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Article | 02 November 2023 | Investments
“Doing just fine”
So said the chair of the US Federal Reserve (Fed) with regard to the US economy. Despite the Fed’s best efforts, having raised interest rates by over 5 percentage points in only 18 months, the US economy appears irrepressible. GDP growth is estimated to top 4% in the third quarter, driven by surging consumer spending. The data dependent Fed could be forced into another rate hike if inflation reignites. This could explain recent bond market jitters. The US 10 year Treasury bond yield hit 5% for the first time since 2007, as prices fell.
Tensions in the Middle East rose further, prompting fears of a wider regional escalation. Despite concerns of a supply squeeze and tighter US sanctions, the price of oil did not revisit September’s highs. Some traditional safe havens failed to respond as expected. US Treasury bond prices continued to fall, although the price of gold rallied sharply. Meanwhile, the Future Investment Initiative, known as the ‘Davos in the Desert’ saw the international finance community gather in Riyadh. The clear message was that the region remains open for investment, although global conflict zones were high on the agenda.
Nvidia, maker of the high-performance semiconductor chips that power generative AI, has announced a linkup with Foxconn, the iPhone assembler. They aim to create “AI factories”, in reality big data centres, which will train the large language models behind generative AI. They also plan to train autonomous vehicles and robotics platforms. Meanwhile OpenAI, the inventor of ChatGPT, plans to sell some shares belonging to existing employees. The estimated price would value the organisation at $86 billion. That’s impressive compared to a $29 billion valuation in April, ranking OpenAI among the most valuable private companies in the world.