Three Things (8/26)

Jackson Hole

At the Jackson Hole, Wyoming conference on Friday, Jerome Powell spoke in a very dovish tone, saying the “time has come for policy to adjust.” He focused largely on looming rate cuts and the labor market, which he does not want to see cool any further. The unemployment rate reached 4.3% in July, which has certainly created some urgency around the transition to dovish policy. Decreasing rates is the Fed’s way of preventing higher unemployment from having outsized, negative effects on the economy.

Although the market was already pricing in a September rate cut, investors were hoping for some clues about the size of the first rate cut and frequency of subsequent reductions, which they did not directly get. Powell made it clear that these decisions will depend on incoming data, such as the August jobs report, which should help solidify whether a 25 or 50 basis point cut makes sense. While data should be a helpful guide, the hope is that it doesn’t prove the Fed is too late for a soft landing as we inch closer to the September meeting.

Boeing’s Starliner setback

Boeing will return its Starliner capsule from the International Space Station without the NASA astronauts that it originally brought there in early June. The two astronauts will wait until Spring of 2025 to return to earth aboard SpaceX’s Crew-9 vehicle. The Boeing test flight was only supposed to last 9 days, but technical issues led NASA to deem it unsafe for the crew to return on the original spacecraft. The setback isn’t exactly great PR especially given competitor SpaceX is set to rescue the stranded astronauts and Boeing has had a number of safety malfunctions and federal investigations this year. 

So while expenses are already high, Boeing has also absorbed over $1.5 billion in losses from the test flight. This Starliner faux pas points to a further departure from the meticulous engineering and quality control that is vital in the aerospace industry and the expenses that come with it. Although it could be an unpopular decision, it's not out of the question that new CEO Ortberg pumps the brakes on the Starliner Space initiative. 

iPhone 16 to hold us over

Apple is set to hold its new product launch on September 10th during which it will unveil the latest iPhones, watches, and Airpods. The iPhone 16 is said to be quite similar to its predecessor model but will run on Apple Intelligence, which encompasses a suite of AI tools, and will have a dedicated camera button. More dramatic overhauls were done on the watches with slimmer designs and Airpods with new low-end and mid-tier versions.

It’s an important launch given sales of iPhones and watches have been slow this year, and Apple has been notoriously behind on AI integration compared to its mega cap tech peers. Initial previews of Apple Intelligence have been highly criticized but will likely improve with updates coming post iPhone 16 release. The goal was for Apple to make the iPhone 16 just attractive enough to support sales growth and hold us over until bigger launches are ready, such as integration of the M4 processor across the Mac line.

Disclosures:

As of writing, AAPL is a holding in Titan's Flagship strategy.

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