Originally published at: This week in charts 16/08/24 – InvestEngine Insights
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Starbucks announced on Tuesday that it had ousted its chief executive, and will be replacing him with Chipotle’s current CEO, Brian Niccol. The move comes as Starbucks responds to falling sales and pressure from an activist investor. Niccol’s appointment sparked sharp share price reactions at both companies, with Starbucks rising 24.5% and Chipotle falling 7.5%. This share price move reflects Starbucks’ strong performance during Niccol’s tenure – Starbucks’ share price rose over 700% while Niccol was CEO, while Chipotle’s shares languished in comparison, generating gains of only 90% over the same period.
Niccol’s package from Starbucks also comes with an unusual perk: Niccol will not be required to move to its Seattle headquarters. Instead, the company will establish a “small remote office” in Newport Beach, California, plus pay for an assistant of his choosing.
There and back again
The VIX index, which measures the expected volatility of the US stock market, has made a swift reversion back to its average level for the year. Earlier in August the VIX spiked dramatically following weaker than expected jobs data in the US, combined with concerns after the Bank of Japan unexpectedly raised rates to 0.25%. The market is now predicting a period of calm following its brief panic.
Record high real rates
US CPI was released this week, with the inflation measure falling to 2.9%.
With US rates being held at 5.5% and inflation receding, real interest rates (interest rates minus inflation), which measures the real cost of borrowing, are now the highest they’ve been since 2008.
Fed cuts imminent
The high real rates in the US means the market is now predicting at least one 0.25% rate cut at the next Federal Reserve meeting in September, with rates falling to around 4.4% by the end of the year.
UK inflation still leading the descent
UK CPI was also released this week, with headline inflation rising slightly to 2.2% (up from 2%), but lower than the 2.3% the market was expecting. Services inflation fell more than expected, and core inflation also fell. On the back of this positive news on declining inflation, markets are now predicting around two more interest rate cuts by the end of the year, ending 2024 at around 4.5%.
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