Fed lightly

MARKETS

  • U.S. markets: They weren't exactly thrilled about the Fed raising interest rates for the fourth time this year. The Dow closed at its lowest point in 2018.

Want Morning Brew Daily Served Fresh to Your Inbox?
Drop Your Email Below...
 

FED

Jay Puts On His Hiking Shoes

Picture
Like a batter dialed in at the plate, Fed Chair Jerome Powell tuned out the hecklers and raised the benchmark interest rate a quarter-percentage point to a range between 2.25% and 2.5%.

What that means in English: The Fed is raising the cost to borrow money, and that'll affect everything from home mortgages to credit cards to auto loans.

And that's pretty much the point. The Fed is in charge of making sure the economy hits a sweet spot—not growing too fast (which might cause inflation)...but, well, still growing. No Fed chair wants to be seen as responsible for the next recession.

Which is one reason why the Fed is taking it easier in 2019

It cut its projections for next year from three rate hikes to two. That change reflects both...

  • An economy that's still humming along. Unemployment is at its lowest level since 1969, and jobs are still being created at an impressive clip.
  • Some acknowledgment that this record run could be nearing the finish line. Financial markets are sagging under the weight of a trade war and fears of slowing global economic growth.

Zoom out: The Fed kept interest rates near zero for seven years following the financial crisis. It's now putting the finishing touches on a strategy of bringing them up to more "normal" levels.

Finally, let's hear from Powell

On shaky markets: "What matters for the broader economy is material changes in broader financial conditions that are unchanged...Some volatility doesn't probably leave a mark on the economy."

On pressure from the White House: "We're going to do our jobs the way we've always done them." The central bank will do its analysis and "nothing will cause us to deviate from that."

PHARMA

Take Two Drugmakers and Call Us in the Morning

PHARMA
Take Two Drugmakers and Call Us in the Morning
Drugmakers Pfizer (-1.01%) and GlaxoSmithKline (+0.84%) are combining their consumer health care businesses and eventually spinning off the new joint venture—creating the world's biggest over-the-counter medicine supplier in the process. Yep, a very big deal.

The new company (which will be listed on a UK stock exchange and be called GSK Consumer Healthcare) will effectively become the sponsor of every CVS run you ever make. It'll include brands from Advil to Sensodyne to Tums.

  • Glaxo will have a 68% controlling stake in the new unit, with Pfizer taking the rest.
  • Any guesses for the combined sales of both Pfizer's and Glaxo's consumer businesses last year? $12.7 billion.

Pfizer spent the better part of the year trying (unsuccessfully) to sell its consumer unit, but few expected a Glaxo deal.

Zoom out: Now, both parties will have more room to focus on R&D for higher-margin (and often higher-risk) prescription drug projects. With the boom-and-bust nature of developing the next big prescription drug, the cash influx from consumer products will be a welcome cushion.

SHIPPING

FedEx vs. the World...Who Ya Got?

Investors had one night to sleep on FedEx's Tuesday announcement that it's cutting earnings forecasts and introducing a voluntary buyout program for some U.S. employees. They woke up groggy, fully clothed from the night before...and proceeded to hammer the stock to a 12.3% loss.

What's going on? International business really struggled during the last quarter. And CEO Fred Smith's not one to make excuses, but..."I'll just conclude by saying most of the issues that we're dealing with today are induced by bad political choices." So who's he got beef with?

  • The UK for the "tremendously difficult situation" with Brexit
  • Germany for its immigration issues
  • China for its heavy-handed government intervention
  • The U.S. for slapping tariffs on China "unilaterally"

Zoom out: Due to the global nature of its business, FedEx is especially sensitive to macro conditions. Per some analysts, those could get worse before they get better.

+ While we're here: For the first time ever, UPS (-3.02%) says the busiest day for returns will come before Christmas instead of after (h/t e-commerce).

PEOPLE

George Soros Named 'Person of the Year' by the Financial Times

Picture
You know the name, sure. Facebook guaranteed that when it admitted to hiring a PR firm to attack Soros, who once called the platform a "menace to society." But how did Soros, just named the FT's Person of the Year, rise to prominence?

  • He amassed a huge fortune as the "father of the hedge fund industry." Soros, who turned 88 this year, started his Soros Fund Management in 1969—about 13 years after he emigrated to the U.S. from Hungary (via London). He's famous for shorting the British pound in 1992, walking away with a profit of $1 billion.
  • Soros was estimated to be worth $8 billion this year...but he's given about $32 billion of his wealth to his Open Society Foundation, which works to further democracy, transparency, and free expression in 100+ countries.

So why is he in the news these days? Well, he's been the subject of numerous conspiracy theories from far-right groups. The truth is, he's a politically active and influential figure with a liberal agenda.

RETAIL

Last Minute Shopping? You’re Not Alone

In fact, you're in the company of 44% of U.S. adults looking for the perfect gift to say, "Sorry I got you SpongeBob boxers last year." They're heading out on Super Saturday, the final Saturday before Christmas (because every winter shopping day needs a moniker).

But you should know Super Saturday: Shoppers are expected to spend $26 billion on the "holiday," topping Black Friday's $24 billion in sales. That's good enough for the title of America's biggest single shopping day.

What makes this Super Saturday so...super? Since Christmas is on a Tuesday, shoppers have two full days between Super Saturday and the holiday to squeeze in both shopping and traveling. Rising wages and low fuel costs don't hurt, either.

What shoppers will focus on: Luxury goods, per Customer Growth Partners. Since Super Saturday's not until the 22nd of the month, dropping $1,600 on Tiffany & Co. hoops won't hit your credit card bill until January (when year-end bonuses can be put to use).

WHAT ELSE IS BREWING

  • Altria (+1.00%) is closing in on a deal to take a 35% stake in e-cig maker Juul at a $38 billion valuation, per multiple reports.
  • SoftBank's telecom unit IPO in Tokyo fell flat yesterday, with shares tumbling 15% to wipe out billions in market value.
  • Facebook (-7.25%) is getting sued by Washington, D.C. over the Cambridge Analytica data scandal.
  • Square (-1.47%) is refiling paperwork with state and federal regulators to get a bank license. It first applied in Sept. 2017 but withdrew earlier this year.
  • Tilray (+11.28% after hours) is getting into a $100 million joint venture with AB InBev (+0.28% after hours) to explore cannabis-infused beverages.

BREAKROOM

Math Puzzle
Find the lowest positive number divisible by all the single digit numbers 1 to 9

(Answer located at bottom of newsletter)

Want Morning Brew Daily Served Fresh to Your Inbox?
Drop Your Email Below...

 

Breakroom Answers


Math Puzzle
2520 (Explanation)

 

Quam eaque et qui laborum et excepturi ex. Debitis voluptatibus quod rerum sit aut error. Assumenda in animi exercitationem eius ut. Explicabo molestiae et voluptas tenetur iste nobis.

I'm an AI bot trained on the most helpful WSO content across 17+ years.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
BankonBanking's picture
BankonBanking
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
Secyh62's picture
Secyh62
99.0
5
GameTheory's picture
GameTheory
98.9
6
dosk17's picture
dosk17
98.9
7
DrApeman's picture
DrApeman
98.9
8
CompBanker's picture
CompBanker
98.9
9
kanon's picture
kanon
98.9
10
numi's picture
numi
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”