🏦📝 Latest Fed Policy Meeting Breakdown
Happy Sunday all,
I hope you’re having a relaxing weekend. I spent the day yesterday in San Francisco at the Warriors game and having lunch with a few friends. We had dumplings 🥟, so good! It’s been rather stormy in the Bay Area, abnormally wet for this time of year. According to the National Weather Service, the past 10 days in downtown SF were the wettest in more than 150 years! Hopefully you’re staying dryer than we are.
Enjoy this Sunday edition of Hump Days where we go over what’s to come this week, recap Tesla’s recent delivery numbers, and share what we’ve been reading.
—Humphrey, Tim, and Rickie
Market Report
Last month's minutes of the Fed’s policy meeting, released Wednesday, displayed a blunt message to investors: risks to inflation are to the upside and rates will be high for some time. Here are the full Fed minutes, but if you don’t want to read the whole thing (who does??), here were some things we noticed:
“An unwarranted easing in financial conditions, especially if driven by a misperception by the public of the Committee's reaction function, would complicate the Committee's effort to restore price stability." In simple terms, markets going up makes the Fed’s job harder.
A number of participants emphasized that it would be important to clearly communicate that a slowing in the pace of rate increases was not an indication of any weakening of the Committee's resolve to achieve its price-stability goal or a judgment that inflation was already on a persistent downward path.” In simple terms, slowing the pace of rate hikes does not necessarily mean that the Fed believes inflation is coming down.
“With inflation still elevated, the staff continued to view the risks to the inflation projection as skewed to the upside.”
In its latest press release on Monday, Tesla announced that it had delivered a record-breaking 405,278 vehicles during the fourth quarter of 2022. While this is a new record for the company, it falls short of most analysts' estimates, which were around 420,760 according to Bloomberg. While Tesla's deliveries for the year still grew by 40% compared to the previous year, reaching a total of 1.31 million, this figure falls short of the 50% growth the company had originally projected.
In China, a key area of growth for Tesla, it has cut prices twice in the past 10 weeks. The starting price for Tesla China’s Model Y is now 43% less than the base Model Y in the US and the Model 3 is now 30% cheaper than in the US. Despite this, Tesla’s December deliveries in China dropped by about 20% from the same month in 2021.
Cumulative net retail purchases of TSLA soared by more than 420% to $15.41 billion, edging out Apple as the most-purchased single stock by individual investors in 2022. Putting this in context, retail investors have bought more Tesla stock over the last 6 months ($13 billion) than they have done overall in the 60 months prior.
Forecast Ahead
The big focus next week will be on CPI. Will inflation keep coming down or will there be a reacceleration? Analysts expect a 0.1% increase in prices from the previous month and an annual inflation rate of 6.5%. This would mark the slowest annual inflation rate since October 2021.
Corporate Earnings (Throughout Week)
Monday, January 9th - Jefferies Financial Group (JEF)
Tuesday, January 10th - Albertsons Companies (ACI), Bed Bath & Beyond (BBBY)
Thursday, January 12th - Taiwan Semiconductor Manufacturing Company (TSM)
Friday, January 13th - UnitedHealth Group (UNH), JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), BlackRock (BLK), Citigroup (C), Bank of New York Mellon (BK), First Republic Bank (FRC), and Delta Air Lines (DAL)
What We Read Last Week
Eye on the Market Outlook 2023: The End of the Affair (JP Morgan Asset Management)
Economist Says His Indicator That Predicted Eight US Recessions Is Wrong This Year (Bloomberg)
The rise of ‘Zoomtowns’ is going to make home prices and rents cheaper for everyone (Business Insider)
Microsoft and OpenAI Working on ChatGPT-Powered Bing in Challenge to Google (The Information)
Ghost Writer: Microsoft Looks to Add OpenAI’s Chatbot Technology to Word, Email (The Information)
Here’s (Almost) Everything Wall Street Expects in 2023 (Bloomberg)
The Many Forces Fueling Tesla’s $860 Billion Tumble (Bloomberg)