More are saying it depends…

Thoughts of the Day

Central banks like the US Federal Reserve and Bank of Japan are emphasizing that their policy decisions will be highly data-dependent due to economic uncertainty, This will lead to continued market fluctuations until we get more clarity on where inflation and the economy are heading.

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Day Ahead

The UK unemployment rate rose slightly to 4.3% from 4.2%. Same as expected. No significant market reaction.

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What Happened Yesterday

Market Movements as of New York Close 11 Sep 23

The US Treasury Yield curve narrowed to 0.68% as the US 2 year bond yield slipped -0.01% to 4.97% while the 10 year bond yield rose +0.03% to 4.29%.

The US Stock futures traded quietly in the early Asian trading session before picking up pace at midday and started trading higher until the New York session started. The US stock futures rose +0.46% before the New York session began.

The US stock market opened higher from Friday. The US stock market then traded slightly higher through the New York session. Consequently, the S&P 500 closed the day higher at +0.67% (intraday high: +0.75%, low: +0.23%) the Dow Jones rose +0.25% on the day (intraday high: +0.60%, low: +0.01%) while the Nasdaq spiked +1.19% (intraday high: +1.33%, low: +0.31%) due to optimism over Tesla’s AI (+10.09% on the day) powered Dojo supercomputer (See headline 3).

The crypto market continues to experience weakness amid the sale of $3.4 billion worth of crypto assets from bankrupt exchange, FTX. Bitcoin is down -2.6% on the day while Ether is down -4.1%.

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Headlines & Market Impact

Fears over access to credit hit highest level in more than a decade, New York Fed survey shows

Notable Snippet: American consumers are worried about access to credit amid persistently higher interest rates and tighter standards at banks, according to a New York Federal Reserve survey released Monday.

Respondents indicating that the ability to get loans, credit cards and mortgages is harder now than it was a year ago rose to nearly 60%, the highest level in a data series that goes back to June 2013. The results were part of the New York Fed’s Survey of Consumer Expectations for August.

Worries also are rising about employment: The survey showed that the mean expectation of losing one’s job in the next year rose by 2 percentage points to 13.8%, the highest since April 2021. That comes with an unemployment rate of just 3.8%, or 0.1 percentage point above its year-ago level.

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Jamie Dimon says it’s a ‘huge mistake’ to think economy will boom with so many risks out there

Notable Snippet: JPMorgan Chase CEO Jamie Dimon said Monday that while the U.S. economy is doing well, it would be a “huge mistake” to believe that it will last for years.

Healthy consumer balance sheets and rising wages are supporting the economy for now, but there are risks ahead, said Dimon, who was speaking at a financial conference in New York. Topping his concerns include central banks reining in liquidity programs via “quantitative tightening,” the Ukraine war, and governments around the world “spending like drunken sailors,” the executive said.

The world’s largest economy has defied expectations for a downturn for the past year, including from prognosticators like Dimon, head of the biggest U.S. bank by assets. Last year, he warned that a potential economic hurricane was on the way, citing the same concerns around central banks and the Ukraine conflict. But the U.S. economy has proven resilient, leading more economists to expect that a recession might be avoided.

“If and when you have a recession, which you’re eventually going to have, you’ll have a real normal credit cycle,” Dimon said. “In a normal credit cycle, something always does worse than” expected, he added.

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Tesla’s market value could surge by $500 billion because of its Dojo supercomputer, Morgan Stanley says

Notable Snippet: Tesla Inc.’s Dojo supercomputer may add as much as $500 billion to the company’s market value through faster adoption of robotaxis and network services, according to Morgan Stanley.

Dojo can open up “new addressable markets,” just like AWS did for Amazon.com Inc., analysts led by Adam Jonas wrote in a note, upgrading the stock to overweight from equal-weight and raising its 12-month price target to a Street-high $400 per share from $250.

The supercomputer, designed to handle massive amounts of data in training driving systems, may put Tesla at “an asymmetric advantage” in a market potentially worth $10 trillion, said Jonas, and could make software and services the biggest value driver for Tesla from here onward.

The next version of Tesla’s full self-driving system, expected by year-end, and the company’s Artificial Intelligence day in early 2024 are worth watching, he added. The stock slipped about 4.2% since Jonas cut the recommendation on the stock to neutral in June.

Tesla has been mentioning how Dojo gives it an edge in AI and self-driving technology since at least 2021. In July this year, CEO Elon Musk told investors that the carmaker plans to invest more than $1 billion on the project by the end of 2024.

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Best,
Phan Vee Leung
CIO & Founder, TrackRecord