Global Market News

Global Equities Decline

Global equities declined on the week, with the Dow Jones and S&P 500 losing 0.15% and 1.37%, respectively, while the Nasdaq dropped 1.50%. The US 10-year Treasury note continued its climb, ending the week at 4.38%. The price of a barrel of West Texas Intermediate crude oil decreased more than 3%, falling back below $70 to $69.49. Volatility, as measured by the CBOE Volatility Index, rose a couple of points to 21.88.

US Economy Grows Solidly in Q3

The US economy posted a 2.8% growth rate for the third quarter of 2024 as inflation has slowed and consumer spending has risen. In fact, consumer spending increased at its fastest rate in more than a year and a half. The 2.8% growth rate came in slightly lower than the expectation of 3.0% due to a decline in exports and a boost in imports which some are contributing to stockpiling ahead of the brief port strike on the East Coast last month. Overall, the US economy has shown resilience despite the cumulative 5.25% of interest rate increases in 2022 and 2023 from the Federal Reserve to reign in inflation.

Updated Market Figures

International Developments

Elections Abroad Increase Uncertainty

The Liberal Democratic Party in Japan lost its parliamentary majority for the first time in 15 years in the October 27th general election, securing only 215 out of the 465 seats with its coalition partner. This outcome is attributed to public dissatisfaction over a political funding scandal. In Georgia’s parliamentary election on October 28th, the ruling Georgian Dream party claimed victory with 54% of the vote, but this result was widely disputed due to allegations of electoral misconduct. Concerns have arisen regarding Georgia’s democratic trajectory in light of these allegations. Bulgaria’s parliamentary elections, also held on October 28th resulted in former Prime Minister Boyko Borisov’s Gerb party winning the most votes with 26%, but this was insufficient to form a government so it will have to seek a coalition partner(s). This was Bulgaria’s seventh election in four years, triggered by the failure of parties to form a governing coalition after an inconclusive election on June 9th.

Iranian President Vows Appropriate Response to Israeli Strikes, Israeli Parliament Bans UNRWA

On October 27th, Iranian President Masoud Pezeshkian stated that Iran does not seek war with Israel but is prepared to respond to recent Israeli airstrikes on Iranian military sites, which were conducted in retaliation for an attack on Israel by Tehran on October 1st. Pezeshkian attributed the escalating regional tensions to Israeli aggression and US support for Israel. Meanwhile, the Israeli parliament passed legislation on Monday prohibiting the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) from operating within Israel. This decision raises concerns about the future of aid to Gaza, where UNRWA provides essential services to millions of Palestinians and has been a key player in aid distribution throughout the ongoing Israel-Hamas war. Critics of the legislation, including the US State Department and UNICEF, argue that it will significantly hinder humanitarian efforts and could lead to a collapse of the aid system in Gaza.

North Korea Successfully Test-fires ICBM, Deploys Roughly 10,000 Troops to Russia

On Friday, North Korea launched an intercontinental ballistic missile (ICBM) that flew for a record 86 minutes, reaching an altitude of 4,350 miles, before landing in the waters off its east coast. This launch, condemned by the UN and the US as a violation of UN Security Council resolutions, prompted South Korea to impose new sanctions on North Korea. The US and South Korea also allege that North Korea has deployed approximately 10,000 troops to eastern Russia for training purposes, with a smaller contingent sent to Kursk in western Russia and thousands more expected. These allegations, which both North Korea and Russia have neither confirmed nor denied, have raised concerns about the deepening relationship between the two countries.

US Social & Political Developments

Chinese Hackers Target Both Campaigns, Arson Attacks in the Northwest Don’t Deter Early Voters

On October 25th it was reported that Chinese hackers had targeted the cellphones of individuals associated with both the Trump and Harris campaigns. US officials believe that this was part of a larger espionage campaign by China. An unnamed source told the Associated Press that the Trump campaign was advised of the hacking attempts this week. However, a spokesperson for the Chinese Embassy in Washington, DC denied that the Chinese government was interfering in the US elections. Earlier this week, two ballot boxes in the Pacific Northwest were set on fire, one in Portland, Oregon, and the other in Vancouver, Washington. An unnamed law enforcement official told the Associated Press that the suspect attached an incendiary device to each of the ballot boxes in the early morning hours. Despite these incidences, more than 68 million voters have taken advantage of early voting in the US in what is expected to be a very close election.

Space Force Warns About Increasing Chinese Space Capability

General Chance Saltzman, head of space operations for the US Space Force, expressed concern over the rapid development of Chinese military capabilities in space. Saltzman, who spoke during a European tour to raise awareness of potential space warfare, stated that the speed and scope of China’s development of space weapons is “very threatening” and increases the risk of conflict in orbit. In response to the growing threat posed by China and Russia over the past 20 years, the US established the Space Force in 2019 under then-President Donald Trump. China has prioritized space, cyber, and information warfare as part of its military modernization efforts, consolidating these domains under the Strategic Support Force (SSF) in 2015 and further enhancing their importance in 2023 by placing them under direct military leadership.

Corporate/Sector News

Investors Worry About Big Techs’ Heavy AI Spending

Investors are concerned about the soaring investment in artificial intelligence (AI) by Big Tech companies, as capital spending in this area is projected to exceed $200 billion in 2024. This spending surge, driven by the race to develop and deploy generative AI, has resulted in a 62% year-over-year increase in capital expenditure by the four largest US internet companies – Microsoft, Meta, Amazon, and Alphabet – during the recent quarter. Although these companies highlight AI’s potential to enhance core services, reduce operating costs, and generate new revenue streams, analysts remain skeptical about the tangible benefits and the impact on profit margins, particularly in 2025. The market reaction on Thursday, with the tech-heavy Nasdaq Composite closing 2.8% lower, reflects these anxieties and raises questions about the sustainability of Big Tech’s recent strong earnings performance.

Gold and Bitcoin Prices Continue to Rise

Driven by emerging market central bank purchases, Goldman Sachs Research predicts that the price of gold will rise to $3,000 per troy ounce by the end of 2025— it reached a record high of $2,790.15 on Thursday. The increased demand for gold, estimated to lift prices by at least 2.4% for every 100 tons of physical demand, stems from concerns about financial sanctions and US debt sustainability, particularly following the freezing of Russian central bank assets in 2022. Meanwhile, Bitcoin surged past $73,000 on October 29th, reaching its highest level since March 2024 as investors anticipated the outcome of the US presidential election. This price surge, which triggered over $113 million in short liquidations in the preceding 24 hours, was fueled by optimism surrounding the potential impact of the election results on the regulatory landscape for cryptocurrencies. Despite previously struggling to maintain a value above $70,000 in 2024, Bitcoin is on track for a 14% gain in October, its best monthly performance since March.

SMCI’s Stock Plummets as EY Resigns as Auditor

Shares of Super Micro Computer (SMCI), a maker of artificial intelligence servers, plummeted almost 33% on Wednesday after the company’s auditor, Ernst & Young LLP (EY), resigned. EY submitted its resignation letter to the audit committee of Super Micro’s board of directors on October 24th. Although Super Micro disagrees with EY’s decision and has started searching for a new auditor, the company claims it is taking EY’s concerns seriously. This event follows a series of challenges for Super Micro, including a short-seller report from Hindenburg Research in August, a subsequent delay in its annual 10-K filing, and an investigation initiated by the Department of Justice in September. Despite these issues, Super Micro maintains that it does not anticipate any significant revisions to its financial statements for fiscal year 2024 or prior years.

Company Profile: Apple

Cook’s Focus on Quality is Steering Apple into the Future

Tim Cook, Apple’s CEO, has a strategic philosophy of focusing on “Not first, but best,” highlighting the company’s commitment to innovating products that profoundly impact users’ lives. Apple’s growth under Cook is substantial, valued at over $2.5 trillion, with product launches boosting its market cap by hundreds of billions in a day. Apple recently launched two of its most ambitious products to date—the Vision Pro headset and Apple Intelligence. Vision Pro, a $3,500 mixed-reality device, offers a highly immersive experience but is currently targeted at early adopters, with Cook expressing confidence that future versions will be more accessible and continue to improve. The Apple Intelligence platform aims to streamline users’ lives through advanced, user-friendly AI tools integrated across Apple devices, which Cook views as a transformative milestone akin to past innovations like the iPhone’s touch interface, positioning Apple to lead in a highly competitive tech landscape. Looking forward, Cook’s vision centers on refining spatial computing and AI capabilities to maintain Apple’s position at the forefront of consumer tech, with anticipated advancements that could make products like Vision Pro mainstream as technology improves and prices decrease.

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Source: Bloomberg