The Fed, Trump and buggy robots. Oh my!

When it comes to financial markets, there is never any shortage of new news.

Of course, not all news is useful, some is not even all that interesting.

As an investor, this is a battle I wage daily.

Sometimes, it can feel like finding insight is akin to finding a needle in a haystack. Other times, such as reporting season, it can be like trying to rehydrate yourself by drinking from Niagara Falls – it might work, but it can be overwhelming. Often, it’s somewhere in between.

Still, it is necessary as what happens today could lead to big changes to a company and its share price performance in the future.

Here are some of the stories that got my attention.

US Federal Reserve cuts (finally?)

The biggest macroeconomic story was probably the US Federal Reserve’s decision to cut interest rates for the first time this year.

Although it was widely expected that “the Fed” would cut interest rates by 0.25% (which is what happened), there were some things that made this announcement more noteworthy than most.

For starters, lower jobs growth and higher inflation make the argument to cut not as simple. There also continues to be concerns about the Fed’s independence as US President, Donald Trump, continued to attack the Fed’s lack of action. This meeting was the first to include recent Trump-appointee, Stephen Miran, in the decision making who did propose a more aggressive cut but was the lone dissenting voice.

Still, the recent cut, with more expected to follow, is likely to be considered a good thing for equity investors.

As J.P Morgan global market strategist, Kerry Craig, said recently:

“When you’re in a rate cutting cycle, risk assets tend to perform quite well”.

Chanos and Trump disagree on market reporting

Trump also had some comments on the reporting requirements for US public companies and found a notable critic in famous short seller Jim Chanos of Kynikos Associates.

Of course, semi-annual reporting is also the norm in Australia, apart from certain categories of companies that are required to produce quarterly cash flow statements.

Those in favour of Trump’s proposal will point to quarterly appointment being an expensive exercise in short-term thinking, those against will argue that quarterly reporting helps keep investors better informed on company performance.

With the Securities and Exchange Commission now confirming they are investigating the proposal, we’ll soon find out if and when this change will take place.

If it does, it will shake up how some analysts will approach covering US-listed companies.

Perhaps we don’t need to fear the robot takeover yet

As I have previously discussed, artificial intelligence has been one of the key themes that have captured investors’ attention over the past few years.

This shows no signs of disappearing either after the announcement of it striking a deal with AI leader, OpenAI, led to a 43% increase in the share price of tech company, Oracle (NYSE: ORCL) and sending its founder, Larry Ellison, to the top of the world rich list.

This week could have further added to the excitement of AI, with Meta Platforms (NASDAQ: META), unveiling its newest AI-powered smart glasses.

It didn’t go smoothly, however.

“I don’t know what to tell you guys” a red-faced Mark Zuckerberg said as he gave up on trying to demonstrate part of the product’s new functionality that just didn’t play ball. 

To his credit, he beat on “we’re going to we’re just going to go to the next thing that I wanted to show and hope that will work”.

As embarrassing as it was for Zuck, it didn’t seem to both investors with Meta’s share price barely moving. I have no doubts Meta will sort out the bugs, but it does, however, highlight that we still are in the very early days of artificial intelligence.

Notable mentions

While not necessarily massive news events, the following also caught my eye.

Tesla (NASDAQ: TSLA) continues to be a divisive stock. On Monday, Tesla’s famous CEO, Elon Musk, purchased around US$1 billion in Tesla stock, Senior Associate Dean of Yale School of Management, Jeff Sonnenfeld, made headlines when he called the car manufacturer “the biggest meme stock we’ve ever seen”.

It was also arguably an end of an era on the ASX, with shares in Brickworks (ASX: BKW) being suspended from trade as the brick manufacturer begins its merger with Soul Pattinson (ASX: SOLDA). Although both have been historically linked due to their cross holdings, it will be different not to see the 80-year-old company on the local boards.

Finally, I’ve previously written about the elevated valuations of Aussie defence stocks, something that was reiterated by QVG Capital in their recent webinar. However, as shown by Droneshield’s (ASX: DRO) recent announcement of a new $7.9 million order from the U.S. Department of Defense, which brings the total systems sold by the company beyond 4,000 units, there is still evidence that, at least in the drone space, there remains reason for optimism.

Did something catch your eye? Share your thoughts below.