Dear valued client,
Markets are on track to finish relatively flat this week after the Bank of Canada cut its interest rate by half a percentage point to 3.75%, marking its fourth consecutive rate reduction. This move signals that inflation is under control, with the bank aiming to return borrowing costs to a neutral level to prevent economic stagnation or recession. Governor Tiff Macklem noted that inflation has returned to the 2% target, and further rate cuts are likely depending on economic conditions. Key points include a reduction in inflation and the anticipation that lower rates could spur consumer spending and business investment, potentially reviving Canada’s dormant housing market. However, given continued high housing costs, uncertainties remain around how quickly the real estate sector will recover.
Starbucks is facing significant challenges under its new CEO, Brian Niccol, a Chipotle veteran who was brought in to revitalize the brand. Despite his leadership, the coffee chain reported disappointing quarterly earnings, with sales declining by 7% in the third quarter, including a 6% drop in North America and a 14% slump in China. Starbucks’ promotional efforts, including new offerings and in-app deals, failed to boost sales, causing shares to tumble. Niccol’s strategy to turn things around focuses on simplifying the menu, adjusting pricing, and improving store operations, particularly during the busy morning rush. He also faces growing competition in China, the company’s second-largest market, where local chains are expanding rapidly. Tesla posted a strong earnings report on Wednesday evening, marking its highest quarterly profit in over a year and pushing the stock to an 11-month high. This surge in share price, which closed nearly 22% higher, was described by Dan Ives of Wedbush Securities as “an early Christmas present.” The stock’s impressive performance also added $30 billion to Elon Musk’s net worth, reflecting renewed investor confidence in the EV giant’s profitability and future growth.
Cuba is facing a severe energy crisis, exacerbated by the collapse of its largest power plant, which triggered a nationwide blackout that has lasted for days. The power grid, dependent on eight outdated plants running on dwindling fuel supplies, has been in decline for years due to underinvestment, U.S. sanctions, and a lack of crucial fuel imports – particularly from Venezuela. The situation worsened as Hurricane Oscar hit the island, further damaging key infrastructure. Cuba’s economic struggles, compounded by the COVID-19 pandemic and long-standing U.S. trade embargoes, have left the country in disarray, with rolling blackouts, water shortages, and widespread food and medicine scarcities. Frustration is mounting among the population, as protests have erupted and over one million Cubans have fled the country since 2022.
“I became a Communist by studying capitalist political economy, and when I had some understanding of that problem, it actually seemed to me so absurd, so irrational, so inhuman, that I simply began to elaborate on my own formulas for production and distribution.” – Fidel Castro
Have a terrific weekend,
PW
