🥊🙅🏻♂️ Elon Dodging Zuck?
Happy Sunday!
Rickie checking in with you from Split, Croatia! An absolutely beautiful city, as is the case for many European cities. My stop in Split marks the halfway point of a week in Croatia, where I also got a chance to see Zagreb, Plitvička Lakes National Park, and Zadar - and for having not known about the city of Zadar prior to leaving for this trip, I must say that it quickly catapulted up to one of my favorite places in Europe. It’s got a beautifully preserved Old Town, absolutely stunning beaches, great food, and is home to the best sunset in the world! I’ll attach a picture of last night’s sunset.
If you’ve been to Split, or to my next stop at Krka National Park, be sure to leave me some recommendations in the comments or in a reply to the email!
This week, we have a packed newsletter, including some macro updates on inflation, classic geopolitical tensions between U.S. and China, and an update on the Elon v. Zuckerberg fight.
Enjoy this week’s Sunday Primer!
- Humphrey, Tim, & Rickie
Market Report
Disinflation Continues but Concerns Remain…
Core inflation in the U.S., which excludes food and energy prices, rose by 0.2% for two consecutive months, the smallest increase in over two years.
This could mean that the Federal Reserve is successfully managing inflation without driving the country into a full-blown recession. The overall rise in the CPI was mainly attributed to housing costs, while used-car prices and airfares experienced declines. Despite these positive indicators, American households still faced increased costs for essentials, with groceries and utilities seeing significant hikes.
Consumer real wages have started to see an upward trajectory, benefiting from the economic conditions. In July, inflation-adjusted wages rose by 0.3%, showing a 1.1% increase from the previous year. Nevertheless, the future remains uncertain for both the economy and inflation rates, with potential hurdles like the resumption of student loan payments and possible spikes in gasoline prices.
Though the official data suggests that inflation is slowing, the practical experience for many Americans is a continuous rise in the costs of everyday items. The Bureau of Labor Statistics report highlights significant increases in the prices of common goods since the pandemic's onset. This includes basic commodities like ham, chocolate chip cookies, and beef. Since February 2020, the cost of home food has surged by over 23%. This price increase becomes even more problematic when considering that wage growth hasn't proportionately kept up.
The U.S. and China are ‘Social Distancing’
Trade ties between the U.S. and China have deteriorated, leading to China's goods accounting for the smallest percentage of U.S. imports in 20 years.
According to the Census Bureau data, only 13.3% of U.S. goods imports came from China in the first half of the year, a significant drop from its peak of 21.6% in 2017. This decline began during the Trump administration in 2018, accelerated during the COVID-19 pandemic due to supply chain disruptions, and has continued under the Biden administration's increased scrutiny of China, especially in areas of advanced technology.
Companies, in response to these geopolitical tensions, have been diversifying their supply chains, leading to a shift towards Mexico, Europe, and other parts of Asia, such as India, Thailand, and Vietnam.
Consequently, Mexico’s share of U.S. imports has now matched China's, bolstered by the free-trade agreement between the U.S., Mexico, and Canada and a post-pandemic preference for shorter supply chains. When exports and imports are combined, Mexico emerges as the U.S.'s top trading partner, pushing China to third place behind Canada. This shift has resulted in a decrease in the U.S. trade deficit with China, reaching $313 billion in June.
Elon vs. Zuck Called Off?
After months of going back and forth, it looks like the Elon vs. Zuckerberg fight will be postponed. Mark Zuckerberg posted on Threads today, noting that “Elon isn’t serious and it’s time to move on”. This comes just days after Elon tweeted about the fight being held in Italy.
Definitely excited to see what happens next.
Forecast Ahead
Big Number: $25 Trillion
The U.S. government's borrowing surged to a record $25.137 trillion in July, a significant increase from under $20 trillion in June 2020 and under $15 trillion in June 2018.
This sharp rise in borrowing began in 2018 due to tax cuts and escalated in 2020 because of the pandemic response. Currently, increasing interest rates are elevating the debt service cost, and the deteriorating federal budget deficit outlook is causing further concern.
Overcome the Sunday Scaries
Memes of the Week
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