🚙 Tesla in trouble?

and two cuts this year?

Good morning investors! The focus this week will be on earnings as companies like Tesla, IBM and General Motors report earnings.

Today we cover:

  • Two more rate cuts this year?

  • Fed investigating Tesla.

  • Netflix hits a new high.

📊 Economy and News 

Fed to cut twice more this year

Stronger-than-expected economic data has raised concerns about Federal Reserve rate cuts, but Evercore ISI analysts argue these worries are exaggerated. They see a strong case for two rate cuts this year to support the labor market.

In a Friday note, they dismissed fears regarding November and December cuts, labeling November as "rock solid" and December as likely but not guaranteed, depending on data. They predict the Fed will lower rates in both months to a range of 4.25% to 4.5%.

This perspective persists despite solid economic indicators, like retail sales and unemployment claims, which have led some to speculate that the Fed might pause cuts. However, Evercore ISI believes the central bank will prioritize achieving a "more neutral setting" for rates to maintain a robust labor market as inflation stabilizes.

Current interest rates are high enough to restrict growth and contain inflation. Analysts note that real rates are well above neutral levels, even short-term. They foresee the Fed cutting rates twice more, aiming for 4.25% to 4.5% after December, before possibly slowing the pace of cuts.

Looking ahead to 2025, Evercore ISI has upgraded its growth forecast, expecting gains from increased fiscal resources and a rebound in credit growth. While the initial cuts seem certain, the second phase, from 4-4.5% to 3-3.5%, will require a more cautious approach, influenced by the Fed's assessment of neutral rates and political shifts.

Global hits:

Also check: US single-family homebuilding hits five-month high, but trend remains soft.

📈 Stocks

S&P 500 5,864.67 (+0.40%)
DJIA 43,275.91 (+0.085%)
NASDAQ 18,489.55 (+0.63%)
BRENT CRUDE 73.06 (-1.87%)
* Prices as of Oct 20th, 12:20 AM UTC

Feds investigating safety of Tesla’s ‘Full Self-Driving’ feature

The National Highway Traffic Safety Administration (NHTSA) has initiated an investigation into the safety of Tesla's Full Self-Driving (FSD) feature following a fatal pedestrian accident and three other incidents involving injuries. The probe focuses on crashes occurring in areas with reduced visibility due to conditions like sun glare and fog.

FSD is integral to Tesla's growth strategy, marketed as an $8,000 option that requires drivers to remain alert and ready to take control. While CEO Elon Musk claims FSD is safer than human driving, the company also revealed plans for fully autonomous vehicles without traditional controls. Musk's recent announcement of self-driving "robotaxis" and a car rental service to generate income for Tesla owners failed to impress investors, leading to a nearly 9% drop in the company's stock.

This isn't the first time the NHTSA has scrutinized Tesla's self-driving technology. In February 2023, it mandated a recall of over 360,000 vehicles using FSD software, citing significant safety risks and violations of traffic laws. Earlier, another recall in December affected 2 million vehicles to adjust the less advanced Autopilot driver-assist system after investigating numerous crashes.

As Tesla prepares to report its earnings this week, the ongoing investigation adds another layer of scrutiny to its self-driving ambitions.

Netflix flies higher: Netflix shares surged to a record high, closing at $763.89 after jumping over +11% Friday, a day after the streaming giant reported strong third-quarter earnings. The stock has received new target prices and is being called a ‘top pick’.

Surprising: Spirit Airlines extends debt refinancing deadline hours before expiration. Elsewhere, Stellantis to shutter and sell large testing facility amid cost-cutting efforts. Lastly, CVS has replaced CEO Karen Lynch with exec David Joyner as profits, share price suffer.

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💵 Personal Finance

Gold is Your Only Option, says Bank of America

Bank of America recently warned that gold may be the last safe haven in the United States, as rising national debt presents increasing risks.

With the national debt projected to reach new highs over the next three years, economic pressures have shifted gold’s behavior in response to macroeconomic changes, such as lowered interest rates. As a result, Bank of America predicts gold could eventually reach $3,000, making it a good time to invest in gold.

Throughout 2024, gold has consistently set all-time high prices, nearing $2,700 and approaching its October peak of $2,696. Many investors see the asset as a superior investment, and Bank of America echoed this sentiment, highlighting gold's resilience compared to US Treasuries in light of the debt crisis.

Bank of America also noted that no US presidential candidates appear focused on addressing the problem, and their economic plans are likely to increase the debt, which already exceeds $35.7 trillion.

This situation could drive global demand for gold, with central banks continuing to diversify their reserves. Over the past decade, central bank gold holdings have grown from 3% to 10%, and this trend is expected to push gold’s value even higher, with further record highs likely before the end of the year.

The best thing about gold is that it can be accumulated in a number of ways, including in your retirement accounts. Check this free guide for more on using gold to protect your wealth.

Check this video for more:

💰 Be a Better Investor

“The individual investor should act consistently as an investor and not as a speculator.”

Ben Graham

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👩🏽‍⚖️ Legal Stuff
Nothing in this newsletter is financial advice. Always do your own research and think for yourself.