Weekly newsletter 123
All market and portfolio news for the week
Welcome to all new subscribers! Subscribers to Outperforming the Market get full access to the Barbell Portfolio, all my intrinsic value, 1-year and 3-year price targets in the Price Target Report, and real-time trade alerts when I place buy and sell orders. (I am fully invested in the Barbell Portfolio)
In addition, subscribers get a weekly deep dive on Fridays, a weekly newsletter on Mondays, and other earnings analysis, market review and portfolio review articles during the week. All links can be found consolidated here.
Articles posted in the last week
Market Updates
Fed
Fed officials voted to hold the benchmark federal funds rate steady and released new economic forecasts showing weaker growth, higher inflation, and higher unemployment this year. Interest-rate projections show a split among policymakers, with 10 officials expecting at least two rate cuts before the end of 2025, while seven officials foresee no rate cuts this year. Fed officials and economists expect the administration's expanded use of tariffs to weigh on economic activity and put upward pressure on prices, with Chair Jerome Powell signaling that higher prices are coming due to tariffs, and policymakers are waiting to see how much of the cost will fall on consumers before making judgments on policy.
Triple witching
Investors are preparing for $6.5 trillion of notional US options expiries on Friday, which could lead to more sudden stock market moves next week. The "triple witching" event is not expected to add additional volatility on Friday itself, but could open a path to more sudden stock market moves. The pinning effect of bearish options trades placed earlier in the year has helped to restrain daily gyrations in US stocks since early May.
US retail sales
US retail sales fell 0.9% in May, the largest decline since the start of the year, with seven of 13 categories posting drops. The decline is attributed to consumer anxiety over tariffs and personal finances, following an early-year spending rush, with spending at restaurants and bars falling by the most since early 2023. Despite a 0.4% increase in control-group sales, which feed into GDP calculations, economists suggest the report is not encouraging, with some signs of caution and potential weakness in certain retail categories.
US consumer sentiment
US consumer sentiment rose 8.3 points to 60.5 in June, well above expectations of 53.6, as concerns about the economy eased and short-term inflation expectations improved. Consumers expect prices to rise at a 5.1% rate over the next year, down from 6.6% in May, and see costs rising at an annual rate of 4.1% over the next 5-10 years. The sentiment improvement is the first this year, showing less anxiety about Trump's protectionist trade policy, but views of business conditions, finances, and buying conditions remain below levels seen at the end of last year.
Stablecoin legislation
The US Senate passed stablecoin legislation with a 68-30 vote, setting up regulatory rules for cryptocurrencies pegged to the dollar. The legislation requires dollar-pegged stablecoins to hold dollar-for-dollar reserves in short-term government debt or similar products overseen by state or federal regulators. The House must now decide whether to take up the Senate bill or negotiate a compromise measure, with industry backers hoping the legislation will turn stablecoins into a mainstream form of payment.
Stablecoin adoption
Stablecoins are being experimented with by banks, securities firms, and fintech startups to make payment systems faster and cheaper, with retailers like Walmart and Amazon showing interest. For most retailers, stablecoins are seen as a way to gain traction in their long-running dispute with Visa and Mastercard over the fees merchants pay to accept consumer cards. But there are also hurdles to their adoption, including convincing consumers of their advantages over traditional cards and addressing the need for instant settlement and vendor payments.
TikTok
Trump is extending the deadline for ByteDance to divest the American operations of TikTok for a third time, allowing the social media app to keep running in the US while negotiations proceed. The 90-day extension will allow more time to ensure the deal is closed, providing assurance that user data is safe and secure. The decision provides another lifeline for the popular app, which has been a source of US-China friction, and gives Trump more time to secure a complicated agreement that would require an American buyer and Beijing’s sign-off.
Scale AI
OpenAI is phasing out its work with data-labeling startup Scale AI, citing a need for more specialized data providers to support advanced AI models. The decision to cut ties with Scale was made before Meta Platforms Inc. invested billions of dollars in the company and hired its founder, Alexandr Wang. OpenAI had already been winding down its reliance on Scale over the past six to 12 months, seeking other providers like Mercor to support its increasingly advanced AI models.
Intel
Intel has named new engineering leadership, including Srinivasan Iyengar, Jean-Didier Allegrucci, and Shailendra Desai, as part of a turnaround effort under CEO Lip-Bu Tan. The new executives will take on key engineering roles, with Iyengar leading a customer engineering center of excellence, Allegrucci overseeing AI system-on-a-chip engineering, and Desai leading the development of AI graphics processors. The changes are part of Tan's efforts to restore Intel's engineering talent and make better products that fit customers' needs, following the company's struggles in competing with Nvidia in the AI chip market.
Texas Instruments
Texas Instruments plans to spend over $60 billion on semiconductor plants in the US, including two new factories in Sherman, Texas. The company's long-term capital spending plan remains unchanged, with increased spending a temporary spike to revamp a Utah plant and build new facilities. The investment is seen as a boost to domestic chipmaking, with the US government offering subsidies and tax credits to encourage companies to manufacture in the US.
Waymo
Waymo has applied for a permit to test its robotaxis in New York City, with a trained human specialist supervising behind the wheel. Despite the permit application, Waymo plans to have a human driver manually operate its cars in New York to collect data and evaluate its technology starting next month. Waymo won't be launching a comparable commercial service in New York soon due to a prohibitive regulatory environment, but is seeking regulatory changes to operate a vehicle with no human behind the wheel. Shares in rival ride-hailing providers Uber Technologies (-1.6%) and Lyft (-1.7%) slid on the news.