What We Learned This Week

Inflation Moderates Further: This week's release of Consumer Price Index (CPI) data indicated a continued moderation in inflation, with month-over-month prices remaining flat and a year-over-year increase of 3.3%, both below expectations. Core inflation, excluding volatile food and energy prices, also fell below expectations, marking the lowest figures in two years. Retailers reporting results echoed these trends, expressing relief in their cost structures and suggesting that the peak of inflation challenges might be behind them. This development supports the Federal Reserve's efforts to combat inflation and contributed significantly to the market rally this week.

Cautious Consumer Impact on Outlooks: Notable companies such as Home Depot, Walmart, Target, and TJX reported solid sales for the current quarter but shared a common concern – consumers are displaying caution, scaling back on significant and discretionary purchases amid higher interest rates and a slowing economy. As a result, cautious outlooks for the holiday shopping season emerged. In this environment, we continue to favor specialty consumer companies offering a blend of premium products and value (e.g., Starbucks, Costco, TJX).

Boeing's Positive Momentum: After facing challenges, including the 737 Max grounding and operational missteps, Boeing received positive news this week. China signaled a willingness to end its nearly five-year freeze on purchasing the 737 MAX. Additionally, Boeing secured 285 new aircraft orders at the Dubai Airshow, outperforming Airbus. The positive momentum is encouraging, and we see potential value in Boeing, given the industry's duopoly structure.

Amazon Expands Service Offerings: Amazon announced plans to allow users to purchase cars on its platform starting in 2024, beginning with automaker Hyundai. This move expands Amazon's presence in the automotive space, and its success will be interesting to observe, considering the complexities of relationships between auto manufacturers and local dealerships. Amazon also enhanced health/medical benefits for Prime members, offering 24/7 virtual care, expedited care for common issues, and same- or one-day appointments at One Medical care centers for $9/month. These initiatives demonstrate Amazon's commitment to pushing the boundaries of Prime service offerings.

Tesla Cybertruck Flipping Restrictions: Tesla updated purchasing terms for its long-awaited Cybertruck, requiring initial customers to sign an agreement not to sell the vehicle within the first year of ownership or face a potential $50,000 penalty. This measure aims to prevent flipping in the initial stages of production when supply is limited. Initial deliveries are scheduled for the end of November, and the market response will be closely monitored after years of anticipation.