🔥 Hot rate-cut summer

Fed up… with high interest rates. Rate cuts are investors’ Roman Empire (always thinkin’ about ’em). Last week the Fed kept its federal-funds rate target untouched at a range of 5.25% to 5.5% (FYI: the highest level in 20+ years). The federal-funds rate — the rate at which banks borrow and lend extra cash to each other overnight to meet their legal reserve requirement — isn’t particularly sexy. But investors are obsessed with it. The Fed’s high rate has led to elevated interest rates on credit cards, bonds, mortgages, and savings accounts. It can also affect stocks.

• Rates are headed south: Despite this month’s hotter-than-expected inflation #s, last week most Fed officials maintained their forecast of three rate cuts this year.

• J. Powell conference > “Love is Blind” reunion: Investors dissected every word of the Fed Chair’s Wednesday speech, hoping to glean when cuts will come. J. Pow said the Fed still needs more proof of inflation’s continuing decline in order to start trimming.

• Hot cut summer? After last week’s comments from Fed officials, traders’ bets on a June rate cut rose to odds of 75%, up from 50%.

Why everyone’s talkin’ rates… Low rates (which make borrowing cheaper) tend to stimulate the economy and investment. High rates have the opposite effect, which is exactly what the Fed’s trying to achieve now to cool inflation. In March 2020, the US central bank slashed rates to near zero to juice a pandemic-stalled economy. That, plus trillions in gov’t stimulus, worked well — perhaps too well (see: sky-high inflation). Then the Fed started hiking rates in 2022, and US stocks fell into a bear market for most of that year. Markets don’t like high rates:

• When rates rise, so do potential returns from lower-risk investments (think: US gov’t bonds, savings accounts). That makes riskier investments like stocks less attractive in comparison, and investors demand higher stock returns to justify the shift.

Shuttin’ the door… on crypto winter’s darkest days. Sam Bankman-Fried’s day of reckoning arrives this week. The founder of FTX, the crypto exchange that imploded in late 2022, is set to be sentenced Thursday by a federal judge. The former billionaire was convicted of stealing $8B in customer funds, and prosecutors have asked for a 40- to 50-year sentence (SBF’s lawyer called that “barbaric”). Meanwhile, crypto’s thriving with bitcoin hitting an all-time high this month. SBF’s sentencing could bring (some) closure as investors bask in crypto spring.

Revenge cruise szn… Carnival reports on Wednesday as more vacationers hit the high seas. One of the world’s largest cruise companies, Carnival sailed past earnings and sales expectations in Q4 as scorching demand allowed it to raise prices. Last month Norwegian Cruise reported its first profitable year since 2019, and Royal Caribbean touted record annual bookings. Thanks to revenge travel and the rise of remote work, nearly 36M passengers will set sail this year, up from 31M last year. Carnival’s expected to report double-digit sales growth.

Mifepristone takes the stand… The US Supreme Court’s scheduled tomorrow to hear its first abortion-related case since it struck down Roe v. Wade. Up for debate: proposed restrictions on the abortion pill mifepristone, including that it only be prescribed in person. 63% of US abortions last year were through medication, often prescribed via telemedicine. CVS and Walgreens started supplying mifepristone this month in states where it’s legal. Related: the first daily OTC birth control pill went on sale last week, and experts think it may also face restrictions.

The AI “Bluey” grindset… YouTube last week updated its AI disclosure rules, requiring genAI content to be labeled. The big exception: animation, leaving the (purportedly) lucrative hustle of AI-generated kids’ cartoons free to grow undisclosed. YouTube holds a commanding lead over Netflix for kids’ content, and some parents worry their kids are consuming unvetted AI slop. YouTube isn’t new to kids’ content blindspots: a BBC investigation last year found 50+ kid-focused channels promoting pseudoscience, conspiracy theories, and other misinfo.

• OzempOff: Americans are looking to ditch pricey weight-loss drugs like Wegovy, which can cost $1K/month. Telehealth companies are charging hundreds/month to help folks stay trim while weaning themselves off the meds.

• KillBill: France’s lower parliament house approved a “kill bill” banning advertisements for ultra-fast fashion brands like Shein and Temu, aiming to combat an industry where over half of all clothes end up as waste.

• Expat: Last year, 120K millionaires moved countries (double the # from a decade ago). The US, home to 37% of millionaires, had the highest rate of alt-residence seekers as some sought to ease fears over political turmoil and wealth taxes.

• Monday: Earnings expected from BuzzFeed

• Tuesday: Earnings expected from McCormick and GameStop

• Wednesday: Earnings expected from Carnival, Cintas, Paychex, Restoration Hardware, and Rumble

• Thursday: Sam Bankman-Fried’s sentencing. Major League Baseball’s Opening Day. Earnings expected from Hut 8, Planet Labs, and Walgreens

• Friday: US stock market closed for Good Friday. New York International Auto Show. Fed Chair Jerome Powell speaks

Authors of this Snacks own bitcoin and shares of: Alphabet, Carnival Cruise Line, CVS, Norwegian Cruise Line, Nvidia, and Planet Labs

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