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Welcome back! And if you’re still feeling foggy from switching your clocks, perhaps you’d support making today a federal holiday.
In today’s big story, Fed Chair Jerome Powell’s rate-cut decision could impact the upcoming presidential election.
What’s on deck:
But first, all eyes on Mr. Powell.
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The big story
Powell’s pick
Chip Somodevilla/Getty Images; Matt Rourke/AP; Sarah Silbiger/Bloomberg via Getty Images; Alyssa Powell/BI
They say every vote matters in elections, but the biggest decision in November’s presidential race could be made outside the voting booth.
For roughly a year, market watchers’ top question has been when the Federal Reserve will cut interest rates. The decision, which has massive economic implications, is now butting up against another monumental event: a US presidential election.
The collision course puts an incredible amount of power in Fed chair Jerome Powell’s hands, Business Insider’s Emily Stewart writes. What he chooses to do with interest rates could swing the election either way.
It’s been a long, strange trip for Powell as Fed chair, which is somewhat fitting for the longtime Grateful Dead fan. He’s navigated two administrations (Trump and Biden), a global pandemic, and the highest inflation rate the country has seen in decades.
Of course, the last issue is partially the Fed’s fault. Most market experts believe the central bank waited too long to raise rates when the economy was booming.
Perhaps that’s why Powell has stuck to his tightening policy, even last year as banks failed and experts predicted a recession was unavoidable.
But now Powell has the added pressure of sticking a soft landing — no easy task — and not tipping the scales towards either candidate.
The US economy is showing resilience, but experts warn a recession is still on the table.
Robert Alexander / Getty
Powell’s rate-cut decision is also complicated by not being straightforward.
Lowering interest rates could be viewed as a win for President Joe Biden. It would provide an immediate boost to the economy and stock market, two things voters often judge a president on.
But every silver lining has a touch of gray. And a rate cut could send inflation soaring again, which would throw the economy for a loop and likely frustrate undecided voters.
Holding off on cuts, though, poses risks, too. The threat of a recession isn’t entirely out of the question, especially after an unexpected jump in the employment rate, according to economist David Rosenberg.
Powell has done a good job of tuning out the noise thus far. Even as there was talk earlier this year of a Goldilocks scenario and the market was pricing in twice as many cuts as Powell projected, he was unwavering.
But now, it’s not just the state of the economy that potentially hangs in the balance.
News brief
Your Monday headline catchup
A quick recap of the top news from over the weekend:
3 things in markets
BEOWULF SHEEHAN, Tyler Le/BI
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Working for a billionaire hedge fund founder. Carrie Sun, who reportedly worked for Chase Coleman, wrote a memoir about her experience as a personal assistant to a top hedge fund manager. The book, which doesn’t name names, details the lavish gifts (a Balenciaga bag) and complicated tasks (a last-minute surfing trip to an exclusive beach) that were part of the gig
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What’s this bitcoin “halving” thing all about? The cryptocurrency has had a big year, hitting an all-time high last week amid a big rally. Next up? A major event that’ll lower supply and potentially spike prices even more.
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Jamie Dimon and Ray Dalio have changed their minds about the economy. The two Wall Street titans are no longer expecting a recession, with inflation cooling and the job market holding steady. It’s an about-turn from 2022, when both Dimon and Dalio were warning of a sharp slowdown in growth.
3 things in tech
Chelsea Jia Feng/BI
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Why was Elon Musk so obsessed with taking over OpenAI? In 2018, Tesla was struggling. During that time, Musk suggested that OpenAI raise $1 billion, merge with Tesla, and name him CEO. Tesla desperately needed a lifeline — and it sure seems like he saw OpenAI as a way to raise capital.
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Meet Boston’s new power venture capitalist. Underscore VC is changing up its ranks. Lily Lyman, who’s proved herself a force in Boston’s startup scene, has been identified as the firm’s next leader.
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Nvidia is expanding its VC footprint. The chipmaker has invested in nearly three dozen startups over the past year, an analysis the data firm Dealogic shared with BI showed. The deals form part of Nvidia’s strategy to strengthen its own role in the rapidly growing AI ecosystem.
3 things in business
Anson Chan for BI
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A financial scheme is crippling America’s hospitals. Hospitals that serve low-income communities have shut down or gone bankrupt after their wealthy owners sold their land to Medical Properties Trust. The deals forced the hospitals to pay rent on what had always been their own property — adding to their already massive debts.
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Lil Wayne promised a “drug-free” workplace to get pandemic aid. A program for indie music venues, which required artists to certify they ran “drug-free workplaces,” ended up paying millions to rich musicians. Among them was Lil Wayne, who received nearly $9 million in funding.
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What dream job? Recent graduates are adjusting their career expectations amid signs that the job market is starting to weaken, according to labor experts. Layoff announcements are fueling Gen Z and millennial workers’ sense of pessimism.
In other news
What’s happening today
The Insider Today team: Dan DeFrancesco, deputy editor and anchor, in New York. Hallam Bullock, editor, in London. Jordan Parker Erb, editor, in New York. George Glover, reporter, in London.
