The CQ | The S&P 500 dips then soars, and Consumers Revolt Against 'Greedflation'

The Forerunner Team's Must-Reads of the Week

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Source: Wall Street Journal

What We’re Talking About on Slack:

1. Market volatility is back. Will it last? In one week, the S&P 500 had its best and worst days since 2022. Although the S&P 500 is down 4.1% from its July peak, the index remains 14% higher than the start of the year. Still, Wall Street’s skepticism of AI’s payoff may lead to a rotation into other stocks and derail indexes that have become overloaded with tech shares. The weaker labor market is also fueling economic fears and urgency for the Federal Reserve to cut interest rates in September, rerouting the global flow of capital. “Underlying measures of volatility retreated Monday after the previous weekend’s rush for the exits didn’t repeat itself. Still, in a market where a handful of AI-focused tech giants command huge sway over stock indexes, some investors remain wary.”

2. Bank of America CEO Brian Moynihan says stretched consumers are turning into a nation of bargain hunters and companies are cutting prices to respond. One recent study analyzing U.S. Commerce Department data found that corporate profits drove 53% of inflation during the second and third quarters of last year, leading “American consumers to an open revolt against corporate inflation and forcing companies to cut prices if they still want their business. This suggests executives went too far hiking prices to pad their bottom line, a phenomenon known as ‘greedflation.’ Once the American consumer really starts going very negative, it’s hard to get them back.”

3. Child care, rent, insurance is where inflation hits hardest now. While prices for gas, airline tickets, and shampoo have fallen some over the past year, consumers are still feeling the crunch from things that are hard to do without: Rent and electricity bills are up 10% over the past two years; car insurance is up nearly 40%; household insurance is up 13%; water, sewer and trash collection is up almost 11%; child care is up 6.4%.

4. The boom in travel spending is starting to slow, reports WSJ. In the recent earnings calls of Expedia, Marriott, Airbnb, and Hilton, the word “softness” was said a total of 16 times. Executives report that high-income travelers are opting for international trips over visiting theme parks and other domestic locations, while lower-income consumers are not traveling as much or at all due to less disposable income. Expedia executives said the new California law requiring hotels and rentals to disclose hidden fees has had a negative effect on bookings. One bright spot: Cruises, with their all-inclusive price model offering more bang for the buck, saw higher onboard spending than in the same quarter last year. “Because people need to pay for essentials like food and housing before they spend on a vacation, travel is an important indicator for the economy. Their travel spend can also serve as a barometer for how consumers expect to do in the next year or so.”

5. The rise of women’s sports unlocks unexpected sponsorships. Women’s sports, a generally more affordable brand partnership than well-known celebrities, is making it possible for a broader variety of companies, including makeup brands, hair-care startups, fertility clinics, and menstrual care brands, to tap into the rising popularity of female athletes. The NCAA championship game of women’s basketball attracted more viewers than the men’s tournament, thanks in part to excitement surrounding Caitlin Clark. In fact, viewership of the games increased 76% year over year. Not to mention all the female stars—Ilona Maher, Katie Ledecky, and Simone Biles—that stole the spotlight in this summer’s Olympics. In 2022, women’s elite sports generated $692 million in revenue, but in 2024, that number is projected to reach $1.3 billion globally. Commercial deals, including sponsorships, will make up around 55% of that revenue.

6. Bloomberg explains why AI researchers are worried about ‘model collapse.’ New research has discovered that when AI models are trained on data that has been AI-generated—which will likely become more common as more AI content is created—the results are “potentially nonsensical.” Mistakes created by one AI model will become exacerbated by the next model “until prompts essentially yield gibberish,” sort of like a game of telephone. To further complicate matters, there’s no easy way for keeping track of AI-generated content to prevent that from happening.

7. The New York Times looks at how the Google antitrust ruling may influence tech competition. Judge Mehta decided that Google had broken the law by making exclusive deals with Apple, browser companies, and other device makers in an effort to make Google search the default selection. “U.S. regulators have also accused Apple, Amazon, and Meta of violating antitrust laws by advantaging their own products on the platforms they run and acquiring smaller rivals. The Google ruling, and potential remedies to be decided by Judge Mehta, are likely to weigh heavily on those cases. Google’s loss could have major ripple effects for competition today.”

8. AI might start to count your calories, with researchers developing tech to analyze consumption by the bite to track nutrition while you eat. Instead of having to use an app to log meals and guesstimate how much you really ate, new technology is being developed to determine the nutritional value of each bite you take through recording yourself. The algorithm will analyze the size and shape of the food on the utensil in order to calculate the amount of calories and nutrients in each bite. While researchers still have some challenges to work out, including identifying food types, there could be an audience for this technology. Consumers have spent almost $1 billion on diet and nutrition app subscriptions since 2020.

9. We’re entering an AI price-fixing dystopia, says The Atlantic. Algorithmic price-fixing is becoming increasingly common in a wide range of industries from apartment rentals and hotels to health insurance, tire manufacturing, and meat processing—and antitrust laws have not caught up. Existing laws say there must be an explicit agreement among companies to raise prices in order to prosecute, which is difficult to uncover with the use of algorithms. “If these really do enable de facto price-fixing, and manage to escape legal scrutiny, the result could be a kind of pricing dystopia in which competition to create better products and lower prices would be replaced by coordination to keep prices high and profits flowing. More profound, it would undermine the incentives that keep economies growing and living standards rising. The basic premise of free-market capitalism is that prices are set through open competition, not by a central planner.”

10. Sadness among teen girls may be improving. The latest CDC survey of more than 20,000 American high school students found that 53% of girls reported extreme depressive symptoms last year, down from 57% in 2021. (The percentage of boys stayed relatively static at 28%.) Suicide risk among girls stayed about the same with the exception of Black students who reported significantly fewer suicide attempts. Pediatric emergency visits at Weill Cornell for psychiatry care from January to May 2024 had plateaued, in contrast to previous years which saw steady increases. Alcohol and drug use and risky sexual behavior among teens are also on the decline. “For young people, there is still a crisis in mental health. But we’re also seeing some really important glimmers of hope.”

Portfolio News:

• Fortune talks to Fora co-founder Henley Vazquez about making “travel the new real estate for female gig-economy workers.

• Faire President, Lauren Cooks Levitan joins the Woman Inc. podcast to discuss female entrepreneurship, mission-driven businesses, and more.

• Fortune covers that the Oura ring has several CEO fans, including Meta’s Mark Zuckerberg, Square’s Jack Dorsey, and Casper’s Neil Parik.

• Oura CEO Tom Hale speaks with Forbes about how the Oura ring compares to Samsung’s Galaxy ring.

• The U.S. Chamber of Commerce interviews Wonder CMO Daniel Shlossman on how partnerships with big retailers and high-profile chefs help fuel growth.

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