Axios Markets

April 16, 2024
👋 Welcome back. Today's newsletter is 1,082 words, 4 minutes.
1 big thing: Everyone got rates wrong again
Illustration: Annelise Capossela/Axios
Here's an investment strategy that has consistently outperformed during the 2020s: Bet that the U.S. economy is going to run hotter than either the stock market or the bond market expects, Felix writes.
Why it matters: That strategy is the exact opposite of the way traders made money in the 2010s, which was to bet that the recovery from the 2008-09 global financial crisis would be slower and feebler than the market was hoping.
By the numbers: In the 14 quarters since the brief 2020 recession ended, U.S. GDP has soared by $8 trillion, or 40%.
- By contrast, in the 14 quarters after the 2009 recession ended, GDP rose by a relatively measly $2 trillion, or 14%.
How it works: Economic weakness causes the Fed to keep interest rates at near-zero levels, in an attempt to spur growth.
- The Fed Funds rate was kept at zero for seven full years, from the beginning of 2009 to the end of 2015.
- For most of those seven years, the bond market expected rates to rise within a year or so; they just never did, because the economy consistently disappointed.
- In that environment, a trader like Gary Stevenson could make a fortune off his prediction for continued economic weakness — by betting on continued low interest rates.
Where it stands: Since the recovery from the pandemic shock started in 2020, the Gary Stevenson trade has been a consistent loser — while the opposite bet, that economic strength would surprise to the upside, has been a clear winner.
- Corporate profits have surged, propelling the stock market to recent record highs.
Between the lines: In the U.S., the most visible sign of the economy running hot has been inflation.
- High inflation caused the Fed to raise rates by a stunning 5.25 percentage points over 18 months, in an attempt to slow down economic growth and bring surging prices under control.
- Economists expected such aggressive rate hikes would cause a recession — but they didn't.
- Fed officials expected in both December and March that they would cut rates three times this year. But given continued above-target inflation figures, that now seems unlikely.
The bottom line: Don't hold your breath waiting for a rate cut. The economy seems to be doing just fine without one.
2. The child care puzzle


The cost of day care and preschool rose 4.4% in March from the year before — outpacing the overall inflation rate, per the Bureau of Labor Statistics, Emily writes.
Why it matters: Rising costs are putting stress on families, with some spending at a slower pace and dipping into savings, and there's even some evidence that parents are leaving the workforce entirely.
State of play: The decline in pandemic-era child care benefits and rising wages for child care workers are part of the equation.
- Last year, the median weekly wage in the industry was $635 — or about $33,000 a year. That's a 27% increase from 2019, even after adjusting for inflation.
- And pay is still rising. Wages were up 4.8% for these workers in March over last year, according to analysis of pay in job listing data from the jobs site Indeed. That's compared to a 3.1% rise overall.
The big picture: This is hardly a story about high pay run amok — wages are still extremely low in the industry. Rather, child care providers are struggling to attract and retain workers in these low-paying jobs.
- The end of pandemic-era benefits eliminated the cash providers were using to fund bonuses and higher pay for workers — pushing some to find other ways to pay employees, like raising tuition.
3. DJT meltdown


Donald Trump's meme stock fell on Monday, just like it has fallen on most of the 14 days it has traded on the Nasdaq stock exchange. It closed at $26.61 per share, down 18% from Friday's close and down 66% from its March 26 high of $79.38, Felix writes.
Why it matters: Trump's shareholding in Trump Media and Technology Group accounts for most of his net worth.
The intrigue: The latest drop came after the social media company released a 217-page SEC filing designed to officially register millions of shares that belong to Donald Trump and other shareholders. Those shares aren't yet being traded on the Nasdaq, and they can't do so until the SEC deems the filing effective.
- The filing and the associated press release do mention — eventually — that Trump Media and Technology Group isn't issuing new shares and won't receive any money when the newly registered stock starts trading.
Between the lines: The total number of shares outstanding isn't changing, and neither are lockup restrictions preventing shareholders like Trump from selling any of their holdings until September. In fact, there was essentially no new news in the filing at all.
- DJT stock is however held by a disproportionate number of retail investors, many of whom have relatively little investing experience. Many of them may have thought the company itself was issuing new stock and diluting existing shareholders — an idea encouraged by some reporting.
- "The corporate media's misreporting on every aspect of Truth Social is relentless and intentional," said a spokesperson for the company.
Zoom in: Early investors in the blank-check company that acquired Truth Social were granted warrants to buy shares at $11.50 each. The new filing officially allows those warrants to be converted into newly issued shares — something that will certainly happen if the share price remains above $11.50, but that won't happen if the shares fall lower than that level.
- The warrants, which trade separately under the ticker symbol DJTWW, closed Monday at $11.62 each.
Zoom out: Because Trump can't sell DJT stock until late September, its current price gyrations are largely academic to him for the time being. What's most relevant to him is how valuable and how liquid the stock will be in October, rather than how much it's going up or down today.
- At that point, it would be better for him if the stock is rising from a low level rather than falling from a high level because it's easier to sell into a rising market without tanking the stock.
- Trump supporters might also be more likely to start buying the stock once the former president's lockup expires because we'll be much closer to the election and because their money might end up going directly to Trump himself.
The bottom line: Trump dominated the news cycle on Monday — but that did nothing to help the share price of his social media company.
4. Bonus for Markets readers
You're invited: On Wednesday, Axios co-founder Mike Allen will grill Axios CEO Jim VandeHei at a virtual event tomorrow for readers who've preordered "Just the Good Stuff" — his book about life, leadership and well-being.
- Why it matters: This conversation will take you behind the scenes of two of the hottest media startups of the past 20 years — Jim also founded Politico — and give you a window into the Axios business model and culture.
👀 How to join: Click here to preorder the book (with lots of choices of stores).
- Then drop by here to claim your free ticket. After you click "Register," you'll be asked to paste in the confirmation or receipt number as proof of purchase. (Ignore the promo code box.)
Proceeds from the book go to help kids get through vocational school, or 2- or 4-year college.
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Today's Axios Markets was edited by Kate Marino and copy edited by Mickey Meece.
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