Moody’s Analytics Mark Zandi has a message for investors: Brace for a significant market correction.
The firm’s chief economist expects a more hawkish Federal Reserve will spark a 10% to 20% pullback.
And, unlike the sharp drops over the past several years, Zandi anticipates a quick recovery won’t be in the cards particularly because the market is richly valued. He estimates it could take a year to return to break even.
He suggests the correction may already be underway because investors are starting to get spooked.
The Dow just saw its biggest weekly loss since October 2020, tumbling 3.45%.The broader S&P 500 saw its worst week since late February. The tech-heavy Nasdaq also had a losing week, but it’s just 1.28% off its all-time high.
Despite his market warning, Zandi believes the economy will avert a recession because the downturn is more about risk asset prices getting overextended than a serious fundamental issue.
“The economy is going to be rip-roaring,” he said. “Unemployment is going to be low. Wage growth is going to be strong.”
Zandi has been ringing the alarm on inflation for months.
On “Trading Nation” in early March, Zandi asserted inflation was “dead ahead” and investors weren’t fully grasping the risks. According to Zandi, it’s still a problem affecting stock market and bond investors. Zandi sees little chance the benchmark 10-year Treasury Note yield will keep falling.
“I wouldn’t count on rates staying at 1.5% for very long given what’s going on,” he added.
Stocks and bonds aren’t the only risk assets catching his attention. Zandi also sees more trouble brewing in the commodities and cryptocurrency sell-offs. Plus, he’s worried about the sustainability of a strong housing market amid higher mortgage rates.
“Inflation is going to be higher than it was pre-pandemic,” Zandi said. “The Fed has been struggling for at least a quarter of a century to get inflation up, and I think they’ll be able to get that.”
Unilever committed to Israel business
Tubs of ice-cream are seen as a laborer works at Ben & Jerry’s factory in Be’er Tuvia, Israel July 20, 2021.
Ronen Zvulun | Reuters
Unilever‘s CEO Alan Jope told investors that the company remains committed to its businesses in Israel during a conference call on Thursday, after its subsidiary Ben & Jerry’s announced earlier this week that it will stop the sale of its ice cream in the occupied Palestinian territories.
The ice cream maker, known for its left-leaning political stances, made the move after facing backlash online for its business in the occupied territories. Unilever’s CEO sought to distance the parent company from the decision, saying it was made independently by Ben & Jerry’s.
“Unilever remains fully committed to our business in Israel,” Jope said. “This was a decision that was taken by Ben & Jerry’s and its independent board in line with an acquisition agreement that we signed 20 years ago.”
“I can assure you it is not our intent to regularly visit matters of this, where sensitivity has been a long-standing issue for Ben & Jerry’s,” Jope said.
“We were aware of this decision by its brand – by the brand and its independent board, but certainly [its] not our intention that every quarter we’ll have one quite as fiery as this one,” Jope said.
Ben & Jerry’s announced on Monday it will not renew its partnership with its licensee, which manufactures and distributes the company’s ice cream in Israel in the region, when the partnership agreement expires at the end of next year.
However, Ben & Jerry’s plans to remain in Israel through another arrangement that the company has not yet announced.
Israeli Prime Minister Naftali Bennett has vowed to act aggressively against Ben & Jerry’s decision, telling Unilever’s CEO the move would have “serious consequences, legal and otherwise.”
In response to Ben & Jerry’s move, Republican Sen. James Lankford of Oklahoma called for a block of all Ben & Jerry’s sales in the his home state in line with state laws.
Oklahoma passed an anti-boycott of Israel law in 2020, which recognizes Israel as a prominent trading partner and prevents the state from doing business with any company that is engaged in a boycott of Israel.
Ben & Jerry’s is not the first company to find itself tangled in controversy over business in the occupied Palestinian territories. In 2018, the rental site Airbnb said it was banning listings of Israeli property in the West Bank, territory Palestinians claim should be part of their state.
— The Associated Press contributed to this report.
Mercedes plans to go all-electric by the end of the decade
Sina Schuldt | picture alliance | Getty Images
Germany’s Daimler said Thursday that its Mercedes-Benz brand would “be ready to go all electric at the end of the decade, where market conditions allow.”
It’s the latest sign of how major automotive firms are gearing up for a future based around electric vehicles.
According to Daimler, from 2025 all of Mercedes-Benz’ “newly launched vehicle architectures will be electric-only.”
Breaking things down, Daimler explained how it planned to launch three pure-electric architectures that year: MB.EA, which will relate to medium and large passenger cars; AMG.EA, which will focus on performance vehicles; and VAN.EA, for light commercial vehicles and vans. Models based on these platforms will be electric only.
From 2025 onward, consumers will also have the option of purchasing an “all-electric alternative for every model the company makes.”
“The EV shift is picking up speed — especially in the luxury segment, where Mercedes-Benz belongs,” Ola Källenius, who heads up both Daimler and Mercedes-Benz, said in a statement.
“The tipping point is getting closer and we will be ready as markets switch to electric-only by the end of this decade,” he added. “This step marks a profound reallocation of capital.”
In light of its plans, Daimler stated that Mercedes-Benz would ramp-up its research and development. “In total, investments into battery electric vehicles between 2022 and 2030 will amount to over 40 billion euros.”
Alongside global partners, Mercedes will also look to establish eight gigafactories to manufacture the cells it needs for its vehicles. This would supplement plans to develop nine plants focused on the development of battery systems.
Daimler added that Mercedes-Benz intended to, “team up with new European partners to develop and efficiently produce future cells and modules, a step which ensures that Europe remains at the heart of the auto industry even in an electric era.”
Low and zero-emission transportation is seen as being a crucial tool for major economies attempting to reduce their environmental footprint and cut air pollution.
The U.K. government, for example, plans to stop the sale of new diesel and gasoline cars and vans by 2030 and require, from 2035, all new cars and vans to have zero tailpipe emissions.
Elsewhere, the European Commission, the EU’s executive arm, is targeting a 100% reduction in CO2 emissions from cars and vans by 2035.
Against this backdrop, a host of companies involved in the auto industry have announced plans to expand their offering of low and zero-emission vehicles.
Earlier this month, for example, the Volkswagen Group said half of its sales were expected to be battery-electric vehicles by 2030. By 2040, the company said almost 100% of its new vehicles in major markets should be zero-emission.
Speaking to “Squawk Box Europe,” Herbert Diess was asked if he would rule out any future deal with Elon Musk’s electric car maker, in which VW could manufacture its cars, or if the Tesla and VW brands would ever unite.
“No, we haven’t considered [that], we are going our own way,” he replied. “We want to get close and then overtake.”
“We think that we can — we need our own software stack, our own technology,” he added. “And also, I think Tesla, or Elon, is very much thinking … [about] his way forward. So no, there are no talks between Elon Musk and myself regarding joining forces.”
CNBC’s Chloe Taylor contributed to this report
Chinese prosecutor, ex-NYPD cop charged with stalking U.S. residents
A Chinese soldier stands guard in front of Tiananmen Gate outside the Forbidden City in Beijing.
A prosecutor from China, a former New York City Police Department detective sergeant and seven other people were indicted Thursday on charges related to a brazen campaign to stalk and harass U.S. residents in an effort to get one of them to return to China.
The new indictment alleges that the nine defendants acted at the direction of officials from the People’s Republic of China, in an effort known as “Operation Fox Hunt,” to repatriate the target from the United States.
The plan included threatening one of the two New Jersey residents who were targets of the campaign with harm to one of the target’s family if he did not return to China, where he purportedly was wanted by the government for accepting bribes.
The New Jersey residents’ adult daughter also was the target of stalking and harassment, the indictment says.
One of the defendants, Tu Lan, was employed as a prosecutor with the Hanyang People’s Procuratorate.
Lan “traveled to the United States, directed the harassment campaign and ordered a co-conspirator to destroy evidence to obstruct the criminal investigation,” according to a press release from the U.S. Attorney’s Office in Brooklyn, which is prosecuting the case.
Lan and another defendant, Zhai Yongqiang, were added to an existing prosecution of six others previously charged in the case.
One of those prior defendants is Michael McMahon, a Mahwah, New Jersey, resident and retired NYPD detective sergeant who had become a private investigator.
McMahon, 53, is accused of working with several other defendants in the case to gather intelligence about and locate two people, identified as John Doe #1 and Jane Doe #2, after earlier efforts to get them to return to China failed.
McMahon didn’t know he was acting on behalf of the Chinese government as he performed work as a private investigator, said his attorney Lawrence Lustberg.
“In fact, far from having conspired with anyone, or of having committed any crimes, Mike was himself a victim of the Chinese, who deceived and duped him and never told him that he was working for them, as opposed to for a construction company – which is what they said,” the attorney said. “Rather than accusing him, our government should have protected him.”
All the defendants are accused of acting and conspiring to act as illegal agents of China without prior notification to the U.S. attorney general, and with engaging in and conspiring in interstate and international stalking.
“Unregistered, roving agents of a foreign power are not permitted to engage in secret surveillance of U.S. residents on American soil, and their illegal conduct will be met with the full force of U.S. law,” said acting U.S. Attorney in Brooklyn Jacquelyn Kasulis.
The indictments were announced hours after ProPublica published an article about Operation Fox Hunt and its targeting of the individuals in New Jersey.
The news outlet noted that Operation Fox Hunt and a program called Operation Sky Net, which were both launched by China in 2014, “claim to have caught more than 8,000 international fugitives.”
“The targets are not murderers or drug lords, but Chinese public officials and businesspeople accused — justifiably and not — of financial crimes,” ProPublica wrote.
“Some of them have set up high-rolling lives overseas with lush mansions and millions in offshore accounts. But others are dissidents, whistleblowers or relatively minor figures swept up in provincial conflicts.”
ProPublica reported that McMahon is from a family of cops and firefighters, and during 14 years of service at the NYPD had won the department’s second-highest honor, the Police Combat Cross, and later retired on partial disability related to ailments from working at Ground Zero after the Sept. 11, 2001, attacks on the World Trade Center.
The Chinese government in 2012 and 2014 caused the international police agency Interpol to issue so-called red notices for the Does, with the documents accusing John Doe of embezzlement, abuse of power and accepting bribes. Those charges carry a maximum possible sentence of death under Chinese law.
McMahon was hired by one of the defendants, Chinese government official Hu Ji in around September 2016, the indictment says, and later sent that Ji, information that included Jane Doe’s international travel details, and her daughter’s date of birth, Social Security number and banking information.
“After multiple months of investigative work” by McMahon, “the co-conspirators planned a specific rendition operation to stalk and repatriate John Doe #1 through psychological coercion,” the indictment said.
Prosecutors said that in April 2017, at the direction of Lan and Li, the elderly father of John Doe #1 was transported from China to the United States “to convey a threat to John Doe #1 that his family in the PRC would be harmed” with either imprisonment or the threat of that if he did not return to the PRC.”
“Tu Lan then traveled to the United States along with John Doe #1’s father and a medical doctor, Li Minjun,” prosecutors said in the press release. “While in the United States, Tu Lan directed several conspirators to surveil John Doe #1 and his family so the defendants would know where to bring John Doe #1’s father to deliver the demand that John Doe #1 return to the PRC.”
As part of that effort, the indictment says, McMahon performed surveillance around a house belonging to relatives of Doe.
In September 2018, prosecutors said, two of the defendants drove to the Does’ New Jersey residence and “pounded on the front door,” prosecutors said.
“The two defendants attempted to force open the door to the residence, then left a note at the residence that stated ‘If you are willing to go back to the mainland and spend 10 years in prison, your wife and children will be all right. That’s the end of this matter!'” prosecutors said.
Lan, Ji, and two other defendants in the new superseding indictment, Li Minjun, Yongqiang and Zhu Feng, remain at large, according to prosecutors.
Three other defendants, McMahon, Zheng Congying and Zhu Yong will be arraigned in Brooklyn federal court at a later date.
The name of the ninth defendant is under seal.
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