While we ended the week on a positive note, we finished the month of August down. Perhaps this isn’t going to surprise many of you, but the markets this year have been driven by the Nasdaq and in particular seven stocks that make headline news regularly. The rest of the market is certainly doing better than last year but has been mostly lackluster through the end of August. During the month, the only sector that finished in the green was energy which shouldn’t come as a surprise if you’ve had to fill up your gas tank recently. We still have four months before closing out 2023 and there remain many unknowns, i.e. further Fed rate interest rate hikes, and a fiscal budget showdown/potential government shutdown. As I’ve lamented much of the summer, we’ve been in no-man’s land. The economy remains resilient even in the face of higher interest rates and despite the Fed’s best efforts. Consumers also remain resilient, relying on their credit cards and savings to get them through another month. Once we get through September, we should have a better handle on where things are headed.
One thing we can count on are worker strikes. Unions are in focus across the country as more workers threaten industrial action and strikes continue to impact entire industries. Joining the train in 2023 have been pilot associations at major airlines like American and Southwest, the Teamsters Union at UPS, Workers United at Starbucks, and the International Association of Machinists and Aerospace Workers at Spirit AeroSystems. Don’t forget the damaging walkout that continues to plague Hollywood – with both writers and actors conducting a historic double strike. Many workers feel compensation and conditions have worsened over the past three years despite bumper corporate profits since the pandemic. More importantly, besides pay not keeping up with the rising cost of living, employees might see a moment of leverage in a tight labor market, while big changes are threatening control of entire industries (i.e. EVs/autos, or AI and the screenwriters). The latest case is the United Auto Workers, representing Ford, General Motors, and Stellantis employees, which plans a strike on September 14th if a deal is not achieved. A work stoppage by its 150,000 workers could result in an economic loss estimated at $5B in just 10 days. Between additional regulations, increased charges by federal agencies, and ongoing threats of employee walkouts, it is not an easy environment for businesses these days.
About companies, let’s talk about some things I heard this week. Duke Energy announced it is launching an EV charging subscription service in North Carolina. In a pilot program with General Motors, Ford, and BMW, it is trialing a flat-fee residential charging program. Customers can use up to 800kWh/month to charge an EV at home for a flat fee of $24.99 (or approx. $0.031 per kWh). Before you say hallelujah, the average EV driver uses less than 15 kWh/day (or 450 kWh/month) which still amounts to $0.055 per kWh compared to nearly double that for the going electric rate. In other news, Amazon announced it is hiking its free shipping minimum to $35 for non-Prime members to match Walmart’s requirement. This could incentivize non-Prime members to sign up for the $139 per year Prime service. While we’re on the subject of shipping fees, FedEx announced it is increasing its shipping fees and various surcharges at the start of 2024. On average, shipping costs will increase 5.9% for U.S. domestic, export, and import services. Freight shipping rates will increase between 5.9% and 6.9%. And lastly, Visa and Mastercard are rumored to be planning hikes to fees they charge merchants. The fee increases are set to begin in October and April and could increase the fees merchants pay by $502M, according to the Wall Street Journal. The fee structure, mostly unnoticeable to consumers, has become a source of irritation between the card networks and merchants of all sizes.
As for the story of the week, I turn to false advertising. It should come as little surprise that food stylists have been working their magic on fast food advertising for as long as I can remember. You know the glossy ads highlighting juicy hamburgers with fresh tomatoes and lettuce and just the right amount of ketchup. Well, it finally happened. Burger King will have to go to trial after a federal judge in the Southern District of Florida rejected a motion to dismiss a class action lawsuit over the chain making the Whopper appear 35% larger on menu boards than its actual size. Burger King denied any wrongdoing and maintains it is not required to deliver burgers that look exactly like the pictures on menu boards. Well, in my limited experience, they are living up to their belief. Not that I am a fan of class action lawsuits, but in this case, I understand the grievance. Now you know.
Bruce J. Mason, MBA