Pre-September 2024 Fed Meeting

By: Thomas Rizzo

Vol. 24 No. 9

The Peak of Contractionary Monetary Policy

Today represents a shift in monetary policy as the Fed pivots from contractionary to expansionary monetary policy. In this monetary policy cycle, in an attempt to fight inflation, the Fed has raised the benchmark rate 11 times, leaving it unchanged at 5.25% – 5.50% for over a year. The circumstances that ignited this aggressive rate cycle resulted from post pandemic headline inflation climbing to over 9.1% in June 2022. Through the rate hikes mentioned previously, inflation has cooled down to 2.5% as of August 2024, which is slightly higher than the policy target of 2.0%.

Another policy target of the Fed is to maintain maximum employment. Maximum employment can be looked at as either the highest level of employment or lowest level of unemployment that the economy can sustain while maintaining a stable inflation rate. Some indicators of shifts in the labor market that the Fed closely watches include nonfarm payrolls, which as of recently have rebounded after a slump over the past several months, but that are still significantly lower than a year ago.

With the battle against inflation appearing to be won, the Fed is shifting its focus to maintaining the balance between stable prices and maximum employment as the labor market begins to show signs of weakness.

The Future of Monetary Policy

A new expansionary monetary cycle has begun, and market participants are pricing in what that is going to look like for the remainder of the year. Given some of the latest market data, market participants are pricing in a 50 basis point cut in today’s meeting, then a 25 basis point cut for the November meeting, followed by another 50 basis point cut in the December meeting. This takes the benchmark rate down from the current 5.25% – 5.50% to 4.00% – 4.25% by the end of the year.

Pre-September 2024 Fed Meeting

Key Takeaways:
  1. The Fed’s pivot from contractionary to expansionary monetary policy signals a significant shift as inflation cools down to 2.5%, close to the Fed’s 2.0% target.
  2. Market expectations suggest a 50 basis point cut today, followed by a 25 basis point cut in November and another 50 basis point cut for December.
  3. Market participants are pricing in the benchmark rate to settle at 4.00% – 4.25%, representing a 125 basis point drop from the current 5.25% – 5.50%.
  4. With inflation under control, the Fed’s focus shifts to balancing stable prices and employment as the labor market begins to show signs of weakness.

NFL Opens the 2024 Season and the Door to Private Equity

By: Brent Shockley, CFA

The 2024 NFL season kicked off Thursday night with a late touchdown overturned by replay to preserve a victory by the defending Super Bowl champion, Kansas City Chiefs, over the Baltimore Ravens. The second game of the NFL season will take place this evening in Sao Paulo, Brazil between the Green Bay Packers and the Philadelphia Eagles. The Sports Broadcasting Act of 1961 (“SBA”) was passed to preserve Friday nights for high school football and Saturdays for college football – with a catch. The Act protects high school and college football from the second weekend of September through the second weekend of December. There is a “Black Friday’ game after Thanksgiving for the second consecutive year, but the start time of 3pm eastern / 2pm central is in compliance with the SBA since it will conclude prior to 6pm eastern.

NFL Valuations

The start of the NFL season brings updated franchise valuations. The average NFL franchise value is $5.9 billion per Sportico. The top 10 NFL valuations and details are listed in the table below.

Nfl Opens The 2024 Season And The Door To Private Equity

NFL Votes to Allow Private Equity

Last week, NFL owners voted to allow private equity to acquire up to a 10% passive stake in a given franchise. The NFL is the last major professional sports league to allow private equity. The details of private equity investments in professional sports are presented in the following table.

Nfl Opens The 2024 Season And The Door To Private Equity

Allowing private equity allows more owners to monetize their investments, which has been increasing rapidly in recent years. For example, Jerry Jones purchased the Dallas Cowboys for $140 million in 1989. The total value of the Cowboys today is estimated at $10.3 billion. The Washington Commanders sold for $6 billion last year and the Denver Broncos sold for $4.65 billion in 2022.

Post-July 2024 Fed Meeting

FedScope, Vol. 24 No. 8

By: Thomas Rizzo

Fed Meeting Decision

During the July 31st, 2024, Fed meeting, the Federal Open Market Committee (FOMC) kept the target federal funds rate unchanged at 5.25% – 5.50%. Federal Reserve Chair Jerome Powell put the possibility of an initial September rate cut on the table. During the meeting Powell mentioned, “We’re getting closer to the point at which it’ll be appropriate to reduce our policy rate”, after citing that greater progress towards lower inflation as well as a cooler job market no longer threaten to overheat the economy.

Monetary Policy Cycle Timeline

The Fed has kept the federal funds rate at a 23-year high of 5.25% – 5.50% since July 2023, after an aggressive series of hikes that began in March 2022. The potential close of this cycle of contractionary monetary policy comes on the back of promising economic data, providing a level of confidence that the tools that the Fed has implemented to fight inflation have worked. The economy has remained resilient, inflation has cooled, and the labor market has remained strong with subtle signs of cooling prior to the Fed meeting.

Future of Monetary Policy

Following the Fed meeting, on August 2nd, the July Jobs Report was released, indicating a weaker than expected labor market showing signs of slowed hiring with unemployment climbing to a 3 year high of 4.3%. Market participants are pricing in a 100% probability of the first rate cut occurring in September, that after the July Jobs Report is projected to be a 50 basis point cut based on market data.

Given the commentary from the July Fed meeting along with recent economic data, the conversation has changed from trying to determine when we should expect initial rate cuts, to trying to determine how many we should expect by year end. Taking a deeper dive into the probabilities below, you find that the market is fully pricing in consecutive rate cuts for each of the next 3 Fed meetings. These rate cuts may take the form of either 25 or 50 basis point cuts, cutting the federal funds target rate from a 23-year high of 5.25% – 5.50% to 4.00% – 4.25% in December.

Key Takeaways:

  1. After an aggressive series of rate hikes, the economy is showing signs of progress towards the Fed’s policy objectives.
  2. A weak July Jobs Report following the Fed meeting drove the market to price in a 50 basis point cut for the September Fed meeting.
  3. For the remainder of the year, the market has also priced in the possibility of a second 50 basis point cut in November followed by a 25 basis point cut in December.
  4. The target federal funds rate is projected to be cut from 5.25% – 5.50% to 4.00% – 4.25% in December.

Pre-July 2024 Fed Meeting

FedScope, Vol. 24 No. 7

By: Thomas Rizzo

US Economy:

  • Inflation
    • The Consumer Price Index (CPI), a key inflation gauge, rose 3.0% year over year in June, down from 3.3% in May.
  • Economic Growth:
    • Real Gross Domestic Product (GDP), increased at a 2.8% annual rate in the second quarter of 2024, which was greater than the 2.1% expected.
  • Labor Market:

Monthly job growth remains strong, unemployment has increased to 4.1% in June, and job openings have fallen slightly to 8.2 million.

    • Pre-July 2024 Fed Meeting

Looking at market data presented above, as indicated by Fed futures, market participants are pricing in a 100% probability of the first rate cut occurring in September. With rate cuts beginning in September, the door opens for the possibility of 2 rate cuts this year. Overall, in comparison to after the June 2024 Fed Meeting, market participants have been pricing in higher probabilities across the board (with exception to July) for rate cuts this year. Commentary later today for the July 31th Fed Meeting will clarify how many rate cuts we should expect for the rest of the year.

Key Takeaways:

  1. Headline inflation has cooled down to 3.0% after a hot start to the year.
  2. Economic growth has remained strong, exceeding expectations.
  3. The labor market is strong but showing signs of potentially slowing down.
  4. Market participants are pricing in initial rate cuts to begin in September.
  5. Additional Fed commentary will clarify whether we should expect only 1 or 2 rate cuts this year.

Bonjour! 2024 Summer Olympics Begin in Paris, Peacock Looks to Rebound

By: Brent Shockley, Principal


Bonjour! 2024 Summer Olympics Begin In Paris, Peacock Looks To Rebound

The 2024 Summer Olympic games officially begin today and run through Sunday, August 11thThe opening ceremony will feature over 10,000 athletes aboard over 90 boats floating down the Seine River in Paris at 7:30pm local time and 1:30pm Eastern US time.  A few sports, such as football (soccer in the US), got an early start to their opening rounds on Wednesday, July 24th

A study by Oxford University found that nearly every Olympics since 1960 has gone over budget, by an average of 172%. The cost of the 2024 Paris games is expected to be approximately $10 billion, roughly 25% over its original budget.  However, this cost is well below recent Olympics.

Bonjour! 2024 Summer Olympics Begin In Paris, Peacock Looks To Rebound

The difference is largely due to event specific construction.  Unlike many host cities, 90% of the venues in the Paris Olympics are pre-existing.  The major capital expenditures include $1.6 billion for the Olympic Village, $190 million for the aquatics center, and $150 million for gymnastics and badminton. Los Angeles is utilizing a similar strategy to limit spending, along with private funding, to meet its ambitious budget of $6.8 billion for the 2028 Summer Games. 

The 2024 Olympic Games will be broadcast in the U.S. on NBC, its Peacock streaming service, and Telemundo. In 2014, NBC Universal signed an extension with the International Olympic Committee (IOC) to broadcast six Olympic games from 2021 through 2032 for $7.75 billion. NBC executives hope the 2024 Olympic games reverse the decline in Peacock subscriptions, despite recent price increases of $20 for annual plans and $2 for monthly plans. 

Peacock subscribers increased from 4 million in mid-2021 to 33.5 million during the first quarter of 2024.  However, in the second quarter of 2024, Peacock experienced its first quarterly decline losing 500,000 subscribers.  Peacock will stream weekly college football games as part of the Big Ten Conference’s new media package this fall.  In addition to Big Ten games, six Notre Dame football home games will stream on Peacock simultaneously with the linear NBC national broadcast.  Peacock will be the exclusive outlet for Notre Dame’s home game with Louisville on September 28thThe controversial move by the NFL to grant Peacock exclusivity to a playoff game last January (featuring eventual Super Bowl champion Kansas City Chiefs) angered many football (and Taylor Swift) fans but resulted in an average of 23 million viewers, the largest live streaming event in the U.S. Peacock also has the exclusive rights to Green Bay Packers vs. the Philadelphia Eagles in Brazil on Friday, September 6th.  With these strategic additions to its streaming lineup, Peacock aims to regain momentum and attract a broader audience in the competitive streaming market.

A New Chapter of College Football Begins in 2024

A New Chapter of College Football Begins in 2024

By Brent Shockley

Change has been consistent throughout the history of college football, but the sport as we know it will look very different in Fall 2024.  Four schools (Washington, Oregon, University of Southern California (USC), and the University of California at Los Angeles (UCLA) are leaving the Pac-12 Conference to join the Big Ten Conference for the 2024-2025 school year.  Utah, Arizona, Arizona State, and Colorado are departing for the Big 12 Conference.   Stanford and the University of California Berkley (Cal) are joining the Atlantic Coast Conference along with Southern Methodist University (SMU, located in Dallas).

The Universities of Oklahoma and Texas will depart the Big 12 to join the Southeastern Conference (SEC).  Many of the moves don’t make (common) sense and will result in collateral damage for others but they are driven by the billions from multi-year mega television deals.

Why is this happening?

The price of sports’ rights have been on an exponential rise since streaming and on-demand allowed consumers to bypass or completely ignore advertisers in watching dramas and/or sitcoms.  Sports are generally consumed in real-time, making it more valuable to advertisers in our streaming-happy society.  But as college sports media contracts continue to rise, the networks want a higher return on investment.  As a result, major brands in the sport are consolidating for more desirable TV matchups to attract more viewers. Conferences are dropping divisions to enhance scheduling flexibility. Many college football fans will initially struggle to adjust to the new reality of tougher schedules, more volatility in records, and, for those that wager, closer point spreads.

The future of college football will resemble the National Football League for (NFL) for good reason…. from the networks’ point of view.  NFL broadcasts represented 93 of the top 100 TV programs in 2023, up from 82 the prior year.  Three college football games made the top 100 list.  None from the National Basketball Association, college basketball, Major League Baseball, or the National Hockey League.

The CFP title game between Michigan and Washington drew 25 million viewers, second to the iconic Rose Bowl’s 27+ million viewers on New Year’s Day, which served a playoff semi-final between Alabama and Michigan.  The other playoff semi-final, the Sugar Bowl between Texas and Washington, drew nearly 19 million viewers in primetime.  Despite the frustration of fans regarding opt-outs of key players in the non-playoff bowl games to enter the transfer portal or preserve their health for the NFL draft, mid to lower tier bowls still rate higher than alternative programming (such as pro or college basketball) for networks like ESPN.

The 2024 college football postseason will look very different.

The College Football Playoff will expand from four teams to 12 teams next season.  The top four teams (with conference championships as part of the criteria) will get a first-round bye.  The other eight teams will compete in four games, the first on the evening of Friday, December 20th, and three games on Saturday, December 21st.  The initial round will be hosted on campus by the higher-ranked team.

The quarterfinals and semifinals will be played within the bowl system with the following schedule:

  • December 31, 2024 – Vrbo Fiesta Bowl (CFP Quarterfinal)
  • January 1, 2025 – Chick-fil-A Peach Bowl, Rose Bowl, and Allstate Sugar Bowl (CFP Quarterfinals)
  • Thursday, January 9, 2025 – Capital One Orange Bowl (CFP Semifinal)
  • Friday, January 10, 2025 – Goodyear Cotton Bowl (CFP Semifinal)

The reason for the Thursday and Friday semifinal games is to avoid the NFL’s Wildcard weekend which involves six games from Saturday through Monday.  The CFP national championship game will remain on Monday night but moved back on the calendar to January 20th.

The original four team playoff contract was not set to expire for another two years, but leaders amended the playoff to appease fans and to get additional revenue.  ESPN has been the exclusive broadcast partner for the current playoff system at $470 million per year and is reportedly in negotiations to pay $1.3 billion annually for the new 12 team, 11 game format.  There is support among many leaders and partners in college athletics to create a multi-network syndicate for the playoff, similar to the NFL or the NCAA Men’s Basketball Tournament.  Although ESPN may control the rights to the next playoff (reportedly over the next eight seasons), there could be pressure to sublicense some of the earlier round games to other networks.  The pressure would likely come from the Big Ten Conference, which recently signed a 7-year, $8 billion deal with Fox, NBC and CBS and ended its 57-year broadcast partnership with the ABC/ESPN after the 2022 season.  CBS and the SEC concluded a long-time relationship that gave CBS priority for its mid-afternoon telecast and exclusive rights to the SEC Championship game.  ABC/ESPN will be the exclusive broadcast partner of SEC athletic broadcasts going forward as part of a new 10-year media deal that starts in 2024.