10/6/2024

Good Morning.

Thanks for being with us on this journey as we have made it to the 20th consecutive issue! This has not been easy at times, however we have gained valuable skills and improved our understanding of the financial markets. Every issue we learn more and we are excited to continue to publish. Please provide us with reader feedback at [email protected] so we can make the next 20 even better. Cheers!

In today’s newsletter we will cover: 

• Market update

• Jobs report & effect on treasury yields 

• Middle East conflict’s influence on market

• Hours cap in banking

• What to look out for this coming week? CPI & bank earnings!

Markets 

Despite labor disputes between the East Coast ports and dock workers as well as increased tensions in the Middle East, both the S&P 500 and DJIA rose to all-time highs.

Conflict in the Middle East: potential impact on financial markets

• Oil prices: The Middle East's geopolitical instability often leads to volatility in oil prices. With the region being a major oil producer, any disruption could lead to supply concerns, pushing prices higher. Rising oil prices can contribute to inflation and impact global economic growth. 

• Stock market: Heightened risk aversion tends to drive down stock prices, especially in emerging markets and sectors sensitive to global trade. Defense stocks and energy companies might benefit, while sectors reliant on stable global conditions, like technology and travel, could face pressure.

• Safe-haven assets: Investors typically flock to safe-haven assets like gold, U.S. treasuries, and the U.S. dollar in times of geopolitical uncertainty. This can drive up their prices while currencies and stocks in affected regions may decline.

Hours cap in banking

In response to growing concerns over employee burnout and mental health, many large investment banks have implemented ‘hours caps’ to limit the number of hours junior bankers, particularly analysts and associates, can work each week. These measures were prompted by reports of extreme workloads, especially during periods of market volatility and deal surges, where 80-100 hour workweeks became common. The caps aim to promote better work-life balance and retain talent in an industry known for its intense demands. 

Key banks include: Goldman Sachs, JPMorgan, and Morgan Stanley, which have introduced policies capping weekly hours around 80 or less. Enforcement remains a challenge, as client demands and deal deadlines often override these limits. These new proposed limits could potentially force banks to adapt to working within these limited conditions.

10-year yield rises following jobs report

Over the course of last week the 10-year treasury yield rose to 3.981%, which was highly influenced by the release of September’s non-farm payroll number. Non-farm payroll grew by 254,000. This was significantly above analyst expectations. Non-farm payroll makes up 80% of the workforce, excluding farm workers, private household employees, military employees, and not-for-profit employees. This economic indicator is watched closely as it signals the condition of the U.S. economy and future monetary policy. The market interpreted September's data as a sign of strength for the economy, however the Fed may reduce the speed at which it cuts rates. As indicated by CME Group’s FedWatch tool, the market is pricing in a 91% chance of a 25 basis point cut for November. Overall this led to the increase in 10-year yields. 

What To Look Out For This Week!

Thursday: Consumer Price Index CPI (September), Tesla Robotaxi event, AMD Advancing AI event

Friday: JPMorgan Chase, Wells Fargo, BlackRock, and Bank of New York Mellon, all reporting earnings!

We are two college students on a mission to immerse ourselves in the financial industry. We are eager to learn more and make new connections. Our goal is to share exciting and informative content that provides a broad picture of current events and offers valuable insights.

Authors: Ben Banchik, Zachary Singer

If you like this newsletter check out our website for more information. Forward it to your friends!

Sign up:https://sb-cap-insights.beehiiv.com/

Want to reach out? Contact us at 

[email protected]

We welcome feedback as it is our goal to foster discussion and different points of view as we strive to improve our work.