Unadorned Notes: July 12-13, 2024
Trump Shot at Rally; Trump Policies May Spur Inflation; New Ruling Hurts Business Succession; Homebuilder Stocks Surge on Rate Cut Hopes; Nvidia’s New AI Chips Surge
U.S. Politics, Policies, and Business Updates
Trump Shot at Rally: Former President Donald Trump was escorted off stage at a rally in Butler, Pennsylvania, after gunshots were heard. Trump appeared to have blood on his face but was later confirmed to be “fine” and is being checked at a medical facility. The Butler County District Attorney reported that the shooter and a rally attendee were killed. President Joe Biden has been briefed on the incident.1
QZ’s Comment: If Donald Trump remains well and healthy, it seems certain that he will win the election in November 2024.
Trump Policies May Spur Inflation: Economists warn that Donald Trump’s proposed 10% general tariff on imports and the extension of 2017 tax cuts could lead to higher inflation. The tariffs would increase business costs, potentially passing them onto consumers. Moody’s Analytics predicts higher inflation and weaker economic growth if Trump wins and Republicans control Congress. Critics argue that tariffs could harm domestic industries and result in retaliatory measures from other countries. Despite these concerns, Trump’s campaign insists his policies would lower prices and boost the economy.2
New Ruling Hurts Business Succession: The Supreme Court’s Connelly v. United States decision complicates a common succession strategy for small businesses. The ruling affects firms that use life insurance to fund stock repurchases upon an owner’s death, leading to unexpected tax liabilities. In the case, Crown C Supply’s life insurance proceeds increased the company’s estate value, resulting in an additional $889,914 in estate taxes. Experts advise business owners to review buy-sell agreements and consider cross-purchase agreements or LLCs to mitigate tax impacts. This decision underscores the importance of thorough tax and legal planning for closely held businesses.3
Homebuilder Stocks Surge on Rate Cut Hopes: Homebuilder stocks rose sharply after a cooler-than-expected June 2024 inflation report increased speculation of a Federal Reserve rate cut. Investors now see a 90% chance of a rate reduction in September 2024, according to CME Group’s FedWatch tool. Lower mortgage rates could entice sidelined homebuyers back into the market, boosting confidence in homebuilder prospects. Shares of D.R. Horton, Toll Brothers, PulteGroup, and Lennar Corporation gained over 6%, while KB Home saw a nearly 10% increase. This optimism is tied to the expectation that lower rates will reduce borrowing costs and increase housing demand.4
Nvidia’s New AI Chips Surge: Nvidia’s new Blackwell GPUs are poised to significantly boost sales, following the success of the H100 GPU. The GB200 NVL72 system, featuring 72 Blackwell GPUs, is expected to drive substantial demand despite its high price of $3.8 million. Analysts predict Nvidia’s data center revenue could reach $200 billion in 2025, surpassing Wall Street’s current expectations. The new GPUs offer 30 times the performance for AI inference and are four times faster at training models than previous versions. AI model development costs continue to rise, indicating sustained demand for Nvidia’s advanced AI servers.5