There’s plenty in markets to talk about while passing the potatoes on Thanksgiving.
Inflation, work, artificial intelligence, labor strikes, and even Taylor Swift may be fodder for Turkey Day table talk.
To help guide your discussions, here’s what top executives, strategists, and experts have told Yahoo Finance about the biggest topics in markets right now:
1. The worst of inflation may be ‘behind us’
Consumers may notice that their Thanksgiving feast costs less than it did last year, when the price of the holiday meal hit a record high, according to the American Farm Bureau.
“As far as the consumer right now, certainly inflation is top of mind,” Butterball CEO Jay Jandrain told Yahoo Finance. “The great news really is … prices are down this year, which is good to see [and] helps the consumer out.”
As of October, overall inflation has moderated, rising 3.2% over last year as the inflation-busting Federal Reserve maintains its long-run inflation target of 2%.
Prices aren’t necessarily falling across the board yet, but pockets of deflation have emerged month over month and year over year.
“I think the most important observation we’ve made is that the worst of the inflationary environment is behind us,” Home Depot CFO Richard McPhail said during the company’s third quarter earnings call, adding: “Some prices are settling at levels higher than 2022. Others are settling lower.”
2. Gas prices near lowest levels since 2020
Those hitting the road this Thanksgiving may also witness a multiyear low in the national average gas price at $3.25 per gallon, according to GasBuddy forecasts.
“Looking at the nominal price today compared to where we were prior to the pandemic, while gas prices back then were about $2.80 a gallon or so … adjusted for inflation, the price today is not too far off the mark from 2018 and 2019,” GasBuddy’s head of petroleum analysis Patrick De Haan said, later adding: “65,000 stations [are] now below the $3 a gallon mark. In fact, [there are] now 13 states where average prices have also slipped below that $3 mark.”
AAA noted that sales at the pump are a leading economic indicator and anticipates that the Thanksgiving holiday will produce the third-highest travel volume on record.
“Gasoline was more expensive last year, but we’re buying less now,” AAA Northeast senior manager Robert Sinclair told Yahoo Finance Live. “I think that’s a strong indicator of what’s happening with personal finance and being able to deal with it.”
The OPEC+ meeting that was delayed until Nov. 30 is expected to influence gas price dynamics. The group of major oil producers led by Saudi Arabia may hint at whether it will implement additional supply cuts next year as non-OPEC countries ramp up production.
3. AI isn’t new, but generative AI has accelerated demand
ChatGPT’s parent company, OpenAI, has dominated the generative AI discussion this year — even more so after the surprise ousting and then return of its CEO, Sam Altman.
The attention thrust toward the AI startup — with implications for investors — has cast a spotlight on another household name: Microsoft (MSFT).
Earlier this year, the megacap tech company announced a multibillion-dollar investment in OpenAI, with plans to accelerate its artificial intelligence capabilities and yield a new leg of growth.
Artificial intelligence has been embedded within technology for decades, but its offspring — generative AI — is expected to fuel the next industrial revolution. The benefits of AI touted by technology executives include hyper-charged productivity, accelerated intelligence, and fattened margins.
“I think it is worth remembering that AI is not a particularly new technology,” AOL co-founder and Revolution CEO Steve Case told Yahoo Finance in late October. “What’s new is it’s become much more popularized. ChatGPT, in particular, had an overnight success — almost a Netscape moment that we saw with the internet, where the internet was bubbling and selling things accelerated.”
4. The US staved off recession so far, though vibes vary across income groups
Earlier this month, Federal Reserve Chair Jerome Powell admitted that the Fed underestimated the balance sheet strength of small businesses and households.
And the central bank isn’t the only one noticing stronger-than-expected consumer resilience.
“Everyone’s been talking about how bad the economy is or is about to be, but when we look at the fundamentals, we’re actually really constructive looking ahead,” Drew Pettit, Citi’s director of US equity strategy, told Yahoo Finance Live. “So it’s almost the boy who cried wolf here when it comes to recession.”
However, the reality is that the economy is bifurcated, and many low-income households have been feeling recession-like pressure while higher-income households have fared better.
“They don’t have excess savings anymore,” JPMorgan Chase CEO Jamie Dimon said to Yahoo Finance about lower-income consumers. “The middle class is getting close to zero — no excess savings — but they still have jobs, and wages are going up. And then obviously wealthy people still have excess and stuff like that.”
5. The housing market perplexes buyers, sellers, and builders
With shelter costs remaining the largest contributor to overall inflation, the housing market continues to weigh on overall sentiment about the economy.
US existing home sales fell to 3.79 million in October, a level unseen since 2010. As for new homes, things have started looking up for builders, such as Toll Brothers (TOL), which have been identifying markets where demand is rebounding.
Read more: Mortgage rates at 20-year high: Is 2023 a good time to buy a house?
“While builder sentiment was down again in November, recent macroeconomic data point to improving conditions for home construction in the coming months,” National Association of Home Builders (NAHB) chief economist Robert Dietz said in a November statement on builder sentiment.
“Given the lack of existing home inventory, somewhat lower mortgage rates will price-in housing demand and likely set the stage for improved builder views of market conditions in December,” Dietz added.
However, a demand resurgence strong enough to boost home sales and offset mortgage rates well over 7% likely depends on tens of millions of millennials entering their prime homebuying years combined with builders continuing to reduce home prices.
“It’s going to be more of a slow trickle of people deciding that, ‘You know, I can’t wait any longer, and I want to move,'” Redfin chief economist Daryl Fairweather told Yahoo Finance Live. “But a strong economy does mean that more people are moving for job opportunities. They feel more confident. They feel like even though rates are high, they can make it work for their budget.”
6. After strong year-to-date returns, what’s next for the Magnificent Seven tech stocks?
According to data from Goldman Sachs, the Magnificent Seven — a group of megacap tech stocks composed of Alphabet (GOOG, GOOGL), Amazon (AMZN), Apple (AAPL), Meta (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA) — represents 29% of the S&P 500’s market cap. That’s the largest percentage of S&P 500 market cap for a cohort of this size, ever.
Goldman still bullishly forecasts an 11% compound annual growth on these names from 2023 to 2025. And it isn’t alone in its assessment; a top global strategist at BlackRock believes “there’s more to go” for these names.
“We are currently overweight this theme, and the Magnificent Seven is a big part of that,” BlackRock global chief investment strategist Wei Li told Yahoo Finance Live.
“Earnings are coming through for these companies,” Li continued. “If you look ahead to 2024 US equity earnings expectations, tech is driving 50% and more of those high-single-digit earnings growth expectations. It shows that expectations are high, but they are meeting that high bar.”
7. What the year of collective bargaining says about today’s employment situation
Labor negotiations throughout 2023 have threatened deep economic risks if left unresolved.
Among the wide-ranging actions were an averted UPS strike, a historic Kaiser Permanente healthcare workers strike, a 148-day screenwriters strike, a 118-day actors strike, and the longest auto workers strike in 25 years.
Year to date, 736,000 people in the aforementioned strikes have demanded from business executives better compensation, working conditions, healthcare coverage, and protections from replacement by artificial intelligence.
But while strikes make headlines, the overall labor market that the Fed monitors has remained stable.
“This is a very solid American economic expansion featuring historic rates of employment and a very low unemployment rate,” RSM chief economist Joe Brusuelas told Yahoo Finance following the October jobs report. “Look, average hourly earnings, they’re easing. … Take a look at the three-month run rate on that, you’re going to get a much more friendly economic and financial outlook, so I don’t see here much not to like.”
8. Retailers morph Black Friday into a monthlong promotional event
Even the largest retail companies and power merchandisers pulled their promotional levers early to boost sales.
“So much of our business is dependent upon the holiday shopping period,” Walmart CFO John David Rainey told Yahoo Finance. “The fourth quarter in general is about 20% larger for us, and … Black Friday really is no longer a day — it’s more of a concept. We at Walmart started our events on Nov. 8 with deals for our customers.”
Read more: 6 ways to save money on your Black Friday shopping list
The critical holiday shopping season comes as retailers grapple with the return of student loan payments, seen as a bogeyman for consumer spending.
“Overall, consumers are still spending, but pressures like higher interest rates, the resumption of student loan repayments, increased credit card debt, and reduced savings rates have left them with less discretionary income, forcing them to make trade-offs in their family budgets,” Target CEO Brian Cornell said on the company’s third quarter earnings call.
9. Travel roars back as Taylor Swift, Beyoncé power live events
Air travel is back, with TSA passenger throughput on pace to surpass 2019 levels, a pre-pandemic measuring stick for the steel bird operators.
The airline industry has welcomed all forms of travel, whether it be for corporate events and vacations or for the record-setting Taylor Swift and Beyoncé concerts that have powered the experience economy in 2023.
“The big revenge travel, I would say, is behind us,” Delta CEO Ed Bastian told Yahoo Finance in November. “As you’re looking at pricing, as you’re looking at trends, we’re coming off a peak last year, where people just needed to go. They didn’t care what they paid or where they went, they just needed to get out.”
Click here for in-depth analysis of the latest stock market news and events moving stock prices.
Read the latest financial and business news from Yahoo Finance
Read the full article here
