Unadorned Notes: November 18-21, 2024
Jobless Claims Hit Seven-Month Low; Bitcoin Nears $100,000 Milestone; Walmart Outshines Target in Sales; Trump Plans Military for Deportations; Russia Updates Nuclear Doctrine
Economics, Finance, and Business
Jobless Claims Hit Seven-Month Low: U.S. initial jobless claims fell to 213,000 last week, marking a seven-month low, as job growth shows signs of rebounding in November 2024 after being disrupted by strikes and hurricanes in October 2024. Continuing claims, however, rose to 1.908 million, suggesting slower rehiring and a potential upward risk to the unemployment rate. Nonfarm payrolls had increased by just 12,000 in October 2024, the lowest since December 2020, but rebuilding efforts and the end of the Boeing strike are expected to add at least 100,000 jobs in November 2024. The Federal Reserve, which recently lowered rates to 4.50%-4.75%, may consider further easing if labor market weakness persists.1
Existing Home Sales Rebound: Sales of previously occupied U.S. homes rose 3.4% in October 2024 to an annualized rate of 3.96 million, marking the first year-over-year increase since July 2021. The national median home price climbed 4% from a year earlier to $407,200, continuing a 16-month trend of annual price growth. Inventory rose 19.1% year-over-year, but supply remains below pre-pandemic levels, with only a 4.2-month supply at the current sales pace. First-time buyers comprised 27% of transactions, reflecting challenges from rising prices and higher mortgage rates, which now average 6.84%. The housing market remains on track for its lowest annual sales since 1995, despite easing rates earlier this year.2
Single-Family Homebuilding Declines: U.S. single-family homebuilding fell 6.9% in October 2024 to an annualized rate of 970,000 units, largely impacted by Hurricanes Helene and Milton in the South. Multi-family starts rose 9.8%, while overall housing starts declined 3.1% to 1.311 million units, reflecting continued pressure from elevated mortgage rates and supply shortages. Permits for single-family homes increased 0.5% to 968,000 units, the highest since April 2024, but total building permits dropped 0.6% due to declines in multi-family authorizations. Despite a modest rise in builder sentiment, high borrowing costs and inventory constraints are likely to limit recovery in residential construction. Housing completions and units under construction also fell, as builders focused on reducing backlogs from prior years.3
Goldman Projects 2025 U.S. Growth: Goldman Sachs forecasts U.S. economic growth of 2.5% in 2025, driven by tax cuts and regulatory easing, with tariffs on Chinese goods and autos tempering gains. Core PCE inflation is projected to reach 2.4% by late 2025, reflecting tariff impacts, though still below the current 2.7% rate. The Federal Reserve is expected to cut rates by 25 basis points at its next three meetings, eventually settling between 3.25% and 3.5%. A potential 10% across-the-board tariff could slow growth by up to 1.2 percentage points in 2026, while elevating inflation to around 3%. Mass deportations, if pursued, would constrain labor force growth and GDP, though Goldman predicts resistance to large-scale implementation.4
U.S. Stocks Outpace Europe: European markets continue to lag behind the U.S., with the combined value of European exchanges now one-fourth that of U.S. stocks, which total $63 trillion. The Stoxx Europe 600 Index trades at a 40% discount to the S&P 500, reflecting weaker economic growth and lower investor returns. The euro has fallen to its lowest level in over a year, as tax cuts and deregulation in the U.S. make American assets more appealing. Europe faces further challenges from trade tariffs, escalating geopolitical risks, and stagnant economic reforms. Analysts suggest that the region must take action to improve asset competitiveness in response to these pressures.5
Bitcoin Nears $100,000 Milestone: Bitcoin surged to a record $98,558 on Thursday, fueled by optimism around President-elect Donald Trump’s crypto-friendly policies, institutional investments, and the launch of options trading on Bitcoin ETFs. MicroStrategy’s aggressive Bitcoin purchases, totaling 331,200 tokens worth over $31 billion, have also driven the rally. The cryptocurrency’s market value has reached $1.9 trillion, with analysts viewing $100,000 as an achievable target amid growing institutional adoption. Trump’s nomination of crypto advocate Howard Lutnick as Commerce Secretary and potential acquisition of Bakkt by Trump Media & Technology Group have further boosted sentiment. However, uncertainty remains over whether Bitcoin will sustain its meteoric rise or face a correction.6
Trump Jr. Backs Conservative Economy: Donald Trump Jr. has joined 1789 Capital, a venture firm investing in conservative-friendly businesses as part of a “parallel economy” initiative. The firm, co-founded by Omeed Malik and Rebekah Mercer, aims to raise $100 million for U.S.-based companies resisting ESG mandates and foreign influence. Trump Jr.’s involvement has drawn attention to projects like PublicSquare, an anti-woke marketplace, and Tucker Carlson’s media company. Critics highlight potential conflicts of interest given his father’s administration, but Trump Jr. has pledged to avoid investments linked to government contracts. The initiative reflects growing conservative efforts to create alternative financial ecosystems amid political and cultural divides.7
Walmart Outshines Target in Sales: Walmart reported a 5.3% rise in comparable U.S. sales last quarter, surpassing expectations and raising its annual guidance for the third time, while Target’s sales grew just 0.3%, missing forecasts. Walmart has gained significant market share, particularly among high-income households, and continues to expand its e-commerce and high-margin revenue streams. Its $72 billion in capital investments since 2021 has enhanced delivery, pickup, and store efficiency, further solidifying its competitive edge. By contrast, Target and dollar stores face challenges from weaker discretionary spending and potential tariffs on imported goods.8
QZ’s Comment: Target has been considered much more “woke” than Walmart in recent history. Perhaps there is some truth to the saying, “Go woke, go broke”?
U.S. Politics, Geopolitics, and Geoeconomics
Trump Plans Military for Deportations: President-elect Donald Trump confirmed plans to declare a national emergency to facilitate mass deportations of illegal migrants, with U.S. military personnel assisting in support roles. Thomas Homan, Trump’s Border Czar nominee, outlined the military’s duties, including transportation, infrastructure, intelligence, and providing flights for detainees, while adhering to the Posse Comitatus Act. This approach mirrors the 2018-2019 deployment of 6,100 active-duty troops, who supported Customs and Border Protection (CBP) with logistical tasks and border barrier construction. The prior emergency declaration enabled the military to reallocate $6.1 billion for the border wall, while troops also provided administrative support and built temporary housing for migrants.9
Russia Updates Nuclear Doctrine: Russian President Vladimir Putin approved revisions to Russia’s nuclear doctrine, allowing potential nuclear responses to conventional attacks supported by nuclear powers. The changes follow U.S. approval of Ukraine’s use of long-range missiles on Russian territory, including a strike on Bryansk this week. The doctrine broadens triggers for nuclear use, encompassing large-scale air or missile attacks by military blocs like NATO. Western leaders, including the U.S. and UK, condemned the move as irresponsible but reaffirmed support for Ukraine. Russian officials framed the update as a response to escalating Western involvement in the conflict, which has lasted over 1,000 days.10
Russia Escalates With Hypersonic Strike: Russia fired a hypersonic intermediate-range ballistic missile, “Oreshnik”, at Dnipro, Ukraine, in response to Kyiv’s recent use of U.S. and UK-supplied long-range weapons against Russian territory. Russian President Vladimir Putin described the strike as a warning and signaled further potential escalations, while Ukraine condemned the attack as a severe escalation and called for global condemnation. The missile, carrying a MIRVed payload, targeted industrial infrastructure in Dnipro, injuring two people and causing significant damage. NATO and Western officials criticized the attack, viewing it as an intimidation tactic, but reaffirmed continued support for Ukraine. The strikes occur amid heightened tensions, with both sides positioning themselves ahead of peace negotiations anticipated under President-elect Donald Trump.11
BRICS Financial Plans Stall: Russia’s push for BRICS Bridge, a digital payment system to bypass Western financial channels, met with lukewarm reception at the recent BRICS summit in Kazan. Moscow proposed additional mechanisms, including BRICS Pay and a cross-border payment system, but failed to secure strong support from other members. Diverging priorities among BRICS nations, incomplete digital currency infrastructures, and trade imbalances hindered progress. While Russia remains the most enthusiastic proponent, other members, particularly China and India, have shown limited urgency to adopt non-Western financial systems. Analysts expect the dominance of the dollar and Swift to persist in the near term despite growing interest in non-Western mechanisms.12
Hong Kong Activists Sentenced to Prison: Hong Kong’s High Court sentenced 45 pro-democracy activists to prison terms of up to 10 years under the Beijing-imposed national security law, following charges of conspiracy to commit subversion. The case centered on a 2020 unofficial primary election aimed at selecting legislative candidates, which prosecutors alleged sought to disrupt government operations. Western governments, including the U.S. and Australia, condemned the sentences as politically motivated and called for the release of the activists. Chinese and Hong Kong authorities defended the law as essential to restoring order after 2019 protests, rejecting international criticism. The trial has drawn global scrutiny and raised concerns about the erosion of Hong Kong’s freedoms and its status as a financial hub.13
ICC Issues Warrants for Netanyahu: The International Criminal Court (ICC) has issued arrest warrants for Israeli Prime Minister Benjamin Netanyahu and former Defense Minister Yoav Gallant for alleged war crimes linked to the Gaza war. Netanyahu and Gallant are accused of crimes against humanity, including murder and the use of starvation as a weapon. Israel condemned the decision as antisemitic, while Hamas welcomed the move. The warrants, unprecedented against leaders of a democracy, have sparked a polarized international reaction. U.S. President-elect Donald Trump’s incoming National Security Advisor Mike Waltz called the ICC’s actions antisemitic and promised a strong response. Democratic Senator John Fetterman dismissed the court’s relevance, criticizing its decision in a blunt social media post.14