Wall Street Smells a Rate Cut

Plus: What Amazon wants Amazon gets, except for healthcare ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

November 28, 2023

Read in Browser

TOGETHER WITH

Good morning.

He's trading in his ballpoint pen for the bullpen.

Bloomberg Media CEO M. Scott Havens is leaving the financial publication he's been with for almost a decade and heading to the New York Mets, where he'll serve as the team's president of business operations. The move will definitely be a bit of a transition for the longtime media executive who's worked at outlets including Condé Nast, The Atlantic, and Time. But at least he learned how to handle the curve with all that time he spent at mainstream media.

Morning Brief

•

Wall Street is betting that higher-for-longer isn't that long at all.

•

Amazon finds human health a smidge harder than shipping packages.

•

UK immigration has quantity, but lacks quality in the job market.

Finance

Wall Street is Pricing in Interest Rate Cuts

Wall Street knows that interest rates can't stay high forever. And, like little kids in the backseat during a long road trip, investors can't help but keep asking "Are we there yet? Are we there yet? Are we there yet?"

Increasingly, Wall Street thinks we'll be there soon, according to a Wall Street Journal analysis published Monday.

Fed Up

Interest-rate futures data from last week shows that investors have pegged the odds at 60% that the Fed will cut rates by May of 2024, according to CME Group data seen by the WSJ. That's way more bullish than the 29% chance indicated by futures bets near the end of October. The CME data also suggests that investors are now expecting up to four rate cuts by the end of next year.

That jives with recent behavior on the S&P 500, which has risen roughly 9% so far this month after an October dip. That places November on track for the best month the index has seen since June 2022, and reflects expectations that inflation will continue to fall and the Fed will subsequently lower rates to maintain economic growth, or to hedge against a slowdown. Movement on the bond market reflects the same, with yields on longer-term bonds still below those of shorter-term bonds. The so-called inverted yield curve tends to reflect an expectation of a possible economic slowdown, which, again, is likely to prompt rate cuts at the Fed.

Economists are largely on the same page as Wall Street investors:

•

In Bloomberg's latest survey of economists, published Monday, respondents said they still expect the Fed to begin loosening monetary policy by sometime around the second quarter of next year — echoing Wall Street's futures bets of a May rate slash.

•

Still, economists have grown slightly more pessimistic about inflation's cool-down. Projections for 2024's core personal consumption expenditures index — a measure of inflation preferred by the Fed that excludes volatile food and energy prices — hit 2.5% in the latest Bloomberg poll, up from a 2.4% prediction in October.

Soft Spoken: Tamping down inflation without triggering a recession remains the name of the game for Jerome Powell and the Fed. While the inverted yield curve and expectations of rate cuts may look like Wall Street is anticipating a recession, that isn't necessarily so. In the past, the Fed has cut rates by as much as 4% during a recession, Sonu Varghese, global macro strategist at financial advisory firm Carson Group, told the WSJ. So expectations of just a single-point reduction, or less, by the end of next year is more of a prediction of Powell slightly tipping the scales to secure a soft landing. Call it a rate-cutting insurance policy.

- Brian Boyle

Big Tech

Amazon's Healthcare Dreams Are Fractured

Even Amazon can't win 'em all.

A Bloomberg report published on Monday suggests Amazon has something of a reverse Midas touch when it comes to cracking the healthcare business, where everything the e-commerce giant touches turns into largely empty cardboard boxes with way too much puffy plastic packaging inside.

Health Struggles

Amazon, along with its Big Tech brethren, has long been trying to break into the healthcare market. Just this month it announced that Prime members would get a discount on its boutique primary care business One Medical, which Amazon acquired in February. Bloomberg spoke to Amazon insiders about the company's various attempts to get a foothold in healthcare, many of which have collapsed into dust. Some described a certain amount of hubris from management, bringing in executives who had no experience in healthcare and ignored advice from people who'd worked in the sector. Others said that drawn-out debates about how to approach new products meant that Amazon was at most one step ahead of the competition, if not behind it.

One of those offerings, a telehealth service called Amazon Care, failed to take off even though it arrived in good time to catch a surge in demand for telehealth care fueled by the pandemic:

•

Sources told Bloomberg that Amazon had a hard time selling the service to employers and even when it did, it got a lukewarm reception from users. One former Amazon Care nurse told Bloomberg she would go hours without seeing a patient.

•

That might give a clue as to why Amazon targeted One Medical for acquisition. Neil Lindsay, Amazon's head of healthcare, told Bloomberg the acquisition of One Medical brought 8,500 corporate clients with it.

Lindsay pushed back against Bloomberg's portrayal of Amazon's healthcare ventures as hubristic. "I actually think that we are approaching this with a lot of humility," Lindsay said — a word not many consumers will associate with Amazon. "We're going to have some hits and misses, and we're OK with that experimenting and learning," Lindsay added, which to be fair is not confined to Amazon's healthcare ambitions — RIP the Fire Phone.

Package Deal: When it comes to its e-commerce bread-and-butter, Amazon fares much better. A report from The Wall Street Journal reveals that the company's logistics empire has finally surpassed both UPS and FedEx in terms of sheer volume packages. Like aging rock bands still going on tour, sometimes even massive tech firms just need to play the hits.

- Isobel Asher Hamilton

SPONSORED BY FREC

Your ETFs are Failing You

Sure, an index fund provides the diversification you need to avoid single-stock risk, but they are missing one critical piece:

Tax-loss harvesting.

When you track an index, you inherently have exposure to a bundle of stocks. Naturally, some of those stocks will fall, creating an opportunity to harvest the loss and save on taxes. While your index fund sleeps on that task, Frec can be your entry to the world of Direct Indexing and efficient tax-loss harvesting.

Frec executes daily tax loss harvesting that can capture up to $19 in incremental tax savings for every $100 invested and tack on an incremental 2% per year. Not too shabby.

To top it off, Frec's all-in fees come-in at a stunningly low 0.10%.

Position your portfolio for better returns and lower taxes today with Direct Indexing from Frec.

International Economics

UK Flushed with Immigrants, Labor Market Remains Tight and Unfilled

(Photo by Nick Fewings on Unsplash)

The UK is putting back up the "Help Wanted" sign it tore down with Brexit.

A new S&P Global report found that while more people are moving to the UK than leaving, the majority lack the age, status, and skills needed to fill the nearly 1 million vacant positions in the UK's labor pool, exacerbating an already tight job market.

Brexit Stage Left

After the UK withdrew from the European Union in 2020, the country enacted restrictive immigration policies that made it so EU nationals could no longer freely move to England, Scotland, Wales, and Northern Ireland. EU nationals are now required to obtain visas, and if they are joining family members settled in the UK, they must meet an £18,600 income threshold. With all the extra paperwork and limitations, moving to the UK became unattractive for many in neighboring countries.

Also, the British government has bolstered its efforts to take in asylum seekers. In 2022, refugees from countries like Ukraine, Afghanistan, and more accounted for roughly 20% of immigrants to the UK, according to Parliament data. But these are people who are fleeing war and oppression. They're not going to the UK because their firm expanded its international offices.

All this adds up to hundreds of thousands of vacant positions in the fields of healthcare, education, tech and more:

•

S&P data showed that 672,000 more people moved to the UK than left in the first half of this year. Plus, thousands more immigrated to the UK last year than originally thought.

•

Those coming for work made up roughly a fifth of the newbie Brits while non-working family members, students, and refugees made up much of the rest.

Doom Loop: To obtain workers with the right skills, employers are under pressure to offer much more attractive salaries. However, the Bank of England, which is trying to get inflation back down to 2%, is worried that tactic could cause a wage-price spiral. So as the person on a conference call who never knows what to say would say, "it's just about finding a balance."

- Griffin Kelly

Extra Upside

•

Happy holidays: Americans possibly spent a record $12 billion on Cyber Monday.

•

Beyond the Great Wall: iPhone maker Foxconn sets up $1.5 billion investment in India.

•

Go on a Cartoon Conquest. In collaboration with Hulu, NTWRK is unveiling an exclusive Animayhem capsule collection with ten one-of-a-kind pieces from these fan-favorite titles: Family Guy, Futurama, Solar Opposites and Bob's Burgers. Today, you can enter for a chance to claim a piece of animation history. Register here and tune into the live-episode on December 1st (4 PM ET, 1 PM PT).*

*Partner.