ideas during her 2020 campaign (such as banning fracking) and that she is likely to build off the same economic ideas that were present during her tenure as Vice President: lower the cost burden for the middle class, provide access to capital for small business owners and pay for policies by ensuring billionaires and corporations pay their fair share.

Jackson Hole

Federal Reserve Chair Jerome Powell will give a speech today at the Jackson Hole symposium, with many on the edge of their seats, hoping to get some clarity as to what the Fed will do with interest rates come September. The consensus is that a rate cut is imminent, with expectations being split between a 25 and 50 bps rate cut. It is likely that Mr. Powell plays it safe, saying what we already know and all but confirming that a September rate cut is on the table.

There has been some debate amongst economists as to how many rate cuts we would see before the end of the year; the markets are currently pricing in 100bps (1%) of rate cuts. Mohammed El-Erain, chief economic adviser at Allianz, believes that the market is too optimistic, suggesting that 75bps is more realistic. Earlier this week, the Bureau of Labour Statistics revised the number of jobs created in the year, announcing that 818,000 fewer jobs were created than initially reported. That’s the largest revision since 2009, and for some market participants, a strong enough omen that 50 bps is seriously being considered for September.

Rail Stoppage

Canada’s two largest railways shuttered their operations on Thursday, after failing to come to an agreement with labour unions. The shut down was short lived as the Canadian government intervened the same day, ordering an extension on the current labour contract until a new agreement could be decided upon. The impact of a prolonged disruption to service would have far reaching implications for both Canada and the United States. It was estimated that each day of disruption would cost the Canadian economy $340M (or 4% of GDP), also noting that 14% of the total trade between Canada and the US comes from rail transport. Both CPKC and CN are accusing the TCRC (Teamsters Canada Rail Conference) of making unrealistic demands and bargaining in bad faith, while TCRC President Paul Boucher stated that the companies' “sole focus is boosting their bottom line, even if it means jeopardizing the entire economy”. It is difficult to have an opinion here without having all the facts, however, given the importance of the rail networks to the country, it was not surprising to see an intervention.

The Most Important Earnings in Years

Nvidia reports its fiscal second quarter results on August 28th and as the poster child for the AI revolution, a lot of money is riding on their results. Many investors are anxiously awaiting the company’s results in order to gauge the health of the technology sector, with some calling this the most important event in years for the sector. While we value the information that we can derive from quarterly earnings (the data and the earnings call itself), this kind of buildup is totally not necessary and a reminder of how markets struggle to balance the long term narrative with short term developments. Is any long term investor going to dump their Nvidia shares if the quarter is soft? No. Is anyone on the sidelines going to be convinced if they post a strong quarter? Unlikely. If you haven’t bought into the story yet, what’s another quarter where they blow past expectations? And if you believe in the AI trade, it’s not a singular quarter that’s going to change your mind either. If you are a speculator, some high frequency trader or a publication that covers markets, however, there’s nothing more important than hyping up a singular quarterly earnings report or reducing a generational change in computing to a single event. We do not deny that investors are placing significant importance on the event, we just don’t agree with it.

Conclusion

Nothing new happened this week, even if events like today’s Jackson Hole event, this week’s DNC convention and even next week’s Nvidia earnings garnered significant attention. In reality, they are progress reports, confirming details more than redirecting us on a new path. A wise client said this morning that sometimes no news is good news, and we could not agree more!?

Healthy Distraction

Leon here! David asked me to write the healthy distraction this week and I`m going to attempt to get inspired tonight (Thursday), at 8:52pm and not leave it to my busy Friday morning (no, not playing golf, just work). This is around the time when I start to crave a snack. I`ve developed healthier habits in the past few years, snacking on cashews or berries later in the evening, but there was a time when the inner voices would debate between sweet and savory. I`m sure some of you can relate.

Well, earlier this month, Mars, which is a privately owned company, reached an agreement to purchase Kellanova (formerly part of Kellogg co.) for $30 billion. We may now see the perfect marriage between Mars/Twix/Milky Way/LifeSavers/M&M/Juicy Fruit/Skittles and Special K/Cheez-it/Pringles/NutriGrain/ Eggo/Rice Krispies.

This deal will give Mars 8% market share in the ‘snacks & treats’ space, only second to Pepsi who has 9% share. The acquisition will allow Mars to expand overseas, have a more diversified sweet and salty offering and maybe even have some limited-edition flavors that will see products from both brands get mixed in the same bag.

To be honest, writing about sugar and salt isn’t opening my appetite tonight. I think as a society we have become more conscious of what we are eating, when we are eating certain foods and the example we are setting for our kids. I wish Mars lots of success with their skittle flavored pop tarts and Milky Way flavored Pringles, but I’ll stick with my berries and sparkling water past 7pm.

What are our audiences’ opinions, thoughts, tips and tricks about snacking?

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