Buy-With-Friends Trend Was Probably Just Another Fad

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Hello and happy Sunday! Today, we’re diving into market trends, tech shakeups, and some interesting developments across industries. Here’s what’s on the table:

• S&P 500 and rate cuts: History shows optimism after interest rate reductions, with gains typically rebounding after a year.

• Tesla’s delivery miss: The EV giant falls short of expectations as competition heats up in Europe and China.

• OpenAI’s revenue surge: Massive growth, but sky-high costs are cutting into profits.

• Co-buying trend fades: The pandemic home-buying craze with friends is cooling off fast.

• DOJ vs. Visa: The government takes aim at Visa’s grip on debit card swipes, and it could affect prices for everyone.

We Can Be Optimistic

The chart above shows how the S&P 500 has reacted to interest rate cuts since 1973, based on data from PinPoint Macro Analytics.

On average, the S&P 500 sees a 4.9% gain a year after the first rate cut. While the market often dips in the first three months after the cut, it usually bounces back after six months. The best returns happened in the early 80s, and overall, the market tends to recover and go up after a rate cut.

Deliveries Increased But Missed Estimates

Tesla fell short of expectations for third-quarter deliveries, handing over 462,890 vehicles compared to the 469,828 that Wall Street was hoping for. Despite a 6.4% jump from the previous quarter, the miss caused Tesla’s stock to drop by 3%. Now, the company needs to deliver more than 516,000 vehicles in the last quarter to avoid its first-ever annual drop in deliveries. 😰

The EV giant is feeling the heat from rivals like China's BYD and Xpeng, along with European brands like BMW, which recently overtook Tesla in the European electric car market. Fewer subsidies in Europe, slowing demand in China, and tighter competition are taking a toll on Tesla's market share and squeezing its profit margins. On the bright side, all eyes are on the company’s upcoming robotaxi reveal on October 10, where Tesla hopes to make a big splash with its AI-powered autonomous technology.

OpenAI Revenue Booming

OpenAI is making big money but burning through cash just as fast. In August, they hit $300 million in monthly revenue, up a huge 1,700% since early 2023. They’re on track to make $3.7 billion this year and could reach $11.6 billion in 2025. 🚀 But here’s the kicker: despite all that, they’re set to lose about $5 billion this year, mostly due to high costs like staff salaries and using Microsoft’s cloud services.

Even though OpenAI is pulling in major revenue, the company has seen some big changes, like top execs leaving. Right now, they’re raising $7 billion in funding, valuing the company at $50 billion. But to keep things moving, they may need to switch to a full for-profit model soon. 🤑 It's a wild ride for the ChatGPT creators, who are trying to balance massive growth with skyrocketing expenses.

Fun While It Lasted

The whole "buying a house with friends" trend seems to be fading fast. It made sense during the pandemic, when housing prices were crazy, and finding a romantic partner wasn’t exactly easy. A lot of Millennials jumped on the idea, with 14% buying homes with friends or siblings at one point. 😎🍻 

But mixing money and friendships isn’t always a good idea. Break clauses in shared mortgages are causing some serious legal headaches, and the trend is cooling off. In fact, the number of co-buyers is down nearly 30% since 2021. A recent Zillow survey also shows that the percentage of people buying homes with friends has been cut in half since last year. As mortgage rates start to drop, more people are probably going to want out of these co-ownership deals, making for some pretty awkward roommate breakups.

DOJ’s New Target

The DOJ is coming after Visa, accusing them of keeping an unfair monopoly on debit card swipes. 💳 Since the news, Visa’s stock has dropped more than 3%. The issue? The DOJ says Visa’s practices are making consumers and merchants pay billions more in swipe fees.

Visa makes money every time you swipe your card, but the DOJ claims deals with companies like Apple, PayPal, and Square have helped Visa block out competition and keep a tight grip on the market. While Visa’s calling the lawsuit “meritless,” the DOJ points out that Visa handles over 60% of all US debit transactions, which they say drives up prices for everyone.

In the grand scheme, swipe fees add up—last year, US merchants paid $72 billion in fees,🙊 and a lot of that gets passed on to us when we shop. So, this lawsuit could impact prices on just about everything you buy.