Dear valued client,
Markets reached new all-time highs (again) this week following U.S. inflation figures.
The CPI came in at 3.3% south of the border in May (compared to 3.4% in April and 3.5% in March). Despite cooling inflation, the Federal Reserve remains cautious. Interest rates held steady at a 23-year high of 5.25%–5.5% for the seventh straight meeting. Fed Chair Jerome Powell noted that while inflation has eased, it remains too high to start cutting rates. Economists now project only one rate cut before year’s end, down from earlier forecasts of two.
In political news, French President Emmanuel Macron has announced the dissolution of parliament and called for new elections following a significant defeat by Marine Le Pen’s right-wing party in the European Parliament vote. The decision caused turbulence in European markets, with the euro and stocks such as French banks experiencing declines. Investors are concerned that a rightward shift in the European Parliament could undermine EU economic integration, jeopardize climate initiatives, and strain trade relations, particularly affecting automakers with business in China. The latter concern is already coming to fruition; the EU announced plans to impose tariffs ranging from 17.4% to 38.1% on Chinese electric vehicles (EVs), in addition to an existing 10% duty, aiming to protect the European market from an influx of cheap Chinese EVs. This follows an EU investigation revealing that Chinese EV makers benefit from government subsidies, allowing them to undercut European manufacturers. However, major European carmakers like Mercedes-Benz, Stellantis, and Volkswagen oppose the tariffs, fearing repercussions in the crucial Chinese market where they have significant sales and production facilities. Critics argue that the tariffs could hinder Europe’s commitment to reducing carbon emissions by discouraging the adoption of more affordable EVs.
In other political news, Hunter Biden, son of President Joe Biden, has been convicted on three felony charges related to falsely stating that he was not using illegal drugs when purchasing a gun in 2018. Although he faces a maximum sentence of 25 years in prison, as a first-time offender, a harsh sentence is unlikely. This verdict coincides with a tense election season, where former President Donald Trump, the GOP opponent, has also been recently convicted of felonies. When was the last time presidential front-runners (or their families) were embroiled in such serious legal and criminal matters? (If anyone has an answer, I’d be curious to hear it).
Bill Gates, a strong advocate for clean energy, has initiated the construction of a next-generation nuclear power facility near a small Wyoming town. His company, TerraPower, founded in 2008 to drive private nuclear investment, is developing an innovative reactor that promises to be smaller, cheaper, and more efficient than traditional designs. The reactor aims to reduce costs and construction complexities. It will also be capable of adjusting its output to complement renewable energy sources. Despite challenges, including regulatory approval and cost concerns, Gates has invested $1 billion and raised $830 million, demonstrating his commitment to scalable clean energy solutions. Gates was at the forefront of the internet revolution with the founding of Microsoft; is he positioning himself to be at the forefront of the next energy revolution?
“The great psychologist Viktor Frankl, a survivor of three concentration camps, found presumptuousness in the age-old question: ‘What is the meaning of life?’ As though it is someone else’s responsibility to tell you. Instead, he said, the world is asking you that question. And it’s your job to answer with your actions. Right action – unselfish, dedicated, masterful, creative – is the answer to the question. That’s one way to find the meaning of life – turn every obstacle into an opportunity.” – Ryan Holiday
Have a terrific weekend,
PW
