Inflation, Auto Strikes, and Oil Rising – What Does the Data Mean for Investors?
August inflation was higher than analysts expected, but it appears likely that the Fed will still refrain from taking a shot on fresh interest rate hikes. Find out why below...
Market snapshot
S&P500: 4,450.32 (-0.68%)
Dow Jones Industrial Average: 34,618.24 (-0.09%)
NASDAQ Composite: 13,708.33 (-1.27%)
Russell 2000: 1,847.03 (-0.86%)
S&P/TSX Composite index: 20,622.34 (+2.51%)
PHLX GOLD and SILVER SECTOR: 118.67 (+3.70%)
News in the last 7 days
Inflation continues to dominate
After revelations that inflation surged beyond analysts' projections, there's widespread market anticipation that the Federal Reserve will decide to hold off from a rate increase in the upcoming meeting.
This sentiment is underpinned by the fact that year-over-year core inflation decelerated to 4.3% in August from 4.7%, marking its most subdued pace since September 2021. This slowdown suggests that the Federal Reserve’s 11 previous rate hikes are positively influencing the economy.
Additionally, August witnessed a notable 0.3% monthly increase in core inflation, the most significant uptick since February. It's worth noting that Fed officials tend to scrutinize core inflation more closely.
Although futures pricing has seen some fluctuations, CME Group data indicates there's a 40% likelihood of a rate hike by November. This projection aligns with forecasts predicting inflation to trend closer to the 2% goal by late 2023.
Subsequently, 2024 is expected to usher in a phased reduction in rates. Indeed, Economists polled by Reuters additionally expect the central bank to wait until at least April before cutting rates.
What else has impacted investing in the past 7 days?
🚘 UAW Strike: This week’s historic UAW strike is expected to cost automakers millions. But a concluding deal will inevitably spike labor costs for the companies involved. For investors, this means companies like Ford F 0.00%↑ , GM GM 0.00%↑ and Stellantis STLA 0.00%↑ are seeing their margins squeezed. These legacy automakers have a low P/E and decent dividend so long-term investors may not be put off.
🛢️ Oil prices increased for the third consecutive week due to production cuts by Saudi Arabia and Russia. West Texas Intermediate reached nearly $91 a barrel, its peak since November. The rise in oil prices threatens to increase global inflation at a time when central banks are assessing if their interest rate hikes have sufficiently controlled inflation. Higher oil prices adversely affect all businesses, leading to subsequent challenges for investors.
📈 In 2023, smaller companies in emerging markets have emerged as a lucrative investment strategy, outperforming the MSCI large-cap index by 12 percentage points. While large-cap firms grapple with China's economic challenges, small-caps are capitalizing on local growth narratives, such as India's economic ascent and the rising interest in AI and EV startups.
Investing signals
Top 5 gainers in last 7 days
Top 5 losers in last 7 days
Crypto performance
Stocks trending in Google search
Unity Software Inc
U 0.00%↑
Share Price: $36.32
Weekly Change: -5.56%
Google Search Interest: +1,400%
Have you ever enraged an entire industry? Well, that’s what Unity Software managed this week. The videogame software company announced a new business model that will see videogame developers that use its game engine charged for each consumer install of their titles. Though the business has backpedaled slightly, some infuriated developers have vowed to quit using the software.
MGM Resorts International
MGM 0.00%↑
Share Price: $41.08
Weekly Change: -7.04%
Google Search Interest: +450%
Hospitality and entertainment giant MGM found itself on the wrong end of computer hackers this week. Room keys, employee logins, reservation services and even slot machines appear to have been hit by the hack, which seems to have caused considerable chaos. MGM has acknowledged that the incident could have a "material effect" on its operations.
Aurora Cannabis Inc
ACB 0.00%↑
Share Price: $0.9828
Weekly Change: +74.01%
Google Search Interest: +200%
Aurora Cannabis has rocketed over the past week, its share price soaring after it set its sights on positive cash flow in 2024. Additional US legislation boons for cannabis stocks have helped bolster the stock, helping industry peers rise too.
Canopy Growth Corp
CGC 0.00%↑
Share Price: $1.35
Weekly Change: +0.71%
Google Search Interest: +160%
For the second week in a row, Canopy Growth Corp graces our list of top trenders. The stock is enjoying the continued rush of popularity for cannabis stocks, while also grabbing headlines for its decision to cut off funding for its BioSteel Sports Nutrition brand, pleasing investors concerned about its high cash burn.
Nikola Corp
NKLA 0.00%↑
Share Price: $1.19
Weekly Change: +29.40%
Google Search Interest: +70%
This electric vehicle stock surged in the final days of last week, climbing on the back of expansion into Canada and the assertion that it remains on track to release its range of heavy-duty hydrogen trucks on schedule. Could Nikola Corp one day rise as high as Tesla? They might both be named after the famed Serbian inventor, but the EV duo remains leagues apart in both share price and market cap right now.
Alternate investing signals
🍄🤔 Mulling mushrooms
Mushrooms can work magic. At least, that’s what online searchers seem to think.
The stat that caught our eye was that search traffic for Amanita Muscaria Gummies has jumped significantly since March. These gummies are essentially sweets containing some amount of psychoactive mushroom, with online retailers claiming ingestion will result in “mild euphoria and calmness”.
But this is just one aspect of an uplift in magic mushroom interest. It seems that people are also exploring the possibilities of making hot beverages out of our fungi friends. Mushroom coffee, for example, is taking off as a trend of its own.
Again, the product is touted as benefiting individuals’ health and mood.
Opportunities for more hands-on mushroom therapy are becoming more widespread too.
June saw the opening of the United States’ first licensed psilocybin center. EPIC Healing Eugene offers six-hour guided “trip” sessions for a minimum cost of $2,372 a pop. These therapy sessions might sound expensive, but the company reportedly has a waiting list of thousands.
This apparently increasing attention and credibility all looks like good news for companies looking to bring magic mushrooms and psychedelic treatments to the mainstream. If you think it means there is a “shroom boom” or “mush rush” on the way, here are some stocks to watch out for:
Cybin Inc (NASDAQ: CYBN) CYBN 0.00%↑
Atai Life Sciences (NASDAQ: ATAI) ATAI 0.00%↑
Compass Pathways (NASDAQ: CMPS) CMPS 0.00%↑
Incannex Healthcare (NASDAQ: IXHL) IXHL 0.00%↑
Numinus Wellness (OTC: NUMI.F) (TSX: NUMI)
r/WallStreetBets
We’re using QuiverQuant to tell you the stocks generating the most interest in the world’s most influential online investment community. The week’s hottest are below:
NVIDIA Corp
NVDA 0.00%↑
Mentions: 536
The chipmaker was a hot topic too, with some concerned that CEO Jensen Huang sold a chunk of his shares in the company and bears arguing that the stock will inevitably head lower after rocketing across the year-to-date.
Tesla Inc
TSLA 0.00%↑
Mentions: 515
As ever, electric vehicle maker Tesla was a popular topic of discussion on the forum last week. Notably, users were excited about the impact of Morgan Stanley’s upgrade of the stock.
Arm Holdings PLC
ARM 0.00%↑
Mentions: 429
This new face has taken the markets by storm in its successful IPO. As such, it’s perhaps no surprise that Redditors have been excited by the action, with one user even referring to the stock (in jest) as “NVIDIA II Electric Boogaloo”.
Apple Inc
AAPL 0.00%↑
Mentions: 325
Redditors have had a great time commentating on Apple’s rocky few days. Some have been mocking the lack of significant features in the tech giant’s underwhelming reveal of the next iPhone, while others have speculated that the drama impacting Unity Software could heavily impact Apple’s Vision Pro mixed-reality headset.
Top reads
🌎 Has oil giant ExxonMobil spent years trying to downplay the climate crisis? Find out more from the Wall Street Journal’s Christopher Matthews and Colin Eaton.
💪 New NASDAQ member Arm enjoyed a strong IPO, but there’s more work to be done. Richard Waters and Tim Bradshaw of the Financial Times have the lowdown.
🛍️ Retailers are losing huge sums from policy abuses like return fraud. CNBC’s Gabrielle Fonrouge explores what’s happening and what retailers are doing about it.
☀️ Is the increasing affordability of solar tech actually hurting renewable energy efforts? Bloomberg’s David Fickling delves into the topic here.
🚙 Want to know why US carmakers are being hit by strike action? Read this article from Gabrielle Coppola and David Welch of Bloomberg.
Meme of the week
