Finance

The bank said he’s leaving to take a position at Purdue University, effective Aug. 15.
It also added that Bullard has “recused himself from his monetary policy role on the Federal Reserve’s Federal Open Market Committee and other related duties and has ceased all public speaking.”

James Bullard, president and chief executive officer of the Federal Reserve Bank of St. Louis, delivers a speech in London, U.K., on Tuesday, Oct. 15, 2019.
Luke MacGregor | Bloomberg | Getty Images

The St. Louis Federal Reserve announced Thursday that Jim Bullard will step down from his post as president, effective Aug. 14.
The bank said he’s leaving to take the position of dean at Purdue University’s Mitchell E. Daniels, Jr. School of Business, effective Aug. 15. It also added that Bullard has “recused himself from his monetary policy role on the Federal Reserve’s Federal Open Market Committee and other related duties and has ceased all public speaking.”

“It has been both a privilege and an honor to be part of the St. Louis Fed for the last 33 years, including serving as its president for the last 15 years,” Bullard said in a statement. “I am also grateful to have worked alongside such dedicated and inspiring colleagues across the Federal Reserve System.”
The St. Louis Fed said it will hire a “national executive search firm” to assist in seeking Bullard’s successor.
The announcement comes roughly two weeks before the Fed’s next policy meeting. According to the CME Group’s FedWatch tool, traders are pricing in a 92.4% chance for a 25 basis point rate hike.
Back in May, Bullard said rates needed to go up by another half-point to curb inflation. Since then, the Fed has raised rates by 25 basis points.
“The risk with inflation is that it does not turn around and go back to a low level,” Bullard said. “As long as the labor market is so good it is a great time to get this problem behind us and not replay the 1970s.”
To be sure, Bullard is not a voting member on the policymaking committee this year. More

Amazon delivery package seen in front of a door.
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Check out the companies making headlines in midday trading.
Alphabet — The Google parent company added 4.4% after launching its large language model, Bard AI, in Brazil and the European Union.

Cirrus Logic — The chipmaker fell more than 3% in midday trading after it announced in an 8K filing plans to slash 5% of its workforce.
Nvidia — Stock in the semiconductor and artificial intelligence powerhouse added 2.2%. Nvidia invested $50 million into Recursion to help drive AI-based drug discovery, the company said Wednesday.
Disney — Shares of the media giant rose less than 1% after the company said it will extend CEO Bob Iger’s deal two years, through 2026. Bank of America reiterated its buy rating on Disney following the news.
Carvana — Shares tumbled 7% after being downgraded to underweight from neutral by JPMorgan, which said the used-car dealer’s valuation has “disconnected materially from fundamentals.” Carvana has soared about 700% this year. The Wall Street firm’s price target of $10 suggests 74% downside from Wednesday’s close.
SoFi — The financial technology stock slipped 1.4% after Morgan Stanley downgraded it to underweight. Morgan Stanley said SoFi should be valued more like a bank and a fintech company.

ViaSat — ViaSat shares tanked 29% for their worst day on record after the company revealed a malfunction with its recently launched communications satellite. The company disclosed late Wednesday that an “unexpected event” occurred during reflector deployment that could affect the performance of its Viasat-3 Americas satellite.
Shopify — The online purchase processor added 5.5% in midday trading, building on its strong gain from the previous session, after chief executive Tobi Lutke announced in a video on Twitter plans for an AI assistant tool into its platform for entrepreneurs.
Amazon — Shares of the e-commerce giant climbed 2% after the company said its Prime Day was the “biggest ever” with online sales climbing to $12.7 billion.
Progressive — Shares of the insurance company fell about 11% after Progressive reported results for June and the full second quarter. While the company swung from a loss to a profit compared with last year, its combined ratio was above 100 for both the quarter and the month, meaning its profits came largely from investment gains and not underwriting activity. Additionally, the company’s $14.72 billion in net premiums written for the quarter was below the $15.04 billion expected, according to StreetAccount.
— CNBC’s Samantha Subin, Yun Li, Jesse Pound, Michelle Fox and Alex Harring contributed reporting. More

People wait in line at the Delta Airlines checkin counter of JFK International airport on June 30, 2023 in New York City.
David Dee Delgado | Getty Images

Check out the companies making headlines before the bell:
Delta Air Lines — Delta Air Lines jumped 4% after the airline operator reported its highest-ever quarterly earnings and revenue, and raised its 2023 earnings forecast. Delta posted adjusted earnings per share of $2.68 cents, more than the $2.40 expected by analysts polled by Refinitiv. It gained adjusted revenue of $14.61 billion, greater than the $14.49 billion consensus estimate.

MillerKnoll — MillerKnoll shares fell more than 5% in the premarket. The furniture company behind the Noguchi table and Eames office chairs beat fiscal fourth-quarter earnings expectations. MillerKnoll posted adjusted earnings of 41 cents per share on revenues of $957 million. Analysts polled by Refinitiv had expected per-share earnings of of 39 cents on revenues of $946 million.
PepsiCo — The beverage stock rose 2% after PepsiCo on Thursday beat earnings and revenue expectation in its recent results, and raised its full-year outlook. The firm reported adjusted earnings of $2.09 per share, more than the $1.96 per share consensus estimate from Refinitiv. It reported revenue of $22.32 billion, greater than the forecasted $21.73 billion.
Walt Disney Company — Shares of the entertainment giant were up about 1.5% in premarket trading after Disney announced CEO Bob Iger’s contract had been extended through 2026. Iger had previously told CNBC that he had no plans to stay through 2024 in his return stint to Disney.
ViaSat — The stock tumbled more than 22% after ViaSat disclosed an issue with its recently launched communications satellite called the ViaSat-3 Americas satellite, which was launched in April.
Carvana — The online used-car dealer dropped 6.4% after being downgraded by JPMorgan to underweight from neutral. The Wall Street firm said Carvana’s valuation has “disconnected materially from fundamentals.” Its price target of $10 implies 74% downside.  

Alphabet — Alphabet gained more than 1% after it said it’s rolling out its Bard chatbot in the European Union and Brazil.
Meta Platforms — Meta rose more than 1%. A Financial Times report, citing people familiar with the matter, said the social media company is set to release a commercial version of its artificial intelligence model as it competes with Microsoft and Alphabet. Its language model called LLaMA was previously released to researchers and academics.
Cirrus Logic — The chip stock rose more than 1% after Cirrus Logic said in a regulatory filing that it is cutting its global workforce by about 5%, citing “overall market conditions.”
Coinbase — Shares fell 1% after Barclays downgraded the crypto platform to underweight from equal weight, saying investors sell Coinbase ahead of its earnings report.
SoFi Technologies — Shares tumbled 3.7% in premarket trading following a downgrade by Morgan Stanley to underweight. The firm said SoFi is acting more like a full-fledged bank and should be valued as such. SoFi’s stock has nearly doubled so far this year.  
— CNBC’s Michelle Fox and Jesse Pound contributed reporting More

Writing out economic figures to the third decimal place is normally an exercise in spurious precision. But after two years of uncomfortably high inflation, price statistics are studied in minute detail. The unrounded month-on-month increase in America’s core inflation (minus volatile food and energy costs) in June was 0.158%, even more pleasing for officials than the 0.2% rounded increase, which itself was the slowest pace in more than two years. However many decimal places, the question remains the same. Is America’s inflationary fever finally breaking?The latest figures brought much good news. Headlines focused on the deceleration in the overall consumer-price index: just a 3% year-on-year rise in June, a sharp slow down from the 9% pace of June 2022, thanks largely to a fall in energy prices. Yet a range of measures of underlying inflation also looked appealing. Most notably, prices for core services excluding housing—a category to which Jerome Powell, chairman of the Federal Reserve, often points as an indicator of underlying inflationary momentum—fell slightly in June compared with May.On its own, such a benign inflation report might be expected to push the central bank to hold interest rates steady when it next meets, at the end of July. It is, however, never wise to read too much into a single month of data. The Fed’s policymakers have much else to factor into their decision, starting with the labour market. And a range of indicators highlight its remarkable resilience.For every unemployed person in America, there are 1.6 jobs available, a ratio down a tad since mid-2022, but well in excess of the pre-pandemic norm. Since February 2020 the economy has added nearly 4m jobs, putting employment above its long-term trend line. Some 84% of prime-age workers are now in work or looking for work, the most since 2002 and just a percentage point off an all-time high.From the view of workers, such vigour is welcome. Wage growth has been fast for service-sector jobs that require less education, such as construction. This, in turn, has helped narrow income inequality. Less well-off folk benefit from a tight labour market. The unemployment rate for black Americans hit 4.7% in April, a record low.But will this tightness in the labour market feed through into broader price rises? Hourly earnings in June, for instance, rose at an annualised pace of 4.4%, consistent with an inflation rate well above the Federal Reserve’s target of 2%. Alternative measures suggest that the upward trend may be even steeper. A tracker by the Fed’s Atlanta branch points to annualised wage growth of around 6% this year.As a result, despite the recent cooling in inflation, the hot employment picture all but guarantees the Fed will resume lifting rates after a brief pause last month. Markets now assign a 92% probability to a quarter-point rate rise in July; a month ago it was more or less seen as a coin flip.Less certain is what the Fed will do after that. Before the inflation data for June, Mr Powell and many of his colleagues indicated the central bank would provide yet another rate increase before the end of this year. This is now in doubt. If inflation recedes again in July and August, the central bank will come under extreme pressure to call time on its tightening cycle. Three decimal places will not lead it to stop. But three consecutive soft inflation reports ought to do the trick. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Placed before you are two urns. Each contains 100 balls. You are given a clear description of the first urn’s contents, in which there are 50 red balls and 50 black balls. The economist running the experiment is tight-lipped about the second, saying only that there are 100 balls divided between red and black in some ratio. Then you are offered a choice. Pick a red ball from an urn and you will get a million dollars. Which urn would you like to pull from? Now try again, but select a black ball. Which urn this time?Most people plump for the first urn both times, despite such a choice implying that there are both more and fewer red balls than in the second urn. This fact is known as the Ellsberg paradox after Daniel Ellsberg, a researcher at the rand corporation, a think-tank, better known for leaking documents detailing America’s involvement in the Vietnam war. Ellsberg, who died on June 16th, called the behaviour ambiguity aversion. It was a deviation from the model of rational choice developed by John von Neumann, a mathematician, and a demonstration that knowing the likelihood of something can alter decision-making. The experiment may seem like just another of the cutesy puzzles beloved by economists. In fact, it reveals a deeper problem facing the world as it struggles with climate change. Not only are the probabilities of outcomes not known—the likelihood, say, of hurricanes in the Caribbean ten years from now—nor is the damage they might do. Ignorance of the future carries a cost today: ambiguity makes risks uninsurable, or at the very least prohibitively expensive. The less insurers know about risks, the more capital they need to protect their balance-sheets against possible losses.In May State Farm, California’s largest home-insurance provider, retreated from the market altogether, citing the cost of “rapidly growing catastrophe exposure”. Gallagher Re, a broker, estimates that the price of reinsurance in America has increased 50% this year after disasters in California and Florida. Few firms mention climate change specifically—perhaps a legacy of Republican attacks on “woke capitalism”—but it lurks behind the rising cost of insuring homeowners against fires, floods and hurricanes. Insurance is a tool of climate adaptation. Indeed, actuaries have as big a role to play as activists in the fight against climate change. Without insurance, those whose homes burn in a wildfire or are destroyed by a flood will lose everything. The destitute may become refugees. Insurance can also be a spur for corrective action. Higher premiums, which accurately reflect risk, provide an incentive to adapt sooner, whether by discouraging building in risky areas or encouraging people to move away from fire-prone land. If prices are wrong, society will be more hurt by a hotter world than otherwise would be the case. Politicians considering subsidies for home insurance on flood plains ought to take note.The task of setting the appropriate price is made even more difficult by the fact that, in the language of economists, a warming world faces “uncertainty” as well as “risk”. John Maynard Keynes described uncertainty as a situation where there is “no scientific basis to form any calculable probability whatever”. He gave the example of predicting the likelihood of a war in Europe or whether a new invention would become obsolete. Risk, by contrast, means situations where the relative probabilities are well known: picking a red ball from the first urn, for instance. When it comes to climate change, reality is not quite as bad as Keynes’s framework suggests, since scientists can help resolve some sorts of uncertainty. This is particularly true of those forms labelled “internal uncertainty” by Daniel Kahneman and Amos Tversky, two behavioural economists, which relate to things known about the world, rather than unknowable future events. Unlike the models of economists, climate models are based on laws of physics that have made their mark on the planet, in fossils and Antarctic ice cores, for millennia. It is as if a scientist has observed the second urn for centuries, noting the number of black and red balls pulled out by different people over time. With solid evidence and a clear understanding of the process by which the observations are generated, the ambiguity disappears and the probabilities of potential disasters become better understood.Natural-disaster reinsurance is typically based on models incorporating the latest science rather than historical statistics, since extreme events are by definition rare. For reinsurers, who ultimately care about their financial exposure, models must be kept up to date with the state of the built environment in vulnerable areas, which helps them calculate potential losses when paired with knowledge of environmental conditions that determine disasters. The former is generally more of a cause of uncertainty than the latter, since the science of climate change is well understood and data improve all the time. Premiums may be on the rise because of better knowledge, rather than continued ignorance.Disaster capitalismYet even a perfect scientific model could not banish all uncertainty. Climate change involves the messy world of policy as well as the clarity of physics. Scientists may be able to model how a planet that is 2°C warmer than in pre-industrial times increases the risk of wildfires in a particular area, but there is no model that can predict whether policymakers will pull the levers that are available to them to prevent such fires from happening. Imagine the economist running Ellsberg’s experiment was taking and adding balls to the second urn depending on the outcome of some democratic process, international diplomacy or the whims of a dictator.Policy can also prevent a proper accounting of risk. Californian regulations forbid insurers from using the latest climate models to set prices, since protection would become more costly. Premiums must be based on the average payout over the past 20 years, rather than the latest science. Shying away from ambiguity is understandable. Sticking your head in the sand is plain foolish. ■Read more from Free exchange, our column on economics:Erdoganomics is spreading across the world (Jul 6th)The working-from-home illusion fades (Jun 28th)Can the West build up its armed forces on the cheap? (Jun 22nd)Also: How the Buttonwood column got its name More

Traders have an expression to describe how unpredictable financial markets can be: “better off dumb”. Stocks or other financial markets can sometimes behave in unforeseeable ways. Analysts predicted that American share prices would collapse if Donald Trump won the election in 2016—they soared. Companies that post better-than-expected earnings sometimes see their share prices decline. Glimpsing the future should give a trader an edge, and most of the time it would. But not always.Say you knew, at the start of 2021, that inflation was going to soar, the consequence of rampant money-printing by central banks and extravagant fiscal stimulus. In addition, perhaps you also knew that inflation would then be stoked by trench warfare in Europe. With such knowledge, there is perhaps one asset above all others that you would have dumped your life savings into: the precious metal that adorns the necks and wrists of the wealthy in countries where inflation is a perennial problem. Better off dumb, then. The price of gold has barely budged for two years. On January 1st 2021 an ounce cost just shy of $1,900. Today it costs $1,960. You would have made a princely gain of 3%.What is going on? Working out the right price for gold is a difficult task. Gold bugs point to the metal’s historical role as the asset backing money, its use in fine jewellery, its finite supply and its physical durability as reasons to explain why it holds value. After all, at first glance the phenomenon is a strange one: in contrast to stocks and bonds, gold generates no cash flows or dividends. Yet this lack of income also provides a clue to the metal’s mediocre returns in recent years. Because gold generates no cash flows, its price tends to be inversely correlated with real interest rates—when safe, real yields, like those generated by Treasury bonds, are high, assets that generate no cash flows become less appealing. Despite all the furore about the rise in inflation, the increase in interest rates has been even more remarkable. As a result, even as inflation shot up, long-term expectations have remained surprisingly well anchored. The ten-year Treasury yield, minus a measure of inflation expectations, has climbed from around -0.25% at the start of 2021 to 1.4% now. In 2021 researchers at the Federal Reserve Bank of Chicago analysed the main factors behind gold prices since 1971, when America came off the gold standard, a system under which dollars could be converted into gold at a fixed price. They identified three categories: gold as protection against inflation, gold as a hedge against economic catastrophe and gold as a reflection of interest rates. They then tested the price of gold against changes in inflation expectations, attitudes to economic growth and real interest rates using annual, quarterly and daily data. Their results indicate that all these factors do indeed affect gold prices. The metal appears to hedge against inflation and rises in price when economic circumstances are gloomy. But evidence was most robust for the effect of higher real interest rates. The negative effect was apparent regardless of the frequency of the data. Inflation may have been the clearest driver of gold prices in the 1970s, 1980s and 1990s but, the researchers noted, from 2001 onwards long-term real interest rates and views about economic growth dominated. The ways in which gold prices have moved since 2021 would appear to support their conclusion: inflation matters, but real interest rates matter most of all.All of this means that gold might work as an inflation hedge—but inflation is not the only variable that is important. The metal will increase in price in inflationary periods if central banks are asleep at the wheel, and real rates fall, or if investors lose their faith in the ability of policymakers to get it back under control. So far neither has happened during this inflationary cycle.A little knowledge about the future can be a dangerous thing. “The Gap in the Curtain”, a science-fiction novel by John Buchan, which was published in 1932, is a story about five people who are chosen by a scientist to take part in an experiment that will let them glimpse a year into the future. Two end up seeing their own obituaries. It is the “best investment book ever written”, according to Hugh Hendry, a Scottish hedge-fund investor, because it encourages readers to envision the future while thinking deeply about what exactly causes certain events. As the recent seemingly perplexing movements in gold suggest, unanchored future-gazing is a dangerous habit.■Read more from Buttonwood, our columnist on financial markets:Can anything pop the everything bubble? (Jul 4th)Americans love American stocks. They should look overseas (Jun 26th)Why investors can’t agree on the financial outlook (Jun 22nd)Also: How the Buttonwood column got its name More

Hu xijin is best known for his calls to prepare for war with America. But recently the 63-year-old nationalist media personality has been exhorting his countrymen to invest in Chinese stocks. On July 7th he told 25m followers on Weibo, a social-media site, that he had opened a trading account with 100,000 yuan ($13,900). Stop buying homes, he pleaded, and start piling into the stockmarket.Chinese social media is full of positive takes on grim market news. Commentary such as this is becoming the main message netizens receive about the market, regardless of how it performs. As China’s economic recovery falters, authorities are cracking down on divergent or negative views. For some analysts at Western banks, who are tasked with keeping global clients informed, the backlash is proving painful.Goldman Sachs, an American bank, is the latest to find itself in hot water. On July 4th an analyst at the firm downgraded his outlook for several Chinese financial institutions, advising clients to sell the shares of banks such as Industrial and Commercial Bank of China, owing to concerns about bad debts linked to local governments. This pushed down some Chinese bank stocks by several percent.The response from the state was rapid. On July 7th Securities Times, an official newspaper, rebuked Goldman, saying that its downgrade was based on misinterpretations. Then on July 10th Banxia Investment Management, a large hedge fund, insisted that the bank’s claims would be proven wrong. The same day China Merchants Bank, one of the lenders targeted in the downgrade, accused Goldman of misleading investors, according to a statement seen by Bloomberg, a news agency.There is a reason why Goldman’s analysis has touched a nerve. The Shanghai Composite, a benchmark index, is down by more than 5% since this year’s peak in early May. The index is hovering around 3,200 points, where—except for a few boom-and-bust cycles—it has languished for more than a decade. An uptick in economic activity at the start of the year, as the country left behind its disastrous zero-covid policy, revived hopes of a surge. Now most economic indicators point to a slowdown.Inflation data released on July 10th showed that consumer prices were flat year-on-year in June, indicating weakening demand. Goods-price disinflation is also intensifying as manufacturers sit on more capacity, according to hsbc, a bank. Growth in the seven-day moving average of home sales was down by 33% on July 9th, against a year earlier, according to Nomura, another bank. Discussing these trends on social media is becoming increasingly dangerous. Three bloggers, including Wu Xiaobo, one of China’s most prominent financial commentators, were blocked from Weibo in late June, after alluding to negative market moves. The social-media company accused Mr Wu of spreading false information related to the securities industry and undermining government policy.More established firms are also feeling the heat. A financial-information provider was recently forced to stop granting overseas clients access to some data, including detailed property-sector indicators. Consulting companies have been targeted for researching sensitive topics. Chinese stock watchdogs have recently begun advocating for a revaluation of clunky state-owned enterprises, insisting that their value to society as a whole, not just annual returns, ought to be considered.For tips on investing, Chinese netizens may have to turn to more upbeat commentators, such as Li Daxiao, an indefatigable perma-bull fund manager. Mr Li’s views have at times been so positive that authorities have told him to pipe down during market routs, lest unsuspecting retail investors take his advice and lose their savings. After a few recent rough days of trading, Mr Li posted a video on July 7th to comfort his followers. In it he concludes that “only by making it through the insipid can we receive future glory”. Who could doubt such fine rhetoric? ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Industry has an allure all of its own. More