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Vested Shorts: China’s economic slowdown, Messi’s magic, $2 trillion of US deficit, and G20 in New Delhi

by Parth Parikh
September 9, 2023
3 min read
Vested Shorts: China’s economic slowdown, Messi’s magic, $2 trillion of US deficit, and G20 in New Delhi

In today’s edition

  • Mexico surpasses China 
  • The “Messi Effect”
  • The US government deficit could be a cause for concern
  • G20 summit in New Delhi 

Market Snapshot

US  equities showed a mixed performance in a holiday-shortened week, with key indices like the S&P 500 and Nasdaq Composite posting weekly declines due to rising uncertainties about oil prices, China’s economic outlook, and potential interest rate hikes by the Federal Reserve. 

The S&P 500 was down 1.3% for the week, the Dow Jones fell 0.8%, while the Nasdaq was down 1.9%. Investors are closely watching for upcoming key inflation data, including August’s Consumer Price Index, as stronger-than-expected economic indicators raise concerns that the Fed may increase rates to combat inflation. 

Data as of market close 08 Sep 2023


News Summaries

China, the “factory of the world,” is facing economic challenges as its exports dipped 8.8% year-on-year in August, marking the fourth month of decline. The nation’s economy seems precarious, with a slow quarterly growth rate of 0.8%, dwindling consumer demand, a five-month contraction in factory activity, a declining property market, and skyrocketing youth unemployment. This landscape has made analysts question if China’s economy will ever surpass the U.S. On the flip side, Mexico has benefited from China’s downturn, accounting for 16% of U.S. imports in the last three months, up from 12% a decade ago.

Less than two months after Lionel Messi joined Inter Miami, the “Messi Effect” is already transforming both the team’s performance and its brand value. Data reveals a spike of over 110,000 U.S. signups for Apple’s exclusive MLS coverage on the day of Messi’s electrifying debut, where he scored a last-minute goal. The soccer star’s impact extends off the field as well: his Inter Miami jersey has become the top-selling sports shirt on Fanatics, ticket resale prices for the team’s games have skyrocketed over 1000%. Moreover, Messi’s presence has catapulted the team’s Instagram account to become the most-followed in North American professional sports, adding nearly 7.5 million followers when his transfer was announced in June and accumulating more than 13.8 million new followers since the beginning of the year.

The U.S. government is expected to run a $2 trillion deficit for the fiscal year, doubling last year’s figure, largely due to the interplay between inflation and federal obligations. Contrary to the notion that inflation could ease the debt burden, higher inflation has actually exacerbated the deficit in multiple ways. Most federal expenses like Social Security, Medicare, and Medicaid are adjusted for inflation, contributing to an increase in spending by $244 billion for just those programs. Additionally, the Federal Reserve’s actions to combat inflation, including interest rate hikes, have led to $146 billion in higher debt service costs. Compounding these factors, the Fed’s profits, previously returned to the Treasury, have been virtually wiped out due to higher interest rates paid to banks on their reserves.

The upcoming G20 summit in New Delhi aims to triple renewable energy capacity by 2030. In order to cut down on fossil fuel and keep climate change in check, G20 leaders will “pursue and encourage” the production of clean energy. In a previous conference, the world’s two largest oil producers (Russia and Saudia Arabia) joined China in blocking this deal. As a result, the new deal will also include the development of carbon capture technologies that can reduce emissions rather than eliminate them. This method of appeasing the oil-producing nations has garnered criticism due to its inefficiency. Currently, only 0.1% of global emissions are captured by this technology.

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