Here's the Deal with the Economy- December 1, 2024

Economy: In Slowdown

Market Cycle: Bullish

_{Week 48 of 52 for 2024: 92.3% of the way through 2024}

Weekly Note:

The biggest economic news this week was Trump throwing the US’s weight around in North American free trade pact. Announcing he would levy tariffs of 25% on imports of all goods from Mexico and Canada until each country provides more border protection to help curb the flow of drugs, such as fentanyl, and illegal immigrants from crossing into the US.

Also promising “to levy additional tariffs of 10% on Chinese imports, citing what he says is China’s failure to regulate the chemical that go into fentanyl. Many Chinese products are already subject to average levies of about 15% after the first phase of the trade war that kicked off in 2018, during Trump’s first term in office.” according to the article.

Mexico fought back with rhetoric of their own warning of retaliation and that the Trump tariffs would kill 400,00 US jobs.

Then again, the threat(s) seem to be wielding early success as Mexico is now having second thoughts over a new Chinese EV plant after Trump’s win.

In addition, Canada is now making moves to outmaneuver Mexico in renegotiating the North American free trade agreement. In response to the recent 25% tariff threat, Prime Minister Justin Trudeau wasted no time as he flew to Mar-a-Lago on Friday to meet with President Trump just days after the announcement.

Amazing what negotiating from a place of strength will get you.

Meanwhile, Trump's recent economic appointments are easing market concerns, as he seems to be sticking to the status quo. This approach signals much-needed stability for both the markets and the broader economy, which I believe is a smart move here while he looks to shake up much of the federal government.

On the inflation front, there were no surprises this week. Year-over-year PCE and Core PCE inflation rates met expectations, coming in slightly higher than last month. This indicates that inflation remains persistent but not yet spiraling higher again. We’re now in a critical period where the coming months will reveal if high inflation rates are indeed finished for this cycle. If they are, it could pave the way for a continued bull market and further economic growth in the next few years. However, if inflation picks back up again, the Federal Reserve may be forced to raise interest rates further. An outcome that would put significant pressure on the economy.

For now, there’s no reason to worry, but this is definitely an area to monitor closely in the months ahead.

The momentum against DEI (Diversity, Equity, and Inclusion) programs continues to grow, with Walmart announcing the end of its initiative this week. This as a positive step for fostering a strong economy and driving future growth. This shift represents a major development in corporate America, highlighting a broader reevaluation of these programs' impact.

Adding fuel to the debate, reports suggest that both The New York Times and Bloomberg withheld a critical analysis of DEI programs. Claiming that both had stories of the study prepared, but decided not to publish due to the outcome of the study. The analysis claimed these initiatives often do more harm than good, exacerbating perceptions of bias, hostility, and authoritarianism within organizations.

Even Jeff Bezos, owner of The Washington Post, has weighed in on the broader issue, acknowledging that media bias has eroded public trust. These combined events underscore the still growing skepticism toward certain legacy media narratives.

The week ended with shocking revelations about the government's involvement in "unbanking" tech founders and entrepreneurs whose views they disapprove. The claim began when Marc Andreessen went on the Joe Rogan podcast earlier in the week. In the days that followed, those impacted flooded social media with their stories and the letters in which they received from the banks. Much of which stems from their investments in crypto, although no laws were broken. Many of which were partnered with their banks for at least a decade. Allegedly, even Melanie and Barron Trump were unbanked as well.

This story is one to watch closely, as it has the potential to become a major issue in the coming year.

If you're wondering why topics like DEI initiatives and unbanking are relevant to an economic newsletter, the connection lies in the lessons history teaches us. When businesses prioritize hiring based on factors other than merit and dedication to achieving organizational goals, productivity and profitability suffer. This artificially suppresses overall economic progress to accommodate the preferences of a select few.

Similarly, when bureaucrats ostracize individuals or businesses they disagree with, it stifles innovation and economic advancement. Innovation is the engine which drives job creation and prosperity, and without it, economies stagnate, leading to fewer opportunities and higher poverty levels.

What we’re witnessing is a broader battle over who shapes the future. On one side are those who believe progress should be driven by individuals willing to take risks and work hard. On the other are government bureaucrats aiming to pick winners based on political alignment. The stakes couldn’t be higher, as the outcome will shape economic freedom, growth, and opportunity for years to come.

Other Top Economic Stories of the Week:

Quikrete bulks up even more ahead of potential construction boom by buying Summit Materials

Why it matters: With interest rates coming down, the largest concrete company is buying Summit at a deal value of $11.5 billion including debt. M&A activity often peaks during Economic Slowdowns, so expect to see this level of activity grow and continue next year.

Farms, Meat Plants Brace for Trump Immigration Crackdown

Why it matters: Having spent considerable time in meat plants, food warehouses, and around farms during harvest, I’ve seen firsthand the role that immigrant labor plays in keeping food prices stable. The idea of deporting all undocumented immigrants might sound straightforward, but the reality is it would lead to skyrocketing food costs. Labor shortages in these sectors would ripple across the economy, straining household budgets.

While critics on the right are now dismissing these points as "racist," this perspective misses a crucial piece of American history. From its founding, the United States has been a beacon for upward mobility, offering opportunity to immigrants and high-quality education to their children. This policy of openness has allowed generations of families to rise above their circumstances in their country of origin and contributes to the next wave of leaders and innovators.

This system creates a win-win for society and the world, raising living standards globally while strengthening the U.S. economy. Reducing this complex and historical process to a simplistic argument ignores its long-term benefits and the foundational principles of America’s success.

Office Conversions Find New Life After Property Values Plunge

Why it matters: This will help the severe housing shortage, but not nearly enough.

Trump’s Tariff Message: I’m in Charge of the Economic Agenda

Why it matters: If Trump’s strategy works, he fully deserves the credit. If it doesn’t, the responsibility falls squarely on him. This is his decision to own. While I don’t fully agree with his tactics, which historically tend to increase costs and hit the middle class the hardest, they may unfortunately be necessary given the current global landscape and the recurring patterns we see playing out.

That said, I genuinely hope I’m wrong about the potential downsides. If his approach ultimately strengthens the U.S., makes it freer, and boosts prosperity for most, it would be a win worth celebrating. I for one love to be wrong when the end result is a better outcome for the most amount of people.

Biden Rushes to Trump-Proof His Signature Energy, Chip Policies

Why it matters: The Chips Act was much needed due to national security concerns in a world which the power dynamic is undergoing a generational shift. In reality, it was about 5 - 7 years late. We are also going to need ALL of the energy sources we can muster to meet the increasingly gargantuan demand.

Googling Is for Old People. That’s a Problem for Google.

Why it matters: Imagine telling someone five years ago that Google would lose its edge in the coming decade. Ten years ago it would have sounded absurd enough for someone to rightly suggest you see a psychologist. Yet, the once great company is in the early innings of some much deserved comeuppance. They tried to persuade their customers into a certain worldview rather than sticking to truth and fairness once they became powerful enough to do so. The result of which is that they have opened the door to their own contraction and deteriorating relevancy. Very similar vibe to that of Microsoft in the 90s.

Wall Street Wins Once Again as US Assets Outpace Rest of World

Why it matters: This headline really should be “US Assets Once Again Outpaces the Rest of the World.” This is a win for the country and is one of the main reasons we did not slip into a prolonged or severe recession.

Trump’s Plans Risk Inflating Bullish Stock Market Into a Bubble

Why it matters: Another terrible choice for a headline, but nonetheless true in terms that Trump’s growth strategies at this time could very easily lead to another wave of higher inflation rates. The result of which could lead to throwing the entire system out of whack and take years to work through the painful process of bringing the system back in line for sustained periods of growth and prosperity. Growth + High Inflation = Runaway Inflation. Whereas, Growth + Low Inflation = Prosperity. The world and economy are in an extremely different state than in 2016. Hopefully he fully understands the significance of the differences. But if timed right, Trump could launch the country into a period of significant long-term prosperity. Either way, it’s going to be one hell of a ride.

Most Important Data Drops from the Past Week:

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