Member Briefing November 7, 2024
Manufacturers Congratulate Trump, Vow to “Get to Work”
Manufacturers pledged today to work with President-elect Donald Trump to provide “a fresh opportunity … for all Americans.” NAM President and CEO Jay Timmons congratulated Trump on the historic win and urged the soon-to-be commander-in-chief “to get to work to address the policies that will define your administration.” These, Timmons said, should include: Permitting reform; Reinstatement of expired 2017 pro-growth tax reform provisions; and An all-of-the-above energy strategy. The NAM worked with the first Trump administration to advocate for the 2017 Tax Cuts and Jobs Act, which contained several key provisions that acted like “rocket fuel” for the manufacturing industry.
“We are facing monumental headwinds today, and sector optimism is at its lowest levels in years,” Timmons said. “The cost of business continues to increase. From health care to looming tax hikes, and aggressive agency overreach, the policies of today are keeping shovels out of the ground. We believe that we can build on the successes of our previous work together to roll back burdensome regulations, unleash American energy security [and] power the economy of the future. Elections may place Americans on different sides, but as we approach America’s 250th anniversary, this can be a moment to renew our belief in each other and in the promise of our nation,” Timmons concluded. “Let’s work together as we did before to define not just your time in the White House but to define a historic moment in our nation’s history.”
Here’s Why Trump’s Win Sent Dollar And Bond Yields To Multi-Month Highs
Financial markets’ strong reaction to Donald Trump’s projected return to the oval office included a spike in the value of the dollar and a sharp selloff in fixed income, hinting at both investor optimism at strong economic growth and concerns about inflation.
- The U.S. dollar index (DXY), which tracks the American currency’s exchange rate against a basket of six other developed market currencies including the euro and the Japanese yen, rose 1.8% to about $105.30 by around 8 a.m. EST, registering its highest level since early July. The dollar’s rise is partially a reflection of the protectionist trade policy endorsed by Trump and the Treasury is in part a result of investors moving money into riskier assets (see the early stock market gains), but there’s also a more pessimistic reason for the movements.
- And bond yields spiked with the benchmark 10-year Treasury rising 16 basis points to a four-month high of almost 4.5%, the largest daily jump in 10-year yields since April; higher bond yields point to a fixed income selloff as investors demand higher annual payouts to hold government debt. “Correct or not, the market views Republican control of Washington as negative for the debt and deficits,” wrote Sevens Report founder Tom Essaye in a Wednesday note to clients, alluding to Trump’s victory and Republicans’ projected majority in the Senate and lead in the House race.
- If this climbing debt is in fact the case, coupled with concerns about the impact on goods’ prices due to tariffs, inflation could remain elevated for longer than previously expected, which in turn would likely cause the Federal Reserve to pump the brakes on its interest rate cutting cycle kicked off in September, with optimism about robust economic growth under Trump similarly pushing out monetary policy expectations, as stimulatory rate cuts are less necessary with strong economic conditions. So, lessened rate cut expectations push up bond yields as traders price in interest rate cuts closer to today’s 4.75% to 5% in the medium and long run, and higher expected rates simultaneously drive up the value of the dollar as the likelihood of cheap borrowing costs in low-rate environments decreases.
Winds Shift Toward GOP In Fight For House
The neck and neck battle for control of the House in the next Congress appears to be shifting in favor of Republicans as results roll in from the most competitive districts a day after voting ended. While the contest for the gavel remains too close to call officially — and dozens of races have yet to be finalized — the momentum was clearly moving with the GOP on Wednesday as more ballots were counted and the battlefield shrunk.
Democrats, to be sure, are still holding out hope they can notch control of the lower chamber as a check on the second Trump administration. Minority Leader Hakeem Jeffries (D-N.Y.) said “the House remains very much in play” Wednesday afternoon, pointing to a number of too-close-to-call races. The mounting GOP wins, however, are drawing a rosier picture for Republicans.
Global Headlines
Middle East
- Israel And Hamas: The Latest News – The Guardian
- Israeli Government Celebrates Trump's Election Triumph - Reuters
- Iran's Currency Plummets Amid Prospect of Trump Presidency - Newsweek
- Israeli Defence Minister's Sacking Removes Thorn In Netanyahu's Side - Reuters
- Protests Erupt In Israel After Netanyahu Fires Defence Minister - BBC
- Biden Admin Gives Israel a 'Fail' Grade on Improving Aid to Gaza - Newsweek
- Interactive Map- Israel’s Operation In Gaza – Institute For The Study Of War
- Map – Tracking Hamas’ Attack On Israel – Live Universal Awareness Map
Ukraine
- Ukraine And Russia: The Latest News – The Guardian
- Russia’s Top Brass Look For U.S. Reset As Putin Keeps Quiet - CNBC
- 'Lame Duck' Joe Biden Faces Calls To Erase Russia Red Lines - Newsweek
- Zelenskiy Lauds Trump As Election Win Plunges Ukraine War Into Uncertainty - Reuters
- Putin Has No Plans To Congratulate Trump, Kremlin Says – The Hill
- Ukrainian Drones Strike Russian Fleet's Caspian Hideout - Newsweek
- Ukraine Says It Fought N Korean Troops For First Time - BBC
- Interactive Map: Assessed Control Of Terrain In Ukraine – Institute For The Study Of War
- Map – Tracking Russia’s Invasion Of Ukraine – Live Universal Awareness Map
Other Headlines
- Germany's Awkward Coalition Collapses - Reuters
- Ireland Faces Snap Election On Nov. 29 – Politico
- China Attempts To Boost Birth Rate Amid Mounting Challenges - VOA
- Nigeria's Army Chief Dies Aged 56 - BBC
- Why Trump Tariffs Pose A Bigger Threat To China’s Economy This Time -Reuters
- China Files Complaint At WTO Over EU Tariffs On Chinese EVs
- Japan To Support Nuclear Power Plant Construction In Poland – Nikkei Asia
- List of World Leaders Congratulating Donald Trump - Newsweek
Policy and Politics
Democrats Will Keep Their Hold On The N.Y. Legislature, Prop One Passes
State government in New York avoided any major shifts on Election Day, with the Democrats in the Assembly and Senate poised to emerge with numbers in the ballpark of the record totals they’ve secured in recent years. New Yorkers voted to pass the Equal Rights Amendment ballot measure by a margin of 62 to 38. The Equal Rights Amendment will expand anti-discrimination protection in the state constitution to cover additional categories such as disability, sexuality, and gender expression. Democrats won 42 of 63 seats in the Senate in 2022. They lost a Brooklyn district Tuesday, and one Republican-held district in the Hudson Valley remained tight as the night dragged on. That seemingly puts the Democratic majority at either 41 or 42 seats.
In the Assembly, Democrats won 102 of 150 seats in 2022. As midnight approached on Election Day 2024, they were about nine seats where neither party had a clear victory. Five of these are currently held by Democrats and four by Republicans, meaning the final tally will likely wind up very similar to the 102 Democratic-held seats of two years ago. Meanwhile, the Working Families and Conservative parties both received enough votes in the presidential contest to keep their official status for the next two years.
Takeaways From The US Presidential Election
Former President Trump completed an extraordinary comeback early Wednesday morning, becoming the first president to win nonconsecutive terms in more than a century by defeating Vice President Harris in an unprecedented battle for the White House. The comeback is remarkable for a host of reasons.
Trump was buoyed up by a fervently loyal support base — most of whom believe his narrative that he has been unfairly victimized by a corrupt political, legal and media establishment. “We overcame obstacles that nobody thought possible,” Trump told supporters during at West Palm Beach, Fla., during his victory speech in the early hours Wednesday, calling his win “a magnificent victory for the American people.” He also gained from public dissatisfaction with President Biden’s record.
What's Next For President-Elect Donald Trump
Donald Trump has been elected as the next president of the US and updating tax, trade and energy policy will likely be priorities for the incoming administration, which will have a Republican majority in the Senate. Although the president-elect's immediate agenda is still taking shape, he has pledged to end certain rules encouraging electric vehicle sales, ease LNG export permitting and take other steps to "unleash American energy" and address trade concerns.
On the economic front, Trump has vowed to undo many Biden policies including parts of his landmark Inflation Reduction Act that gave support to electric vehicles and clean energy. Trump has also suggested that as president he’d seek greater influence over the Federal Reserve and ease regulatory burdens, in particular for digital assets like cryptocurrency. While his economic pitch helped him win, economists warn Trump’s plans to renew expiring tax cuts and offer a myriad of other breaks — in addition to his proposed tariffs — threaten more inflation and to drive up the national debt. The president-elect has dismissed claims tariffs will reduce or divert trade flows and rattle supply chains.
Health and Wellnes
Trump Says He Will Give RFK Jr. A Major Health Role. Here’s What That Means For Patients, Drugmakers
Donald Trump has said he will give Robert F. Kennedy Jr., a notorious vaccine skeptic and conspiracy theorist, a major health role during his second term as president. Some health experts said elevating Kennedy, even in an informal Trump administration role, could potentially lead to severe consequences for patients, drugmakers and the nation’s public health overall. Top leadership roles, such as the FDA commissioner, require confirmation by the Senate, which some experts noted could pose a hurdle for Kennedy. But Kennedy has met with Trump transition officials and could take a broad White House “health czar” position that would not need Senate confirmation, The Washington Post reported Saturday.
The former environmental lawyer may also bring uncertainty to the pharmaceutical industry, which relies on federal health agencies to greenlight new products, keep old ones on the market, and, in some cases, fund research and development. It will likely be difficult for Kennedy to change the drug approval process, but experts said he could gain a new platform to politicize certain treatments he opposes and tout others that aren’t proven to be safe and effective.
Industry News
Tesla Shares Soar 12% Toward Record As Trump Wins Election
Shares of Tesla surged by 12% in premarket trading Wednesday morning, sending the company’s stock toward a new record after Donald Trump was reelected as president, while analysts signaled a Trump victory would likely benefit Elon Musk’s firm. Tesla’s shares rose to over $283 as of around 7:10 a.m. EST, marking what would be a new record for the stock, eclipsing a previous high of $273.54 set on Oct. 27.
Trump praised Tesla’s chief executive as a “super genius” and a “new star” during his victory speech early Wednesday, after Musk spent weeks campaigning for Trump throughout Pennsylvania before Election Day. Trump’s plan to implement tariffs on Chinese imports would also deter Tesla’s Chinese competitors BYD—which Ives noted overtook Tesla as the world’s largest EV maker at the time—and NIO from “flooding the U.S. market over the coming years,” Ives said.
Weekly Mortgage Demand Tanks 11% As Interest Rates Surge Higher
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances — $766,550 or less — increased to 6.81% from 6.73%, with points decreasing to 0.68 from 0.69, including the origination fee, for loans with a 20% down payment. “Applications decreased for the sixth consecutive week, with purchase activity falling to its lowest level since mid-August and refinance activity declining to the lowest level since May,” wrote Joel Kan, an MBA economist, in a release.
Applications to refinance a home loan, which are most sensitive to weekly rate moves, fell 19% for the week but were 48% higher than the same week one year ago. Last year at this time, the 30-year fixed rate was 80 basis points higher. Applications for a mortgage to purchase a home decreased 5% for the week and were just 2% higher than the same week one year ago. Homebuying activity has picked up over the past few months, as more supply comes on the market and home prices ease slightly. Mortgage rates, however, are pricing some buyers out again, and concern over the economy and the election may have some sitting on the sidelines right now.
Hurricane Rafael Strengthening Quickly As It Churns North Towards Cuba
Hurricane Rafael was gaining strength as it churned north towards western Cuba early on Wednesday, the National Hurricane Center said, warning it could approach major hurricane status before slamming into the Caribbean island later in the day. The hurricane was located about 195 miles (310 km) southeast of Cuba's capital Havana at daybreak Wednesday, packing maximum sustained winds of 90 mph (150 kph) with higher gusts, the Miami-based forecaster said.
The timing could not be worse for the Communist-run island, which last month suffered a total collapse of its national electric grid, leaving an estimated 10 million people without power for several days. Continuing rolling blackouts, crippled communications and fuel shortfalls have complicated the government's efforts to prepare residents for the storm. Rafael appeared set to cut across the farm province of Artemisa late on Wednesday, west of Havana. Forecasters predict the storm will spin off towards the western Gulf of Mexico later this week, though the track remains uncertain, the NHC said.
US Air Force Faces Funding Challenge For Key Programs
The Next-Generation Air Dominance fighter; the Next-Generation Aerial refueling System tanker; a second increment of Collaborative Combat Aircraft drones: Air Force leaders have said in recent years they need them all to be prepared for a future fight with a great power like China. But speaking at the Airlift/Tanker Association symposium on Nov. 1, Air Force Secretary Frank Kendall admitted the Air Force will have to get “creative” with its future force structure because it cannot afford them all.
“These three potential new-design platforms are all tied together, all in an Agile Combat Employment context,” Kendall said of NGAD, NGAS, and CCA. They are connected “both operationally and from an affordability perspective, and we are working through a sprint of about four months” to assess “the best combination of capabilities to pursue at various investment levels.” Having enough resources to build the Air Force that’s needed is “what I worry about most,” Kendall added, noting that “we have to get somewhat creative to adapt our existing force to meet the threat.”
Read more at Air and Space Forces
Enel, Ansaldo, Leonardo in talks to set up nuclear reactors firm, minister says
Energy groups Enel, Ansaldo and defence company Leonardo are in talks to set up a state-backed company to build nuclear reactors in Italy, the country's energy minister Gilberto Pichetto Fratin said on Wednesday. Pichetto confirmed the talks with the companies, first reported by newspaper Il Foglio, were taking place, but said nothing had yet been agreed. "If and when we reach a conclusion we will draw up sums on who is participating," Pichetto told a news conference following an event dedicated to fusion energy in Rome, adding the new state-backed company should have "an important role" in the system.
Nuclear-fired power plants are prohibited in Italy following referendums in 1987 and 2011 but the government plans to draft rules to allow the use of new nuclear-power technologies and lift the ban. Italy's right-wing administration thinks small modular reactors and advanced modular reactors could help decarbonise the country's most polluting sectors, including steel, glass and tile-makers. Italy estimates it would be able to save 17 billion euros ($18.20 billion) on the cost of decarbonising the economy by 2050, should it include at least 11% of nuclear power in its energy mix.
Toyota’s Bet on Hybrids Looks Even Better Under Trump
Japanese automaker Toyota on Wednesday reported a 20% year-over-year drop in operating profit for the quarter ended September. It is facing challenges in all of its largest markets as car sales have dropped while rising costs have hit margins. It was also embroiled in a scandal at home about falsifying vehicle safety certifications that led to production suspensions on some models. Finally, it had to recall some of its cars in the U.S.—its largest market—due to issues with the engines. Overall, it sold around 4% fewer cars last quarter than a year earlier.
China continues to be a headache for Toyota, similar to the fate of many foreign carmakers in the country as domestic rivals speed ahead. Toyota’s car sales volume there dropped nearly 10% year-over-year in the quarter. But there is one bright spot for Toyota: its hybrid vehicles. The company’s Prius model was a pioneer in hybrids and it has doubled down on the strategy to roll out hybrid versions of some of its most popular cars like the RAV4 sport-utility vehicle and Camry sedan. Conventional and plug-in hybrids together now made up around 44% of global vehicle sales of Toyota and Lexus, its luxury brand, up from 24% four years earlier. It benefited from a surge in interest in hybrids, particularly in the U.S. as consumer interest in full electric vehicles cooled.
Fed Readies a Rate Cut and Tries to Avoid Post Election Spotlight
The Federal Reserve is widely expected to cut interest rates by a quarter-percentage point at its meeting that ends Thursday. The bigger question is how many more cuts officials expect will be warranted to preserve a solid job market without reversing recent declines in inflation. Officials will be hard-pressed to offer any firm answers on that question because their reply will be some version of the following: It depends. Here is a look at four questions officials face that illustrate why the Fed’s ability to offer meaningful interest-rate guidance could be more limited.
This week’s decision lacks the suspense of the last one, when markets weren’t sure how big the Fed’s rate cut would be. That means that Fed Chair Jerome Powell’s press conference at 2 p.m. Eastern time on Thursday will be the main event. Powell is likely to try to stay out of the postelection spotlight by avoiding questions about hot-button policy issues. The Fed strives to be apolitical, and officials pushed back their meeting by one day to put more space between the interest-rate decision and the presidential election.
Holiday Shipping will Cost More and Be Slower This Year
A recently released report from Coresight Research, Holiday 2024: The Last Mile—Trends and Challenges as We Enter the Holiday Shopping Season, predicts the holiday season “ to pose challenges for logistics and shipping processes, although improved planning and less unplanned packages should help make the impact more manageable for both retailers and parcel carriers.“
Pricing will increase given that FedEx and UPS released peak shipping surcharges and fees that are more aggressive and have longer peak durations than in previous years, according to the report. Also, this year, the two companies have adopted a phased approach to surcharges, spreading them across three periods rather than using a single-rate, single-period system as in previous years. The highest surcharges will apply during the “peak of peak” period, November 24–December 28, 2024. As far as purchasing patterns are concerned, consumers are spreading out their holiday purchases, resulting in more evenly distributed pressure on shipping networks. There will be fewer last-minute surges from both retailers and carriers, which will reduce the risk of delays or capacity issues.
Read more at Material Handling & Logistics
Stellantis To Indefinitely Lay Off 1,100 Workers At Jeep Plant In Ohio
Automaker Stellantis announced plans Wednesday to cut a manufacturing shift and indefinitely lay off roughly 1,100 workers at a Jeep plant in Ohio. The company, which has been battling high inventory levels and lower earnings this year, said the decision at its Toledo South Assembly Plant to cut production to one shift will better align output with demand of the Jeep Gladiator pickup — the factory’s sole product.
The layoffs will be effective as early as Jan. 5, according to Stellantis. The automaker announced the layoffs in conjunction with required notices to government agencies under the Worker Adjustment and Retraining Notification Act. In accordance with the company’s 2023 contract with the UAW, Stellantis said it will provide laid off employees with one year of supplemental unemployment benefits in combination with any eligible state unemployment benefits, equalling 74% of their pay, followed by one year of transition assistance. Health-care coverage also will continue for two years. The United Auto Workers union, which represents Stellantis employees at the plant, did not immediately respond for comment.