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    Auto Strike Continues; Big Week for Rate Decisions

    enSeptember 18, 2023

    Podcast Summary

    • AI Adoption and Challenges in Tech and Automotive IndustriesMajor tech and automotive companies are investing in AI, but face challenges and unintended consequences. The UAW strike continues in the automotive industry, and economic policies may impact jobs. Central bank decisions and Societe Generale's strategic plan are shaping markets.

      The future of artificial intelligence (AI) adoption is a topic of great interest and debate, with major players from tech giants to startups poised to make their mark. However, the industry also faces significant challenges and unintended consequences. Meanwhile, in the world of automobiles, the United Auto Workers' strike continues with no resolution in sight, and former Vice President Mike Pence has criticized President Joe Biden's economic policies for threatening jobs in the industry. Central bank decisions this week, including from the Federal Reserve, will be closely watched by investors, and Morgan Stanley is predicting a tough economic outlook for 2024. Additionally, Societe Generale's disappointing strategic plan has led to a significant drop in their shares this morning.

    • New CEO cuts catch investors off guard, government shutdown looms, GOP in disarray, Trump interview, US-China talks, UN General Assembly, climate protestsUnexpected CEO actions disrupt markets, gov't shutdown threatened, GOP faces internal strife, Trump maintains election claims, US-China talks ongoing, global leaders convene, climate activists rally

      Unexpected cuts in targets from a company's new CEO caught investors off guard, while in politics, House Speaker Kevin McCarthy is proposing a deal to prevent a government shutdown but faces opposition from both parties. McCarthy warned that a shutdown would weaken the Republicans' negotiating power, while House Democratic leader Hakim Jeffries blamed Republicans for the potential shutdown and impeachment inquiry against President Joe Biden. The Republican Party is reportedly in disarray, with chaos, dysfunction, and extremism characterizing the ongoing civil war. Meanwhile, former President Donald Trump gave his first post-presidency interview, insisting that the 2020 election was rigged and that he could have pardoned himself. In geopolitics, there may be progress in US-China relations with talks between National Security Advisor Jake Sullivan and Chinese Foreign Minister Wang Yi, but tensions remain high as world leaders gather for the United Nations General Assembly, and 75,000 protesters call for an end to fossil fuels in Manhattan.

    • Urging Biden for More Aggressive Climate Action, International Tensions, and Domestic CriticismClimate activists push for stronger climate policies, international tensions escalate, and criticism arises over Iran prisoner release deal

      Climate activists are urging President Biden to take more aggressive action on climate change by halting new oil and gas projects and declaring a climate emergency. Meanwhile, international tensions continue to rise, with China sending record numbers of warplanes toward Taiwan, and the UN General Assembly meeting taking place this week with leaders like Ukraine's Zelenskyy and Elon Musk in attendance. Domestically, there is criticism over the Biden administration's deal to free Americans in Iranian custody, which includes releasing $6 billion in Iranian oil revenue. In sports, several NFL teams are off to surprising 2-0 starts, including the Tampa Bay Buccaneers and the San Francisco 49ers. However, tensions remain high both internationally and domestically, highlighting the need for continued vigilance and action.

    • Fed Meeting Expected to be UneventfulThe market's resilience in the face of rising interest rates is due to the ongoing benefits of the low interest rate era for companies and consumers.

      Despite the ongoing dominance of central bank decisions in the financial markets, with the Federal Reserve's interest rate decision coming up this week, the market has continued to rally, seemingly unfazed by the elevated interest rates. According to Lori, head of US equity strategy at RBC Capital Markets, this week's Fed meeting is expected to be uneventful, with no anticipated hike and little new information expected. The market's resilience in the face of rising interest rates can be attributed to the continued benefits companies and consumers have reaped from the era of low interest rates. Meanwhile, in sports news, the Orioles clinched a win against the Rays, securing their lead in the AL East, while the Nationals and Giants also emerged victorious in their respective games. Alabama, however, suffered a narrow loss and fell out of the top 10 rankings for the first time since 2015. The Qatar Economic Forum, powered by Bloomberg, is set to bring together 1,000 global leaders for new connections and insights.

    • S&P 500 companies save on interest with historically low debt ratesCompanies in the S&P 500 saved on interest expenses due to historically low debt rates, but may face refinancing challenges as mortgage rates rise, and potential overbought market conditions could impact valuations.

      Companies in the S&P 500 have significantly reduced their interest expenses due to locking in long-term debt at historically low rates, with an average of 1.7% to 3.1% in the second quarter of 2022. This has given them some breathing room, but as mortgage rates continue to rise, they may need to refinance and repay debt, which could become a headwind in future years. Additionally, there has been a trend of companies deleveraging by paying down debt to prepare for potential refinancing at higher rates. However, with recent inflows into US stocks, there is a risk of overbought conditions in the market, which could impact valuations. The Fed's anticipated rate cuts in 2023 may provide some relief for debt refinancing, but companies will need to manage this headwind as they continue to grow.

    • Passive funds driving growth sector investmentsPassive funds are significantly increasing investments in the growth sector, potentially leading to upside risk as the year ends.

      The growth sector of the market is experiencing a significant influx of investments, primarily driven by passive funds. This trend is generating upside risk as we approach the end of the year. The return of these inflows was discussed on Bloomberg Daybreak Today, highlighting the importance of this development for investors. Listeners can tune in each morning on various podcast platforms and radio stations, including Bloomberg 1130 in New York, Bloomberg 99 1 in Washington, Bloomberg 1061 in Boston, and Bloomberg 960 in San Francisco. Additionally, the Bloomberg Business app, SiriusXM, the Iheartradio app, and Bloomberg.com offer live access to the show. For more in-depth discussions on investment trends, join Bloomberg in San Francisco or virtually on May 7th for the Future Investor event series. Sponsored by Invesco QQQ, this event will explore how data is shaping investment decisions and the creation of innovative investable enterprises. Register at BloombergLive.com/futureinvestor/radio.

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