Good Evening. The stock market dipped on Wednesday as investors awaited further hawkish comments from key monetary policymakers. These results suggested that more Federal Reserve members were willing to move quickly to boost interest rates in order to reduce demand and persistently high inflation.
The S&P 500 dropped 0.97%, the Dow Jones fell 0.42%, and the Nasdaq fell 2.22%.
FEDERAL RESERVE
The minutes from the Federal Reserve’s meeting on March 15 and 16 shed more information on how central bank policymakers were considering shrinking their balance sheet this year. “Participants reaffirmed that the Federal Reserve’s securities holdings should be reduced over time in a predictable manner,” according to the minutes.
While the Fed has yet to agree on how and when to begin unwinding its balance sheet, several Fed members have suggested that it will happen soon. The process might be unveiled as soon as May, according to Fed Governor Lael Brainard, who was once considered a “dove” on the committee.
The Fed minutes also noted that “participants generally agreed that monthly caps of about $60 billion for Treasury securities and about $35 billion for agency MBS [mortgage-backed securities] would likely be appropriate.”
So why does this matter? The Fed is able to pump money into the economy by buying up assets. During the COVID pandemic, these purchases injected huge amounts of cash into the panicked economy. Some would argue this stimulus kicked off the inflation we are seeing now. In case you forgot your macro economics class and the quantity theory of money: money supply X velocity = price X quantity1 . When money supply increases, price and/or quantity needs to increase (holding velocity constant, which most economists do). We typically can expect an increase in prices, i.e. inflation. The Fed can reverse course and begin selling assets from its balance sheet, thus sucking money out of the economy.
1) Quantity of goods and services
SPACE RACE 2.0
The “Battle to Become the Internet King,” or “Space Race 2.0,” is heating up. Amazon announced a multibillion-dollar investment in its satellite internet service yesterday.
Project Kuiper, Amazon’s answer to SpaceX’s Starlink, has secured 83 launches over the next five years. These launches will be used to transport its intended fleet of over 3,000 satellites into orbit. Consumers, corporations, and government organizations would all benefit from the satellite constellation once finished.
For the launches, agreements have been reached with three different rocket firms.
- United Launch Alliance, a Boeing-Lockheed Martin joint venture, will launch 38 satellites.
- The James Webb telescope, which Arianespace recently launched, will conduct 18.
- Blue Origin, will execute at least 12 tests (with the potential for an additional 15).
Elon Musk’s SpaceX, which controls the commercial launching business with more than 50% of the worldwide market share excluding China as of 2021, is noticeably absent from the list. Project Kuiper’s decision to skip SpaceX strongly indicates that it will compete directly with Starlink in the broadband market.
Bezos vs. Musk: In Space
After all, a competitor launching a space company’s satellites isn’t unheard of. OneWeb (SpaceX’s biggest competitor in the market) inked a satellite launch arrangement with Musk’s space company last month after its deal with Russia fell through due to the conflict in Ukraine.
However, the rivalry between Musk and Bezos is intense. For years, the two founders and their respective companies have been vying for orbital supremacy, competing for lucrative government contracts and slamming one another’s space projects.
- Blue Origin sued NASA last year when the agency granted SpaceX a $2.9 billion contract but lost.
- In response to the challenge, Musk tweeted about Bezos, saying, “Can’t get it up (to orbit) lol.”
- Living on Mars, which is essential to SpaceX’s vision for the future, has also been attacked by Bezos, who claims that living on Mount Everest would be a paradise in comparison.
Amazon and Blue Origin, on the other hand, will have some catching up to do. Starlink has roughly 250,000 members and has deployed around 1,900 satellites.