12/2/2024

Good Morning!

We hope you had a good Thanksgiving and want to say we are thankful for you taking the time to read. 

Stocks will begin the final month of the year at all time highs. The S&P 500 has reached all time highs 50 times this year and performance has been similar amongst other major indices. Investors remain confident in the economic fundamental backdrop, for example looking to rate cuts, GDP growth, and strong earnings. Markets historically perform well in December and market sentiment remains confident that the momentum won't dissipate. Volatility in reaction to Trump's proposed policies and tariffs could be expected.

YoY change in spending from last Black Friday:

• Brick and Mortar: .7% increase, however some estimates estimate a decrease in spending which is only exacerbated when accounting for inflation

• Online Retail: 14.6% increase, further evidence that consumers 

In today’s newsletter we will cover: 

• Market update

• NAV Loans in Private Equity 

• Deal of the week: Qatar F1 investment

• What to look out for this week

Markets 

- Friday’s post thanksgiving trading pushed the S&P 500 once again to all time highs. It was the consumer cyclical sector leading the charge. Specifically within the sector, it was the luxury goods industry that posted 8.64% gains for the week. This indicates that the market is confident that U.S consumers remain resilient and willing to spend within the economy.

- Tariffs/Forex: On Monday, Donald Trump announced plans to impose tariffs on goods imported from China, Canada, and Mexico, prompting warnings of potential retaliatory measures. The announcement caused declines in the Canadian dollar and Mexican peso against the U.S. dollar. 

- U.S. government bond yields fell sharply on Monday following President-Elect Donald Trump's announcement of Scott Bessent as his pick for Treasury secretary. The yield on the 10-year U.S. Treasury ended Friday at approximately 4.17%, down from 4.42% the previous week.

NAV Loans in Private Equity 

Net Asset Value (NAV) loans are a growing trend in private equity. Fund managers have struggled to sell portfolio positions and have tuned to using their portfolio as collateral for loans.

These loans are typically used for purposes such as providing payouts for investors and financing follow-on investments. These loans have exploded in use with an estimate that market value will reach $600 billion. The size of this market was only $100 billion in 2022 and raises serious concerns on the increased debt private equity is using.

NAV loans reflect a temporary solution to private equity struggle in selling positions in a time of interest rate volatility. What comes of the use of these loans will be important to look out for.

Qatar Fund Invests in Audi's Formula 1 Team

The Qatar Investment Authority has acquired a 30% stake in Sauber Holding AG, Audi’s Formula 1 team. This investment is ahead of the team’s official debut in 2026. This will boost infrastructure and operations as Audi transitions from the team's current Sauber branding.

This investment is further evidence of Qatar’s growing presence in global sports and strengthening ties with its stake in Volkswagen Group. Qatar is a large shareholder in Volkswagen, the parent company of Audi.  As Volkswagen is undergoing a transition to combat poor sales Qatar investment authority might continue to play a role in its restructuring. 

What To Look Out For This Week!

Monday: ISM manufacturing PMI

Tuesday: Earnings: Salesforce, Scotiabank 

Wednesday 

• ADP employment report

• Earnings: Royal Bank of Canada, Dollar Tree

Thursday: Earnings: TD Bank, Lululemon

Friday: U.S. employment report 

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

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