What does the US economic turmoil mean for business?

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America has reached a point of great chaos. As for the economy, things are going very well.While the stock market did not set any new records last week, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite are all still at highs. GDP continues to grow, and the unemployment rate is near historic lows, although initial jobless claims are starting to rise.

Conversely, More than half of American consumers believe we are currently in a recession.According to a survey conducted by the Harris Poll, GuardianNearly half believe the S&P 500 will be negative this year, and 49% believe the unemployment rate is at a 50-year high. And it's not just this poll: Consumer confidence is at its lowest level since July 2022, according to the latest data from the Conference Board.

This economic polarization is partly due to the rise of online misinformation and a decline in consumption of well-reported business news, but it is not the only problem. Forbes Written by Senior Reporter Derek Saul Inflation continues after the pandemicWhile inflation has eased from a 40-year high of 9.1% in June 2022 to 3.4% last month, many prices have yet to fall. Wages have also not kept up with inflation: Since January 2021, the consumer price index has risen 19.3%, while average hourly wages have risen 16.1%. So even without factoring in costs, Many average consumers are finding that their money is not being spent as much as it used to.“Rising food and gasoline prices in particular dominate consumers' concerns, with politics and world conflict ranking far behind,” said Dana M. Peterson, chief economist at the Conference Board.

What this means for business is complicated, especially as the situation varies across industries.Target reported an across-the-board decline in quarterly profits last week as fewer customers and less spending in stores. But Nvidia surged, reporting a profit increase of more than 600% over last year. Fundamentally, companies should keep a close eye on how their customers view the economic situation and respond accordingly through price cuts, payment flexibility, marketing campaigns, etc. And whenever the Federal Reserve decides to cut interest rates (Chairman Jerome Powell has said that cuts could come this year), it will be important to pass those savings on to customers.

artificial intelligence

Nvidia once again shatters expectations and records When the company reported its quarterly results last week, it said its profits were up 628% year over year, and revenues were up 268%. Gross profit was $20.4 billion, up $15.8 billion year over year, making it the company's most profitable quarter ever. Unsurprisingly, the fastest growth came from the company's data center business, which makes the chips that will power the AI ​​revolution. Data center revenue hit a record high of $22.6 billion, accounting for about 87% of the company's total revenue. Nvidia is now worth $2.3 trillion, making it the third-largest company in the world behind Microsoft and Apple. CEO Jensen Huang, who owns 3.5% of Nvidia, saw his net worth increase by more than $7 billion, putting him in third place in the third quarter of 2015. Forbes List of the top 20 richest people.

As with most companies that offer products and services that fuel the AI ​​revolution, the rally in Nvidia's stock price following its earnings release also boosted several other tech stocks: Taiwan Semiconductor Manufacturing Company, ARM Holdings, Dell Technologies, Supermicro Computer, Advanced Micro Devices (AMD) and ASML Holdings. Nvidia's stock price also rose within hours of the earnings report.Many of the other top tech stocks known as the “Magnificent Seven” ended lower on Thursday, likely as investors interested in buying Nvidia needed to sell other shares, though the overall market recovered on Friday.

Nvidia shares surge The hype around this new technology appears to be fuelling an “AI bubble” that is at risk of bursting, furthering arguments that it could be in danger of bursting.But Nvidia's profits are based on actual sales, and initial orders for its more powerful Blackwell product line are due to arrive to buyers this quarter. It remains to be seen how long AI sales will last, but another product unveiled last week — Microsoft's built-for-AI Copilot+ PC — should at least shed light on actual sales metrics.

Legal issues

The Biden administration is once again flexing the power of antitrust law. It filed a lawsuit against Ticketmaster and its parent company, Live Nation, last week.Thirty state attorneys general joined the lawsuit, calling for the giants to be restructured. Live Nation calls itself the world's largest live music production company, owning or managing more than 265 concert venues in North America. Meanwhile, Ticketmaster is a leader in event ticket sales and marketing, controlling more than 80% of tickets to major concert venues. Attorney General Merrick Garland said in a release that the 2010 merger of the two companies gave Live Nation a monopoly in the live events industry, increasing the fees for fans, reducing the number of concert opportunities for artists, crowding out smaller promoters and forcing venues to use its ticket sales services. Live Nation countered on its website that the allegations that it exercises monopoly power are “absurd” and that Ticketmaster's fees are competitive with other providers.

of The Wall Street Journal The potential lawsuit was first reported in April. Forbes Senior contributor Peter Cohan, who wrote about the Live Nation-Ticketmaster merger for the Business School case, then analyzed the issues at stake and the likely outcomes. Cohan He wrote that ticket prices have risen since 2010.Ticketmaster can automatically withhold tickets for the secondary market, where it can receive huge markups above face value. And despite a clause in the merger agreement that prohibited Live Nation from threatening to shut down concerts in venues that don't use Ticketmaster, the Department of Justice found that Live Nation did so in 2019. But Cohan wrote that analysts expected Live Nation to settle the lawsuit and make some kind of policy change.

sustainability

While companies in some industries have been working to improve sustainability for years, energy suppliers have been slow to move. In the past three and a half years, the Biden administration has created $1.6 trillion worth of federal subsidies to help energy companies pursue sustainable policies, and companies have money set aside. But Forbes Senior contributor Dipka Bhambhani wrote: What stands in their way is politics.With six months to go until a hotly contested election, some companies are pausing their plans after Republican candidate and former President Donald Trump literally promised oil executives that he would roll back clean energy policies if elected. Matt Leggett, a partner in the policy and law group at K&L Gates, said the Trump administration and a Republican-controlled Congress could eliminate all tax credits and incentives for clean energy.

Many companies are moving forwardLeggett noted that incentives are state and industry based and may be difficult to simply cancel. “Every two or four years, there's political instability that can bring individual energy policies into question, but the long-term trends are clearly moving in favor of the energy transition,” Leggett told Bambani.

Facts + Comments

With the summer travel season underway, low-cost carriers Frontier Airlines and Spirit Airlines are allowing passengers who face cancellations or delays to change their plans without fees under a Department of Transportation rule. Many prices have been reduced.

$64: Frontier Airlines used to charge for carry-on bags, but now they're free

$69 to $119: Spirit Airlines Previous Change Fees

“We give you all the options you need, and the customer support you need, when you need it, at the best price.” Frontier CEO Barry Biffle

Strategy + Advice

The CEO's job is very busy, but It is important to have a hobby For mental health reasons and to improve your leadership skills. Here are some suggestions to make the most of your free time.

Complete digital transformation is difficult to achieve Change is inevitable in business, especially when you've been doing things the same way for a long time. PepsiCo uses a pilot program called PepsiCo Labs to test changes. Here are some lessons we can learn from their approach:

video

quiz

Last week, Hims & Hers Health shares The highest price in three yearsWhat did the company announce to drive up its stock price?

A. Plans to acquire diet app Noom

B. We are adding a team of primary care physicians to provide virtual comprehensive care.

C. Became a licensed distributor of marijuana and CBD in 10 states

D. There are newer weight loss drugs like Ozempic and Wegovy that cost just a fraction of the price

Check here if your answer is correct.