Dear valued client,
Markets added more gains this week as investors digested several economic reports. The Federal Reserve raised interest rates by 25 percentage points, marking the highest rates have been in 22 years. This did little to perturb markets as the rate increase was priced in weeks ago. Jerome Powell indicated in his post-decision comments that at least one more hike is on the table before the end of the year (most probably in their September or November meeting) as the strong labor market and increasing wages risk pushing inflation back up. Furthermore, the first estimate of U.S. Q2 GDP came in at a staggering 2.4%. This points to a resilient economy that continues to grow despite more costly debt. The prolonged recession many pundits were predicting at the beginning of the year is nowhere to be found.
Though inflation as a whole has been on a downward trajectory over the past year, one element of the CPI has remained persistently high… food. In Canada especially, food prices are up 9% compared to a year prior. Constricted supply coming from Ukraine, as well as abnormally dry land, could drive up food prices further. In fact, more than 5 million acres of farmland in Alberta have been declared agricultural disaster areas.
Markets were also buoyed this week by remarkable Big Tech earnings reports. Google, for instance, brought in $42.6 billion in search advertising sales while Meta raked in $32 billion in revenue. Microsoft indicated it will continue to pour large sums of capital into AI infrastructure and investors are willing to give these tech giants a long leash given their impressive long-term performance.
Elon Musk announced it’s time for Twitter to undergo a metamorphosis, changing the company’s name to “X” in what he hopes to be the “everything app.” The goal, Musk says, is to make the app maximally useful and do everything, including: secure audio and video messaging capabilities like Signal or WhatsApp, publishing capabilities like Substack, payment systems, gaming systems, banking and financial services, travel booking, and more. Though many observers are skeptical, tech biographer Walter Isaacson – who’s been shadowing Musk for the last 3 years – said Musk is confident “X” can become a trillion-dollar company. Only time will tell…
“The Web as I envisaged it, we have not seen it yet. The future is still so much bigger than the past.” – Tim Berners-Lee, inventor of the Internet
Have a terrific weekend,
PW
