🎙️ At Ease

☀️ Florida’s post-pandemic boom is rooted in low taxes, beautiful weather, and remote work, among other factors.

But there’s a cost to everything, and some residents of the Sunshine State are experiencing that as we speak. Two major trends are colliding: climate change driving up insurance costs, and the challenge of caring for aging Americans.

Some Floridians say that although there’s no income tax, insurance has become the tax.

“How do you make it work when things like property insurance are becoming so onerous and unpredictable?” one nursing home chain owner told Bloomberg.

Our charts of the day say more.

— Matthew & Shawn

Here’s today’s rundown:

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

• How borrowing conditions are improving

• Behind Wall Street’s brutal work culture

This, and more, in just 5 minutes to read.

Chart(s) of the Day

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In The News

🇺🇸 U.S. Companies Find Borrowing Conditions Improving

We see you, bulls. Last week, we discussed how the “everything rally” is in full swing. The latest good news: improving borrowing conditions for U.S. companies. 

Surging share prices and decreasing borrowing premiums are easing companies' access to fresh capital, as the U.S. Financial Conditions Index hits levels unseen since the Federal Reserve commenced its interest rate hikes just over two years ago. 

At ease: The Chicago Fed’s National Financial Conditions Index, which evaluates the ease of corporate borrowing, has reached its lowest point since January 2022. The development comes despite the Fed maintaining high rates in the 5.25 to 5.5 percent range for the past 10 months, the highest levels in 23 years.

• The index’s decline — indicating looser financial conditions — contrasts with the Fed's unaltered high rates, as buoyant markets counterbalance the impacts of rates on corporate America.
  

• At the start of the Fed’s tightening in March 2022, there was an expectation that higher interest rates would broadly affect the economy. But as one chief investment officer at Franklin Templeton noted, the impact is perceived as selective, affecting companies with lower credit quality and higher debt levels rather than being widespread.

Equity valuation szn: Investor speculation that the Fed will cut rates once or twice by year-end has helped increase equity valuations. 

Investor demand has also narrowed the gap between corporate and U.S. government borrowing costs, making it more attractive for businesses to borrow. 

• The S&P 500 has risen about 12% in 2024, reaching a new all-time high again Monday, spurred by April’s consumer price inflation reading of 3.4%, down from 3.5% in March. That also ended four consecutive months of higher-than-expected inflation.
  

• The inflation figures have also driven government bond yields lower as prices rose, reflecting expectations of the Fed loosening monetary policy this year.

Why it matters:

Investors are sitting pretty, and corporate earnings have generally been good. Nvidia’s results Wednesday could weigh heavily on markets, at least in the short term. 

Spread thin: Corporate bond spreads, or the premiums companies pay over US Treasury rates, are also at multi-year lows. 

• But some investors warn that the loosening financial conditions and inflation rates still above the Fed’s 2% target reduce the likelihood of imminent rate cuts. 

One chief investment strategist argues that the loosening conditions indicate a strong U.S. economy, suggesting that the Fed “should not” cut rates. He highlights the economy's resilience despite rate increases and regional banking crises, supporting hopes for a — drumroll, please! — soft landing. Oh, so elusive, yet oh-so-close.

Bottom line: While financial conditions are easing, the ongoing strength of the economy suggests that the Fed may maintain its current interest rate stance for the foreseeable future. And, for now, companies are quite pleased with better borrowing conditions. 

Read more

More Headlines

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😬 100-Hour Weeks: Inside Wall Street’s Work Culture

After two Bank of America employees died in the past few weeks, Wall Street’s intense work culture is once again under the microscope. 

Last week, Adnan Deumic, a 25-year-old London-based trader, died during a charity soccer tournament with other finance employees when he fell suddenly and was administered CPR, according to multiple reports. 

• “He probably worked 11 to 12 hours a day, and those hours were incredibly intense… he didn’t have time to get coffee,” one person told the New York Post.

That death came about three weeks after Bank of America employee Leo Lukenas III, 35, died of a blood clot. Lukenas, who was working 100-hour weeks, leaves behind a wife and two children. 

Banker diary: Both deaths raise questions about how much the human body can work. Multiple bankers told the New York Post that they’ve also sparked outrage over the “extreme work expectations” on Wall Street. 

• “There have been incidents where analysts pass out in meetings due to lack of sleep/food, and other times where analysts are hospitalized due to panic attacks — and nobody steps in to check in on them,” a Bank of America employee alleged.
  

• The grueling schedules are commonplace, per the report, with employees frequently working 100-hour weeks, especially in investment banking, where recent graduates can earn $200,000 annually. (Experienced bankers can earn much more.) Lukenas was working long hours leading up to his death and had just completed a $2 billion merger.

A Bank of America source also revealed to the New York Post that junior bankers must log their hours in a "banker diary," meant to flag those working over 80 hours weekly. However, managers often ask employees to falsify these records to avoid red flags. 

"Our policy is clear and we expect employees to accurately record their hours," stated Bank of America.

Why it matters:

To be sure, not every Wall Street employee is working 100-hour weeks or being hospitalized amid grueling work. 

Nonetheless, the issue is back under focus. The death of Lukenas has led to increased calls for reform, though similar incidents in the past have prompted only temporary changes. 

• For instance, after a Bank of America intern died in 2013 from working until 6 a.m. for three consecutive days, Goldman Sachs introduced a "Saturday rule" mandating employees be out of the office from 9 p.m. Friday to 9 a.m. Sunday. However, the rules are often ignored.

Work hard, play hard: Despite promises of reform during high-profit periods, the pressure to cut costs during downturns results in heavier workloads for fewer employees, perpetuating the cycle of overwork. 

• Some senior bankers remain unsympathetic, noting that the intense workload is necessary to thrive.
  

• "Elon Musk works more than 100 hours a week, and he hasn’t dropped dead," one veteran banker remarked. Another added, "If you don’t want to do the job, three junior people behind you will take your seat."

Read more

Quick Poll

On Monday, we asked: Which asset class are you most likely to invest in over the next six months?

— A respondent who chose “tech stocks,” wrote: “Innovative technologies and its applications are the foundation of the world’s growth.”

— As for bitcoin, one reader said they think it’s “the best long-term horizon investment, with the least risk of basically everything.”

— Other responses included, “I have enough bitcoin…in a stagnant market like this, it’s best to find undervalued companies” and “Chinese/International” and “Utility and Industrials.”

See you next time!

That's it for today on We Study Markets!

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