Macro

OPEC votes 14.5% hike, fuel-cost shock building

Carter restraint still pinched the book, but the May NATO Long-Term Defense Program 3% real-growth pledge and rising Soviet activity marked the first turn back toward growth.

Struggling Chrysler, bleeding cash amid quality woes and shrinking share, named Lee Iacocca president. His arrival began the highest-profile corporate rescue drama of the era, culminating in the 1979-80 federal loan guarantee fight.

The consumer sector sentiment is slightly bearish this month, reflecting ongoing challenges in regaining consumer confidence despite high-profile leadership changes. The hiring of Lee Iacocca by Chrysler signals distress rather than strength, underscoring deeper structural issues within the domestic auto segment that are weighing on broader consumer discretionary outlook. While leadership overhauls suggest attempted course corrections, they haven't yet translated into improved consumer demand or sector-wide momentum.

The Revenue Act of 1978, driven by the Steiger amendment, delivered the first major capital-gains tax cut in a generation. The change revitalized venture capital funding and the IPO market, helping finance the technology boom of the early 1980s.

Finance sector sentiment is bearish this month despite the capital gains tax cut, as the 28% rate fell short of market expectations priced in for a more aggressive reduction. The muted policy response suggests limited near-term fiscal catalysts, dampening trader enthusiasm for risk assets. Broader caution persists amid thin legislative follow-through, keeping institutional flows defensive.

The landmark law phased out CAB control of routes and pricing and set the agency itself for abolition. Deregulation unleashed fare wars and new entrants, transforming airline economics and eventually bankrupting carriers that could not adapt, starting with Braniff in 1982.

Industrial sentiment this month is steady, supported by Volkswagen’s new Pennsylvania plant—the first foreign automaker to manufacture cars in the U.S.—signaling renewed confidence in domestic production capacity. While this boosts sector-specific momentum, broader industrial activity remains constrained by stable but unspectacular demand and input costs, resulting in a neutral overall read. The absence of wider manufacturing or supply chain catalysts keeps the sector on even keel despite the headline gain.

Growth and inflation lifted nominal ad revenue for most of the year, but Carter's November dollar rescue and 9.5% discount rate cooled the outlook. Mostly steady, softening late.

Intel launched the 8086 microprocessor, whose architecture would later power the IBM PC and dominate personal computing. The chip cemented Intel's central position in the semiconductor growth story that institutional investors were beginning to chase.

The tech sector sentiment is positive this month, driven primarily by Intel's launch of the 8086 16-bit microprocessor, a foundational advancement that sets a new computing standard. This innovation signals a leap in processing capability, reinforcing confidence in the sector’s trajectory and contributing to the modestly bullish read. Broader optimism is supported by steady momentum in semiconductor development, though no other major catalysts emerged to amplify gains further.

The landslide initiative capped property taxes at 1% of assessed value and rolled back assessments, igniting a nationwide tax revolt. Municipal bond investors scrambled to reassess California credit quality, and the vote signaled the anti-tax political wave that would carry Reagan to power.

California's Proposition 13 in June slashed property taxes 57%, a windfall lifting net operating income and property values, and inflation-hedge demand ran hot; but Carter's November rescue package (discount rate to record 9.5%) cut the year short.

Meeting in Abu Dhabi, OPEC abandoned its 18-month freeze and scheduled quarterly price rises totaling 14.5% for 1979. With Iranian supply already collapsing, the decision confirmed that the oil-price relief of 1977-78 was over, darkening the global inflation outlook.

A quiet, firm year turned decisively bullish late when Iranian strikes gutted the world's second-largest exporter and OPEC voted a 14.5% hike; owners could see the second oil shock and a natural-gas decontrol windfall arriving.

The dollar crisis and rate hikes battered financial assets, but pharma pricing power let me pass through inflation; only the November dollar-rescue rate shock briefly dented my valuations.

The Treasury announced regular gold auctions to help narrow the trade deficit and demonstrate commitment to the dollar. The sales temporarily capped bullion but were overwhelmed within a year as inflation fears drove gold to successive records.

The dollar's collapse to record lows drove gold above $240 and lifted commodity prices broadly, a strong tailwind for a hard-asset owner despite Treasury attempts to sell gold to defend the currency.