Market Observations: Recap & What's Next
Slow Week in Markets - Thoughts on Politics
Hello and welcome back
Markets have slipped this week off of all time highs, not necessarily due to any big news, just more sellers than buyers this week. As always there are many forces at work including Q3 earnings reports and preparations for the US Election in two weeks. Here is a quick look at the three major market indices this last week.
Company Earnings Reports
Banks reported strong earnings last week, driving the sector ETF XLF 0.00%↑ up to a 10% return over the last three months. Morgan Stanley MS 0.00%↑ was the largest performer reporting nearly 60% increase in investment banking revenues from last year. This shows deal flow regarding mergers and acquisitions and security issuance is strong and recovering from the high rate environment of last year.
Utility stocks have also had an impressive few weeks. The utility ETF XLU 0.00%↑ is up 17% the last three months. Much of this surge has been attributed to the resources demanded by AI compute. This NY Times article mentions AI could potentially demand up to the same energy output of entire countries like Argentina. Playing utility stocks is a classic example of buying the supply constraint. A few years ago semiconductor chips were the supply constraint play, if you wanted exposure to tech companies. Some examples of these companies are: NEE 0.00%↑ CEG 0.00%↑ SO 0.00%↑ DUK 0.00%↑.
I should also mention TSLA 0.00%↑ popped over 20% on earnings expectations and car delivery numbers. Regardless of your opinion on Elon Musk’s politics, he’s got to be up there with history’s greatest founders. I am looking forward to the documentary one day.
The coming weeks will be very interesting as big tech earnings will continue to highlight what is going on with AI spend, the election, and the Fed meets the day after the election to discuss rate policy. We should be in for a treat.
Presidential Election
I am not going to dive too deep into politics, and/or policy of either side, but I do want to talk about a couple of concerning thoughts, as this is one of the first elections I am paying attention to enough to understand the strategies.
I just finished a book called “Amusing Ourselves to Death” where the author Neil Postman discusses the idea that humans are on a track to fall into information and entertainment gluttony. This is a cycle, all civilizations go through this, when times are easy and at peace, we get complacent and comfortable. The book was written in 1985 by the way. He discussed the contrast of thought leaders like George Orwell and Aldous Huxley by stating this quote: Please read
What Orwell feared were those who would ban books. What Huxley feared was that there would be no reason to ban a book, for there would be no one who wanted to read one. Orwell feared those who would deprive us of information. Huxley feared those who would give us so much that we would be reduced to passivity and egoism. Orwell feared that the truth would be concealed from us. Huxley feared the truth would be drowned in a sea of irrelevance. Orwell feared we would become a captive culture. Huxley feared we would become a trivial culture, preoccupied with some equivalent of the feelies, the orgy porgy, and the centrifugal bumblepuppy. As Huxley remarked in Brave New World Revisited, the civil libertarians and rationalists who are ever on the alert to oppose tyranny "failed to take into account man's almost infinite appetite for distractions." In 1984, Orwell added, people are controlled by inflicting pain. In Brave New World, they are controlled by inflicting pleasure. In short, Orwell feared that what we fear will ruin us. Huxleyfeared that what we desire will ruin us.
Huxley and Orwell were both around in the early/mid 20th century, I wonder what they would think about the 21st century?
Huxley and Orwell’s time period was marked by the medium of reading and writing for communicating and transferring information. The television was created in 1927 and it was colorized in 1953. From that point on it has become imperative that a TV was at least in every living room in America, sometimes in every bedroom as well. There is nothing inherently wrong with the television, in and of itself. The purpose of the TV could be many things (1) a lamp to provide light for a room, (2) when turned off a reflective mirror to look at, (3) a drying rack if a shirt is draped over. What we use things for matter. The television in our day is the main source of information transfer. Information influences decision making, from small decisions like what the weather will be thus influencing your outfit, or as big as influencing your vote in who the most powerful individual on the planet with be as President.
The issue with television is that there is a conundrum that Neil Postman calls the “Now….This” complex. If you watch the nightly news, you will see a story about a robbery at the local gas station, then you will see bombs destroying buildings in Ukraine and Gaza, then you will see the local high school football team scores, then you hear about the local dog shelter 5k this weekend. What are you supposed to do with all that information as a human? You cannot change a single thing about any of the stories you saw, and you felt four different impactful emotions, not to mention the commercials for Jeep Grand Cherokee’s and local politicians not caring about abortion.
I have already gone further than I wanted to go, but what I am saying is the rise of information being delivered as very emotional quick headlines, as opposed to well thought out arguments and information (as the written word provides), has influenced our politics to the point that the loudest voice and the more emotional candidate will win. Everyone will agree we have far more competent, intellectual, and strong character individuals in our country. If you are wondering why they aren’t up for election, it is because you and me have chosen to reward the candidates who stir strong emotion, over the candidates who are critical thinkers and great leaders.
The last thought I will leave you with is the 1858 presidential election, Lincoln and Douglas being the candidates. In that time, presidential candidates would talk for three hours EACH on issues and then would have one hour to rebuttal the opponent. The debates would take the whole day.
My first reaction to the Lincoln Douglas debates is, wow our candidates would never speak to each other in public for 6+ hours to really iron out issues our country is facing. My second thought is, there aren’t enough Americans that would care to listen to a six/eight hour debate in person on the biggest issues America faces.
Because of our lack of accountability, we are left with three minutes to open an argument about the border, and a 60 second rebuttal. Then cut the debate down further into 15-30 second clips for TikTok and Reels. That is how a generation of voters are making decisions as to who gets put into power.
It is bigger than democrat/republican, it’s the American public in a state of information and entertainment glut and total disregard for thinking.
This Isn’t Our Home
I did not want to end this week on such a critical and pessimistic message.
What gives me hope and optimism is that whatever happens in this life, it is temporary. I was not made for this world, I am not guaranteed tomorrow, or even to the end of writing this post (if you see this I will have made it). The worries of the world continue to push me closer to Jesus as I look for hope outside of a broken world. My foundation isn’t built on a political system, or the hope for a restored America, it is built on the teachings of Jesus and the hope for a life in his presence.
How do you control only what you can control while you are here? Love God and Love People. Have a great weekend.
Romans 12:2 says “Do not conform to the pattern of this world, but be transformed by the renewing of your mind. Then you will be able to test and approve what God’s will is—his good, pleasing and perfect will.”