Highlights

Stocks dipped as investors trained a wary eye on debt ceiling negotiations at the White House (to be continued on Friday) and all eyes on CPI today, as a higher reading will encourage Fed to keep rates high.

Lucky consensus is that we’ll see a slight dip which means the Fed may finally be able to stop raising rates. 

If the Fed does stop raising rates, some analysts suggest we’ll see as much as a 15% increase in the major US indexes through the rest of the year. If the Fed does lift rates, things will obviously go the other way…

No real progress has been made on the debt ceiling so far. Biden and congressional Republicans made little tangible progress on Tuesday toward averting a first-ever US default but pledged negotiations on spending that would open the door to a possible agreement.
 

• For now, markets do not seem overly concerned, believing that politicians will eventually find a last-minute resolution and kick the ceiling down the road.

• However, there is a non-trivial risk that, like during the last debt ceiling saga in 2011, pressures from financial markets turn out to be the catalyst that leads to an agreement

Stock Spotlight

At its I/O developer conference, Google today announced the launch of PaLM 2, its newest large language model (LLM). PaLM 2 will power Google’s updated Bard chat tool, the company’s competitor to OpenAI’s ChatGPT, and function as the foundation model for most of the new AI features the company is announcing today. PaLM 2 is now available to developers through Google’s PaLM API, Firebase and on Colab.

“What we found in our work is that it’s not really the sort of size of model — that the larger is not always better,” DeepMind VP Zoubin Ghahramani said in a press briefing ahead of today’s announcement. “That’s why we’ve provided a family of models of different sizes. We think that actually parameter count is not really a useful way of thinking about the capabilities of models, and capabilities are really to be judged by people using the models and finding out whether they’re useful in the tests that they try to achieve with these models.”

Instead, the company decided to focus on its capabilities. Google says the new model is better at common sense reasoning, mathematics and logic. Indeed, as Ghahramani noted, the company trained the model on a large amount of math and science texts, as well as mathematical expressions. It’s no secret that large language models — with their focus on language — have struggled with handling math questions without resorting to third-party plugins. Google, however, argues that PaLM 2 can easily solve math puzzles, reason through problems and even provide diagrams.

PaLM 2 also now features improved support for writing and debugging code. The model was trained in 20 programming languages, including popular ones like JavaScript and Python, but also the likes of Prolog, Verilog and Fortran. PaLM 2 forms the basis of Codey, Google’s specialised model for coding and debugging, which it is also launching today as part of its code completion and generation service, among other things.

Today Google also highlighted that PaLM 2 was trained on a corpus that features over 100 languages, making it, in Google’s words, “excel at multilingual tasks,” including more nuanced phrasing than previous models.

Stock Spotlight

Boeing gained after Ireland’s Ryanair put aside their bitter feud and agreed to a monster purchase of up to 300 737 Max 10 jets. This is a multibillion-dollar deal for 737-Max-10s and could double capacity at the budget airline and create 10,000 jobs.

The airline said it was the largest order placed by an Irish company for US manufactured goods – although it will have negotiated a significant, undisclosed discount to the official $40bn value. It will be ratified by shareholders in the September annual meeting.

Sustainability News

Global professional services firm EY announced today the launch of EY OpsChain ESG, a new solution developed on the Ethereum blockchain, aimed at enabling companies to accurately measure and track their carbon footprint and to achieve and report a verifiable view of their current CO2 positions by tokenizing products’ emissions. 

In addition to tracking enterprise emissions, the platform is also aimed at building trust in the use of voluntary carbon credits to offset emissions, adding traceability and verifiability to a rapidly growing sector often challenged by opacity and inconsistent data.

Douugh, Did you know?

Lastly - Good advice never goes out of style, especially when it comes to navigating turbulent investment markets. To help you stay focused on your long-term investment goals, here are four tips from Vanguard, who say, timing the market is futile, and dramatic selloffs are often followed by rebounds - we kinda agree!

The benchmark S&P 500 index in the US has notched a gain of almost 8% in 2023, while the UK's FTSE 100 has climbed 4%. Still, the market outlook remains far from sanguine, given the still-unresolved banking turmoil in America and the mounting risks of an economic downturn. And with stock market predictions getting increasingly grim this quarter, investors are on edge.

1. Bear markets and corrections are a part of life. Stay focused on the long term. Bear markets and periodic corrections are a part of the investing world, so it's important not to get too rattled when they occur. According to Vanguard, investors who stay focused on long-term returns can weather these storms and come out ahead. Despite several selloffs over the past decade, the S&P 500 has returned more than 150%.

2. Dramatic selloffs are typically followed by recoveries. While market downturns can be painful in the short-term, history has shown that they are typically followed by recoveries. For example, the S&P 500 plunged 35% in the span of about a month in early 2020, but that was followed by an extended rally that saw the index surge by almost 120%.

3. ​​​​​​​Trying to time the market is pointless. Market timing is notoriously difficult, and investors who try to do so often end up worse off than those who stay the course. Vanguard notes that the best and worst trading days tend to cluster in brief time periods, making successful market timing improbable.

4. ​​​​​​​Don't panic when the market is in turmoil. Investors who move to cash during periods of market turmoil often underperform the markets, and staying out of the market for long periods can make matters worse. Instead, Vanguard advises investors to avoid overreacting to short-term downturns and focus on their longer-term goals. This means tuning out the noise, controlling costs, setting realistic expectations, and diversifying investments.

While the market outlook may remain uncertain, keeping these four insights in mind can help you stay on course and achieve your investment goals over the long term.

Douugh, Did you know?

What is the debt ceiling? Why it’s important

• The debt ceiling is the amount of money the US is authorised to borrow to pay its bills.

• The US runs a budget deficit, meaning its revenue isn’t enough to cover spending. The government borrows money to make up the difference.

• Congress regularly suspends or raises the debt limit so the US can borrow more. But lawmakers are at an impasse — meaning the government could default on its debt as soon as June 1.

• Failing to pay its bills in full and on time may have serious economic repercussions: recession, job loss, delayed payments of federal benefits like Social Security, higher borrowing costs and a plunging stock market.