Going Rate
"It all comes down to interest rates. As an investor, all you’re doing is putting up a lump-sum payment for a future cash flow.” — Ray Dalio
Hey, Risers!
Looking ahead.
What a week. The looming government shutdown was averted, as House Speaker Kevin McCarthy reached a deal to keep the lights on for another 45 days. It was a pyrrhic victory, however, as McCarthy was voted out of his speakership by the Republicans. No new Speaker has been named, which casts a pall on the likelihood of averting another standoff in the coming weeks.
Although shutdowns are unlikely to impact financial markets, we are watching the developments closely.
99rises performance: Our three main long-short blocks are flat to up in 2023 after outperforming the Nasdaq 100 Index by 23-38% in 2022.
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Economy & Markets
Spooky season.
Renewed Interest
Rates for longer-duration debt were on the move this week, with the 20-year Treasury crossing 5%. The 10-year Treasury yield rose to levels we haven’t seen since 2007, before the Great Financial Crisis. The obvious implication is that borrowing costs will keep rising for businesses and consumers, and as we have explained several times in this forum, these higher rates should also dampen equity multiples (since a higher discount rate will lower the present value of cash flows in a discounted-cash-flow model).
Our take: A worrying development that heightens the risk of recession.
Work On It
Lots of employment data this week. The U.S. Bureau of Labor Statistics released Job Openings and Labor Turnover Survey (JOLTS) results showing more than 9.6 million job openings in August. The number was far bigger than estimates and suggests that the job market is still strong.
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