Unadorned Notes: July 19-21, 2024
Biden Withdraws, Backs Harris; Trump Accepts GOP Nomination; Equity Funds See Major Inflows; Tech Selloff a Buying Opportunity; Rivals Benefit from CrowdStrike Issue
U.S. Politics and Geopolitics
Biden Withdraws, Backs Harris: President Joe Biden has withdrawn from the 2024 presidential race, citing a need to focus on his current duties and endorsing Vice President Kamala Harris as the Democratic nominee. His decision followed a poor debate performance against Donald Trump, raising concerns about his fitness for office. Biden’s announcement, delivered four months before the election, has disrupted the campaign landscape, with Democrats rallying around Harris. Notable endorsements for Harris include the Congressional Black Caucus and former President Bill Clinton. Meanwhile, former President Barack Obama has pledged to support the eventual party nominee.1
QZ’s Comment: Even if the odds are against the Democrats in the presidential race, Joe Biden’s decision to withdraw could introduce a younger candidate who might appeal more to swing voters and energize the base, boosting turnout and positively affecting down-ballot races. It remains to be seen whether Kamala Harris can invigorate the electorate enough to overcome the significant challenges ahead.
Trump Accepts GOP Nomination: Former President Donald Trump accepted the Republican presidential nomination for the third time. Trump recounted the recent assassination attempt at a Pennsylvania rally, expressing gratitude for the Secret Service and what he deemed to be divine intervention. He criticized President Joe Biden’s leadership, vowing to restore America’s strength and stability. Trump also addressed the chaotic Afghanistan withdrawal, attributing it to the Biden administration, despite it being part of a deal he initiated. He concluded by appealing for unity and asking for voter support in the November 2024 election.2
Gershkovich Sentenced for Espionage: A Russian court convicted U.S. journalist Evan Gershkovich of espionage and sentenced him to 16 years in a maximum-security penal colony. Gershkovich, who denied the charges, was accused of gathering sensitive information about a tank factory. His arrest in March 2023 led to the departure of many Western journalists from Moscow. U.S. President Joe Biden condemned the verdict, asserting Gershkovich’s innocence and calling for his release. The trial, marked by closed proceedings and a swift verdict, has fueled speculation about a potential U.S.-Russia prisoner exchange.3
Finance and Business Updates
Equity Funds See Major Inflows: Global equity funds attracted $26.51 billion in inflows for the fourth consecutive week to July 17, 2024, driven by expectations of a Federal Reserve rate cut following cooling inflation data. The MSCI global stock index reached an all-time high last Friday, despite a 1.3% drop this week due to tech sector sell-offs amid Sino-U.S. trade tensions. U.S. equity funds saw the largest inflows since February 2021, with $21.7 billion, while European and Asian funds received $2.2 billion and $2.03 billion, respectively. Global bond funds remained popular, securing $15.84 billion, marking the 30th week of inflows. Emerging market equity funds saw $1 billion in outflows, ending a three-week buying streak.4
Tech Selloff a Buying Opportunity: The recent tech stock selloff, triggered by Donald Trump’s hawkish comments on Taiwan and potential new tariffs, saw the Nasdaq 100 drop over 4%. Wedbush analyst Dan Ives considers this a “golden buying opportunity”, attributing the decline to election-related rhetoric. Ives asserts that Trump’s comments are more bluster than substance and do not alter the positive outlook for the AI Revolution and tech sector. Principal Asset Management’s Todd Jablonski echoes this sentiment, viewing the selloff as a minor market fluctuation typical before elections. Ives believes strong second-quarter earnings will further boost tech stocks, projecting a 15% increase for the year.5
Global IT Outage Grounds Flights: A major global IT outage on Friday disrupted airlines, banks, and other industries worldwide, causing thousands of flight cancellations. U.S. airlines like United, American, and Delta ordered a “global ground stop”, affecting schedules significantly. Microsoft identified a defect in a CrowdStrike update as the cause, leading to widespread computer crashes and blue error screens. Alaska and New Hampshire experienced temporary 911 service outages. CrowdStrike is conducting a root cause analysis to prevent future incidents.6
Rivals Benefit from CrowdStrike Issue: CrowdStrike’s recent update caused widespread Microsoft Windows outages, impacting millions of devices. The company’s shares fell 11% on Friday, but remain up 19% for the year. Oppenheimer analyst Ittai Kidron predicts the incident will hurt CrowdStrike’s reputation and business activity. Competitors like Palo Alto Networks and SentinelOne saw stock gains, potentially benefiting from CrowdStrike’s struggles. Barclays analyst Saket Kalia believes CrowdStrike’s strong customer base will eventually help it recover.7