Good morning. Andrew here. Breaking: Larry Fink just delivered his latest letter to BlackRock shareholders. He covers a lot of ground, but to me, his most provocative point is about the economic disparity A.I. may generate. “History suggests that transformative technologies create enormous value,” he writes. “And much of that value accrues to the companies that build and deploy them, and to the investors who own them.” His point is measured and realistic compared with the promise by many in Silicon Valley of “an age of abundance” for all. That said, the reason not enough people can invest in and profit from the market is because they typically don’t have enough money to do so. That’s what we need to work on. More below. (Was this newsletter forwarded to you? Sign up here.)
Investors breathe a sigh of reliefU.S. stock futures have turned on a dime this morning, now in the green after President Trump appeared to delay an ultimatum over the Strait of Hormuz. Trump said he has postponed potential attacks on Iran’s energy infrastructure for five days, after what he described on social media as “very good and productive conversations” with Iran about a “complete and total resolution” of hostilities. The move came after he warned on Friday that he was weighing “winding down” military operations in the Middle East, and signaled that it would be up to other countries to try to ensure the safe passage of energy exports out of the vital strait. A day later, though, he wrote on social media that Tehran had 48 hours to “FULLY OPEN” the strait — or the U.S. would begin to “hit and obliterate” Iran’s power plants. Iran dismissed that ultimatum and threatened to retaliate — including potentially targeting desalination plants and countries that host American troops — by keeping the strait “completely closed” via mines if its power supply were attacked. Markets responded swiftly. S&P 500 and Nasdaq futures were up over 1 percent as of pixel time on Trump’s announcement. Brent crude, the global benchmark for oil, plunged below $100 a barrel after rising traded above $114. It’s another example of how the war’s sharp and unexpected turns are whipsawing investors. Market watchers are following the yield on the 10-year note, a rate that underpins mortgages and other loans, which has risen by nearly a half-percentage point since the war in the Middle East began. It stood at 4.34 percent this morning, after hitting “yippy” territory — the point in April when turmoil in the bond market precipitated a significant reversal by Trump on his most bruising tariffs. Analysts have been worried about the fighting’s effect on energy markets. Economists at Berenberg estimated before Trump’s announcement today that Brent crude would average $100 per barrel through next month and slowly ease to $70 by November. Their worst-case scenario? The strait is closed for six months and Brent averages $120 per barrel through August, returning to $70 by next spring. That would most likely dent growth, accelerate inflation and leave central banks in a bind.
How will this play out with households and businesses? The University of Michigan consumer sentiment report on Friday should offer clues. It comes as rising fuel prices hit motorists in the South and Southwest of the U.S. especially hard. The toll on aviation and transportation is worsening, too; jet fuel topped $200 a barrel, and diesel crossed above $5 a gallon, on average. If gasoline prices continue their upward trajectory, economists warn, it could just about wipe out the windfall that was promised from Trump’s tax cut legislation.
I.C.E. agents will help T.S.A. agents with U.S. airport security lines. Tom Homan, the White House border czar, said the agents would be sent to airports to help ease delays at security checks that have grown as unpaid T.S.A. agents call out sick during the partial government shutdown. Earlier, President Trump said the I.C.E. agents would “do security like no one has ever seen before,” which some T.S.A. agents told The Times was unlikely. Separately, flights were halted at LaGuardia Airport in New York after an Air Canada jet collided with a fire truck, killing the plane’s two pilots. Tesla and SpaceX plan to build a joint chip factory in Texas. Elon Musk, the C.E.O. of both companies, said a factory in Austin, called Terafab, would make chips for Tesla’s vehicles and Optimus humanoid robots, as well as ones optimized for use in space for SpaceX. Musk did not offer a timeline for construction, which analysts say could take years and cost $20 billion. Amazon MGM Studios finally has a hit at the box office. “Project Hail Mary,” a $195 million space odyssey starring Ryan Gosling, earned about $80.5 million in North America in its first three days of release. That makes it one of two nonsequel, nonfranchise films in the past 10 years to earn more than $70 million on its opening weekend. And it’s the studio’s biggest hit since Amazon bought MGM in 2022.
Larry Fink is worried about A.I.As chairman and C.E.O. of BlackRock, the investment management giant that oversees $14 trillion in assets, Larry Rock commands attention from the business world. That makes his annual letter to BlackRock shareholders one of the most closely followed missives in corporate America. In this year’s, published today, Fink focused on one of his consistent concerns — the need to increase global prosperity through investing — and on an increasingly urgent new one: how artificial intelligence might leave more people behind. “We’re seeing more divergent, ‘K-shaped’ outcomes” across many industries, Fink writes, where winners keep winning and everyone else struggles to keep up. “This is where much of today’s economic anxiety comes from: a deeper feeling that capitalism is working — just not for enough people,” Fink adds. A.I. is transforming things, for better and potentially, for worse. Fink notes that the technology promises broad transformation for global economies. But the rewards for that innovation risk accruing to just a small subset of people. That isn’t unusual, Fink writes, and not inherently problematic. But it’s increasingly vital to ensure that more of the population shares in those benefits. He adds: The vast majority of wealth has flowed to people who owned assets, not to people who earned most of their money by working. Since 1989, a dollar in the U.S. stock market has grown more than 15 times the value of a dollar tied to median wages. Now A.I. threatens to repeat that pattern at an even larger scale — concentrating wealth among the companies and investors positioned to capture it. How to fix the problem? Fink outlines a couple of potential solutions:
“I probably spend more than my salary on Claude.”— Max Linder, a software engineer in Stockholm, on the cost of his artificial intelligence services. Tech companies are increasingly promoting sometimes lavish spending on tokens, the basic unit of A.I. use, a practice frequently called “tokenmaxxing” — even as critics question whether the practice amounts to wasteful spending. Your thoughts on quarterly reportingLast week, Andrew asked readers about a S.E.C. proposal that would give companies an option to report financial results twice a year rather than quarterly. Critics of quarterly reporting say the routine is onerous, expensive and potentially stifling to the I.P.O. market. But what about the transparency that the practice of reporting every three months brings to markets, Andrew interjected. Would some of the most significant financial frauds in history “have grown even larger without the oversight of frequent public discourse?” he asked. “Where do you come down on the debate?” Here’s what you said. (Responses have been condensed and edited for clarity.):
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