A summary of the important events that happened in the stock market, real estate market, and the economy this week.
The Stock Market
War of the Wits: Microsoft Ignites AI Showdown with Salesforce in the Race for Automation
Microsoft is expanding its AI capabilities with the launch of Copilot Studio, a tool that allows businesses to create autonomous AI agents. These agents can handle complex tasks independently, boosting productivity by automating routine processes. Unveiled at a London event, this move places Microsoft in direct competition with Salesforce, which has introduced its own AI platform. Copilot Studio aims to democratize AI by making it easy for non-technical users to build agents using simple commands, offering businesses a way to improve decision-making and efficiency. Microsoft’s AI tools will be available to both private companies and the public sector through a partnership with the U.K. government.
Listen Up: Apple’s AirPods Pro 2 Introduce Groundbreaking Hearing Features
Apple has introduced new hearing health features on its AirPods Pro 2, aiming to make hearing tests and assistive listening more accessible and affordable. With a free software update, users can take a clinically validated hearing test from home, and the results are stored in the Health app for easy sharing with healthcare providers. The AirPods Pro 2 also offer an assistive listening feature, turning them into discreet over-the-counter hearing aids for those with mild to moderate hearing loss. This innovation helps reduce the stigma and cost associated with traditional hearing aids, offering a more user-friendly solution for better hearing support.
Golden Opportunity: The 2024 Surge in Gold Prices Amid Economic Turbulence
Gold has become an even more popular “safe haven” investment in 2024 due to rising economic uncertainties, inflation concerns, and geopolitical tensions, pushing its price above $2,700 an ounce—a 30% rise this year. Analysts like Michael Widmer expect continued growth, predicting gold could reach $3,000 an ounce by 2025, supported by low real interest rates and concerns over rising U.S. government debt. Central banks have also increased gold holdings, adding to its demand as a hedge against economic risks. Investment experts like Todd Jablonski see value in gold as part of a diversified portfolio but caution against over-relying on it due to its potential short-term volatility. Others, like John Reade, advise investors to keep gold as a portfolio component while maintaining a balanced approach to avoid the risks of over-concentration in a single asset.
Tech Giants Turn to Nuclear Energy to Fuel AI Ambitions of Demand: Amazon and Google Lead the Way
The increasing energy demands of artificial intelligence (AI) are driving tech giants like Amazon and Google to invest in nuclear power as a sustainable, reliable energy source. AI models require vast amounts of energy, pushing companies to seek alternatives beyond traditional energy sources. Nuclear energy, with its low carbon emissions and consistency, has emerged as a viable solution. Leaders like Sam Altman of OpenAI are also backing innovative nuclear technologies, recognizing the need for advanced energy solutions to power the future of AI and ensure continued innovation. This shift represents a broader trend where the tech industry is intertwining with energy sectors to meet AI's growing needs.
Wall Street's Major Banks Report Rising Investment Banking Fees in Q3 2024
In the third quarter of 2024, Wall Street’s largest banks reported a surge in investment banking fees driven by increased M&A and corporate debt issuance. Goldman Sachs, Bank of America, and Citigroup all saw significant growth, benefiting from a healthy deal pipeline and rising corporate confidence. Optimism among bankers is bolstered by the prospect of Federal Reserve rate cuts, which would further fuel dealmaking. While investment banking thrives, other areas face slower rebounds due to regulatory hurdles and geopolitical uncertainties.
Goldman Sachs Predicts Less Then a 5% Return in the S&P 500 Over the Next 10 Years: a “Lost Decade” for Stocks, What it Means for Investors
Goldman Sachs has predicted that the stock market may face a "lost decade," with annualized returns of only 4-5%, a sharp decline from the double-digit growth of recent years. The investment bank cites rising inflation, higher interest rates, and economic headwinds as factors that could hinder future gains. While some experts agree, others believe innovation in technology and active stock picking could still provide opportunities for growth. To navigate this potential slowdown, investors are encouraged to focus on defensive sectors, value stocks, and emerging markets while maintaining a diversified portfolio and long-term strategy.
The Chinese Stock Market Rally Still Has More Potential Upside to Grow: Says Goldman Sachs
Following a significant rally in September, Chinese stocks may be positioned for further gains, supported by recent comprehensive policy measures from the Chinese government. Goldman Sachs analysts believe these measures, covering fiscal stimulus and regulatory support for various sectors, could help stabilize the market and improve earnings growth. While some investors remain cautious due to past short-lived rallies, the current policy package may offer lasting effects, making Chinese equities attractive for diversification and long-term growth. Additionally, Chinese stocks offer low correlation with global markets, presenting unique diversification opportunities for international investors.
The Economy
The Federal Reserve’s Latest Beige Book Data Shows Minimal Growth and Highlights The Struggling Manufacturing Sector
In 2024, the S&P 500 Index has surged, rising 12% since mid-August and nearly 23% year-to-date, potentially marking a second consecutive year of over 20% returns—a rarity in stock market history. Craig Fehr of Edward Jones attributes this strong performance to a growing economy, interest rate cuts, and increasing corporate profits. Recently, the index hit a new high of $5,878.46, driven by positive earnings reports from major companies like Netflix and Procter & Gamble, with 75% of over 70 firms exceeding analyst expectations. Notably, the current market momentum ahead of the presidential election is atypical; historically, markets tend to perform poorly before elections but rebound afterward. Traders are now positioning themselves based on expected fiscal policies, particularly favoring sectors sensitive to election outcomes. As over 110 companies, including Coca-Cola and Tesla, prepare to report earnings, these results are anticipated to significantly influence market volatility in the coming weeks.
Traders Are Betting On a Trump Victory In November; And They Are Betting Against Bonds
With the presidential election just two weeks away, many Wall Street investors are betting on a potential Trump victory, reflecting concerns over the differing fiscal policies of the candidates. Notable figures like Paul Tudor Jones and Stanley Druckenmiller are shifting their portfolios in anticipation of a "red wave," believing that Trump’s pro-corporate policies would boost equities while exerting pressure on U.S. treasuries, causing yields to rise. Both traders criticize the candidates for their lack of plans to address the growing deficit, with both seen as unlikely to curb government spending. The betting markets also reflect a growing confidence in a Trump win, although some investors question their reliability. Regardless of the election outcome, the prevailing sentiment suggests that higher government spending will lead to increased treasury supply, further elevating yields.
Why The S&P’S Run May Not Be Over
The stock market in 2024 has experienced remarkable growth, with year-to-date gains of 23% and the S&P 500 reaching record levels 47 times, currently enjoying a six-week winning streak. However, some analysts warn that the market may be due for a correction due to rising geopolitical tensions, concerns over third-quarter earnings, the impending presidential election, and typical year-end volatility. Despite these worries, the ongoing third-quarter earnings season is showing promise, with 75% of the 70 companies that reported outperforming expectations, suggesting broad-based strength beyond the heavily weighted tech sector. Factors such as the Federal Reserve's recent rate cuts, a robust labor market, and improving economic indicators further support market optimism. Additionally, regardless of the election outcome, increased government spending is likely to boost equity markets. With U.S. companies becoming more profitable and potential productivity gains from advancements in artificial intelligence, analysts remain hopeful that the market can continue its upward trajectory, emphasizing that bull markets often outlast bear markets.
Tax Cut Expirations And Tax Bracket Adjustments
As the presidential election approaches, 2025 tax policies are becoming a significant concern, particularly with key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) set to expire at the end of 2025. If not extended, these expirations could result in higher individual income taxes, a reduced standard deduction, the potential reintroduction of tax exemptions, and a decreased child tax credit. Former President Trump advocates for extending the tax cuts, while Vice President Harris supports extensions only for households earning less than $400,000. Financial advisors are advising clients on strategies to navigate this uncertainty, focusing on estate planning and income acceleration to benefit from current lower tax brackets before any increases occur. Recently, the IRS announced modest tax bracket adjustments for 2025, reflecting a slower pace due to lower inflation rates, with the top marginal rate of 37% applying to higher earners. However, some provisions, like the $10,000 cap on state and local tax deductions and the child tax credit, will not be adjusted for inflation and will revert to pre-2017 levels if Congress does not act.
The Federal Reserve’s Latest Beige Book Data Shows Minimal Growth and Highlights The Struggling Manufacturing Sector
The Federal Reserve's October 2024 Beige Book report, which assesses economic conditions across its twelve districts, indicates that economic activity has remained largely stable since early September, although most regions reported sluggish manufacturing. The report noted mixed consumer spending, a steady housing market, and a generally flat commercial real estate sector, with improvements in banking activity and loan demand following recent interest rate cuts. The labor market showed slight employment growth, with limited layoffs and improving worker availability, though certain skilled positions remained difficult to fill. Inflation continues to moderate, but prices for specific food items have risen, contributing to consumer price sensitivity. Despite the steady outlook, recent Beige Book reports have been viewed negatively, leading to uncertainty among economists about future growth post-election. This context suggests that the Fed is likely to implement a modest 25 basis point rate cut in November, given the persistence of inflationary pressures.
Trump’s Aggressive Tariffs And The Potential Economic Effects
Former President Trump has recently outlined ambitious plans to impose tariffs on nearly all foreign imports if reelected, aiming to bolster domestic production and reduce inflation. During his previous term, he enacted tariffs on about 14% of imports, which the Biden administration has maintained and slightly expanded. Trump has proposed tariffs of 10% to 20% on all foreign goods and up to 60% on Chinese products, suggesting these measures could stimulate job creation and lower prices for consumers by encouraging a shift toward domestic goods. However, economists warn of potential downsides, including increased costs for U.S. companies reliant on imports, which could lead to higher consumer prices and reduced competition. Additionally, retaliatory tariffs from other countries could trigger trade wars, adversely affecting U.S. farmers and manufacturers. Despite these concerns, the executive branch has significant authority to implement such tariffs without direct congressional approval. Ultimately, the effectiveness of Trump’s tariff strategy remains a contentious issue among economists, balancing the potential benefits against significant risks.
The Real Estate Market
How the Pandemic Taught Some Retail Landlords that Luxury May be Here to Stay
In a world where the future of brick-and-mortar retail is increasingly uncertain, the pandemic has taught investors one crucial lesson: luxury retail may be here to stay. As high-end brands continue to expand and find new homes in premier shopping centers, savvy investors should pay close attention to this resilient market segment, which has proven itself capable of thriving even in the most challenging economic conditions.
13 Multifamily Related Ballot Measures to Watch in November
For multifamily investors, the outcome of these ballot measures could have far-reaching implications. Rent control, tenant rights, and affordable housing policies can significantly affect profitability, particularly in markets where housing demand outstrips supply. Investors must carefully consider the potential impacts of these regulations on their portfolios and investment strategies.
In rent-controlled markets, owners may need to adjust expectations around rent growth and property valuation. However, increased tenant protections and affordability initiatives could also open up new avenues for investment, particularly in affordable housing development, where government funding and incentives may be available.
Population Growth Drives Record Apartment Demand in 7 Markets
The record apartment demand across these seven markets underscores a broader trend: people are on the move, and they are changing the face of American housing. Understanding the factors driving this shift—population growth, job opportunities, and evolving lifestyle preferences—is key to navigating the current landscape. As demographic and economic tailwinds continue to fuel demand, the U.S. apartment market remains an area of opportunity and transformation for investors.
New Residential Construction in 5 Graphs
The new residential construction data highlights a mixed yet informative picture for investors. The market is in a delicate balance, with high current completions, a decline in starts, and the multifamily sector facing unique challenges. Keeping an eye on these trends, understanding the impact of delayed starts, and aligning investment strategies accordingly will be key to navigating the residential real estate landscape in the years to come.
Office to Residential Conversions are Tough. Could Dorm-Style Co-Living be the Answer?
Dorm-style co-living isn’t a one-size-fits-all answer, but it presents a viable option for utilizing surplus office space and addressing affordability in housing-strapped cities. While the concept requires navigating regulatory landscapes, cultural attitudes, and financing hurdles, its potential for providing cost-effective housing in urban centers is significant.
For investors, cities, and developers alike, co-living conversions represent a creative, forward-thinking solution to the challenges of vacant office space and urban housing shortages. With careful planning and collaboration, it could be a game-changer in reshaping the future of cities.
Expert: Multifamily Remains Buyers' Market Amid 'Generationally High' Supply
While challenges exist, the multifamily sector’s future appears promising. Investors with patience and strategic vision could find this market’s current conditions ripe for opportunity—capitalizing on discounted deals today for potential rewards tomorrow. Whether it's seizing chances in hurricane-affected regions, targeting surban neighborhoods, or waiting for the right time to push rents, the multifamily market is certainly one to watch closely in the coming years.
Window of Opportunity Opens for CRE Investment
For investors looking to time the market, Oxford Economics’ analysis offers a strategic framework. By focusing on sectors like industrial, hotels, and residential rentals in key European markets, there’s a clear pathway for growth in CRE over the next few years. The window for CRE investment is expected to open further starting in 2025, with Europe, North America, and the Asia-Pacific region each offering different strengths and risks.
As property values stabilize and yields normalize, now may be a time to prepare for entry into promising markets. Investors who can capitalize on neutral and excess return segments are likely to find promising returns even as global economic dynamics shift. Whether the focus is on logistics warehouses in the Netherlands or budget hotels in recovering economies, understanding regional trends and sector-specific factors will be crucial for those looking to make the most of this coming CRE opportunity.
Greystar's Gary Kerr On Multifamily Development Becoming ‘More Feasible’
Kerr’s insights highlight the complexities of today’s multifamily market, shaped by factors from interest rates to evolving urban policies. With Massachusetts taking proactive steps to address housing needs and the broader real estate sector at a potential pivot point, Greystar remains committed to building at scale in promising locations. Kerr’s experience underscores the importance of adaptability and forward-thinking in navigating an industry in flux, where a mix of public-private partnerships and resilient investment strategies will be key to success.
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