🤨 What inflation really means for markets

👀 WHAT JUST HAPPENED?

US

Europe

Asia

✍️ WHAT DOES ALL THIS MEAN?

US inflation came in lower than economists expected in October, and given the economy is holding up pretty well, that got investors believing the country just might stick the seemingly impossible “soft landing” – cooling ultra-hot inflation with higher interest rates without causing a recession. And that new optimism helped give stocks a boost.

Home Depot’s third-quarter earnings were lower than the same time last year, but they weren’t as disastrous as investors feared, which helped the stock initially rise. Target and Walmart exceeded investors’ modest expectations too. But all three big-box mavens delivered cautious outlooks and that may leave the whole sector feeling dour, despite the better-than-expected US retail sales data for October.

In the UK, data showed that workers’ wages grew in “real terms” last quarter. In other words, even after you factor in the inflation rate, workers got paid a bit more than they did at the same time last year. Throw in October inflation data that showed a bigger-than-expected easing in price hikes, and it was a surprise to investors and economists alike that shoppers didn't take advantage. Instead, retail sales data showed that the volume of products bought in October dropped from the month before, confounding forecasts of an increase.

Japan’s third-quarter economic growth fell short of expectations and that was a disappointment for investors, sure. But it didn’t appear to discourage Warren Buffett’s Berkshire Hathaway. The global investment conglomerate sold yen-denominated bonds in the country for the second time this year. The move will give the firm more money to plow into its recent Japanese stock bets and all but eliminate the currency risk involved, too.

Retail sales in China grew more quickly than expected in October and so did industrial production, with both helping to partially offset weakness in the country’s real estate sector. But Alibaba’s quarterly results were a wet blanket. The company didn’t just miss its targets: it also announced it would shelve plans to spin off its cloud business, blaming ongoing geopolitical tensions between the US and China.

SPONSORED BY ORACLE

How to keep your business energized in today’s tough conditions

Business leaders are still expected to deliver in this cost-cutting climate – and that’s a tough ask.

That’s why Oracle NetSuite compiled a guide filled with 17 innovative ways to energize a business, increase productivity, and bring in more sales.

Here’s one: embrace automation. That doesn’t mean replacing workers with robots, by any means, but letting newly affordable solutions take care of time-consuming, monotonous tasks.

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If you want to discover the other 16 ways to keep your business thriving in today’s environment, check out Oracle NetSuite’s guide here.

🔍 THIS WEEK’S FOCUS: What goes up doesn’t always come down.

Inflation “cooling” is good news, sure, but day to day, the benefits can be pretty hard to see. After all, inflation measures the rate at which prices are increasing. So, yes, it’s ideal that they’re not increasing at a rate of knots, but unless they’re falling, consumers still have to contend with elevated prices, leaving them with tightened budgets.

Earlier this year, that might not have seemed too pressing an issue: US consumers, for instance, still had ample savings left over from the pandemic period. But as the year has worn on, most people have exhausted those reserves and now their ability to keep on spending looks less certain.

And that could be a bigger worry than people realize. The latest inflation figures suggest the US can deliver a soft landing, but a big bump in the road could be the financial health of the country’s consumers. With private consumption representing almost 70% of the US economy, how Main Street’s Mike and May manage their pocketbooks could be the difference between running smack dab into a recession and avoiding one.

And there’d be economic ripples the world over: when the US sneezes, the world catches a cold. So even though investment bank Goldman Sachs sees only a 15% chance of a US recession in the next year, and expects the key US stock market to end 2024 some 5% higher, it’s worth keeping a close eye on consumer spending as we head into the holiday season.

📅 THE WEEK AHEAD

SPONSORED BY OAKLEY CAPITAL INVESTMENTS

Private equity: top of the class

Private equity has been one of the top-performing asset classes for decades. Over the last 5 years the global PE benchmark has grown at almost double the rate of its public equity equivalent.

Whilst PE funds are hard to access, Listed PE is the gateway to this performance, which are listed companies that invest in PE funds. Oakley Capital Investments (OCI) is one such company and its 5-year 150% share price increase speaks for itself.

PE performs so well because despite the stereotypes, it gives far greater exposure to fast growing, new economy, innovative companies, most of which are choosing to avoid costly and restrictive public markets.