🎙️ Down to Business

After all the OpenAI-Sam Altman drama, the results are in: Altman is Time’s 2023 CEO of the year.

How’d he deal with the stresses of a power struggle for control of OpenAI, an $80 billion AI giant? By going for a hike in Napa Valley, putting his computer away for a few hours, making vegetarian pasta, playing loud music, and drinking wine with his partner.

“This was a 10-out-of-10 crazy thing to live through,” Altman, 38, told Time last week. “So I’m still just reeling from that.”

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the three biggest stories in markets:

• COP28 climate negotiations get down to business

• More signs of a weakening job market

• How India’s stock market narrowed its gap with Hong Kong

All this, and more, in just 5 minutes to read.

CHART OF THE DAY

IN THE NEWS

🌎 COP28 Climate Negotiations Get Down to Business

World leaders from more than 190 countries have gathered at the United Nations climate summit in Dubai this week. There’s a lot at stake after the hottest summer on record, per NASA.

Leaders hope to reach several agreements, including a plan to pay for climate-related damage in poor countries that feel the effects of climate change (think heat waves, droughts, landfalls), even though they do little to contribute to it. Already, rich nations are shelling out billions of dollars to poorer countries dealing with climate-related natural disasters. 

Many world leaders believe phasing out fossil fuels is a priority, but few countries agree on the best approach. 

• The EU and U.S. want a commitment to phase out fossil fuels, but China, India, Saudi Arabia, and other countries wouldn't agree.
  

• In October, the International Energy Agency said fossil fuel demand will peak by 2030, highlighting the importance of transitioning to renewable energy like solar and wind — or even carbon capture — as soon as possible.
  

• As U.S. climate envoy John Kerry noted: “If you’re going to reduce the emissions and you’re actually going to hit the target of net zero by 2050, you have to do some phasing out…You’ve got to have largely a phase out of fossil fuels in our energy system,” including focusing carbon capture technologies on steel and cement.

Of note: The U.S. EPA is working on a new program to reduce methane emissions by preventing food waste (roughly one-third of all food produced worldwide is never eaten).

Why it matters:

Look, it’s not all terrible. There have been enormous costs associated with climate change, but there’s also enormous opportunity in the marketplace. 

American “green” companies are racing to develop technologies that mitigate climate change, potentially saving food systems and lives. Kerry, the U.S. climate rep, said he sees a major opportunity for the U.S. economy in transitioning to cleaner tech. 

• “We’re looking at an extraordinary and very encouraging set of economic opportunities for the United States particularly,” Kerry said this week.
  

• Kerry added that capitalism will push the entire green marketplace where it needs to be, and the companies that develop the best green technologies will be financially rewarded. 

Read more

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💼 The Growing Signs of a Weaker Job Market

Somewhat quietly, big companies are cutting thousands of jobs. That includes what many consider “safe, stable” jobs at places like Amazon and Goldman Sachs, the companies that impress your in-laws. 

Tightening spending: Meta, IBM, and Spotify are among the latest firms to reduce spending in a higher-interest rate environment. By slashing payroll costs, they can invest elsewhere. 

• The latest big name in the headlines this week was Spotify, the streaming service that laid off about 1,500 employees (17%) of its headcount after laying off 800 staffers earlier this year.
  

• Alphabet, Lyft, Morgan Stanley, BlackRock and Salesforce have all cut jobs this year.

Big picture: In late October, the number of open jobs hit its lowest level since March 2021, and Americans need more time to find new jobs. 

Meanwhile, wage growth has slowed. We’ll keep our eyes on the November jobs report on Friday for further evidence of a cooling labor market — precisely what Jerome Powell and Co. want. 

Breaking it down: The number of job openings fell in October to 8.7 million, down from a record high of 12 million in March 2022. But it’s still higher than before the pandemic.

• The Beveridge curve is an economics term covering the relationship between job openings and unemployment rates. After years of trending well above normal, the reading is moving closer to prepandemic levels, another sign that the labor market is reverting to the mean or normalizing.
  

• By sector, the number of open jobs in insurance, real estate, and retail have all fallen this year.
  

• Conversely, healthcare hiring is booming, and government, leisure, and hospitality employers are adding jobs at a healthy rate. 

Other notes on the labor market: The quits rate is falling (fewer people are leaving their jobs — folks typically only quit when they feel confident about finding another job) and the unemployment rate remains low.

• Economists estimate it stayed at 3.9% in November, but it’s risen a half-percentage point rise since the spring, on par with jumps in unemployment before past recessions. 

Why it matters:

The labor market matters for obvious reasons — most Americans work — but it’s also worth understanding the mechanics of why the labor market has cooled off.

• Employment is a lagging indicator of changes in the business cycle, but we can look at trends in the rearview mirror to anticipate what comes next.
  

• Hiring has abated after the Federal Reserve went to work, driving interest rates to a 22-year high this summer. That put a dent in the housing market while discouraging business investment, which trickled down to the labor market. 

The bottom line: The labor market is still relatively strong, better than in 2019. But it’s become a little harder for people to find jobs. Fewer workers are resigning. And raises are getting smaller across nearly every industry. 

Read more

MORE HEADLINES

💸 A new NCAA proposal would allow D1 schools to pay student-athletes for the first time

✝️ A group of activist nuns initiated a shareholder lawsuit against Smith & Wesson

💊 The weight-loss drug gold rush is getting larger

🏆 Taylor Swift named Time’s person of the year

🚬 British American Tobacco writes down the value of U.S. cigarette brands by $31.5 billion

🇮🇳 India’s Stock Market Narrows Gap with Hong Kong

$4 trillion. That’s the market value of India’s stock market, up a trillion dollars in under three years.

India’s stock market has zoomed ahead, becoming not only one of the best performers regionally but worldwide. India’s main stock market benchmark is up over 13% this year, set to lock in eight straight years of gains.

• Touting its political stability and strong economic growth potential, India has pitched itself to global investors as an alternative to China, hoping to boost investment in its capital markets.
  

• And it has paid off — foreign investors have poured some $15 billion into Indian stocks in 2023, almost as much as domestic investors.

Why it matters:

India’s stock market is the fifth-largest in the world, and as India continues to carve out its place in global financial markets, it hopes to capitalize on a slumping Hong Kong.

While Indian stocks have boomed, Hong Kong stock indexes have dropped 17% this year.

And momentum is mounting further for India after topping China as the world’s most populous country earlier this year and becoming the fastest-growing major economy, too. Year over year, GDP recently jumped 7.6%.

• The gap between the market value of Indian and Hong Kong stocks has hit record lows, with Indian markets proving increasingly attractive to investors, pulling capital away from regional rivals.

A price to pay: By conventional valuation metrics, though, India’s stock market isn’t exactly cheap.

• An S&P index of Indian stocks trades at 20 times estimates of next year’s (forward) earnings, about 25% higher than the average for global stocks and above its own five-year average.
  

• But growth deserves a premium, and after upgrading its outlook on Indian stocks last month, Goldman Sachs said it has “the best structural growth prospects in the region.”

Read more

QUICK POLL

Yesterday, we asked: Do you feel as though your household benefited financially from the pandemic?

— One reader summed things up concisely: “Stimulus checks.”

— Another said, “The extra money (on top of EDD benefit money) made me feel like I didn't have to worry about paying rent for a few months.” That allowed them to take up “a few hobbies, read some books, create some artwork, practice guitar, etc.”

— On the positive side, another reader added: “Owning multiple businesses and being eligible for the PPP, EIDL, and ERC was an absolute unicorn dream scenario. Not to mention stocks and crypto if you played those safely and got lucky with timing…I finished school right after the 08 crash, so my start in life was basically at the bottom of the market. ”

See you next time!

That's it for today on We Study Markets!

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