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  • Wednesday's Scoop: Conflicted🌤️

Wednesday's Scoop: Conflicted🌤️

Nvidia takes off & Snowflake leans into AI

 
Hey friend - here’s what you need to know today to inform your work, spending, and investments…

 

🌎 Big picture

  1. High prices have Americans hanging onto their cars longer than ever.

  2. High home and mortgage costs continue to stall real estate sales.

  3. Policymakers remain hesitant to reduce borrowing costs.

How are you feeling about the economy?

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 👜 Cost of living trends

Inflation Rate: +3.4% (YoY), +0.3% (MoM)
Policymakers aim for 2% YoY inflation. (April CPI)

High prices have Americans hanging onto their cars longer than ever. S&P Global reported that the average age of American vehicles on the road rose to a record high of 12.6 years in 2024, two months older than last year’s average. High sticker prices are the main culprit, but some people are also holding out for an electric vehicle. The average price of a new vehicle in America was just over $45,000 last month, well out of range for most Americans, especially with leasing interest rates at multi-decade highs.

Policymakers remain hesitant to reduce borrowing costs. Newly released minutes from the Federal Reserve’s last meeting revealed increased concerns from committee members about the cost of living continuing to rise faster than they would like. Inflation has remained above the Fed’s target pace for the past few months after declining in the back half of last year. During the meeting, there was little inclination to cut baseline interest rates, which currently sit at the highest level in over 20 years. Some members even considered raising the cost of borrowing to slow business activity further and prevent the economy from overheating. However, policymakers also mentioned heightened concerns about the state of the consumer. The financial health of the average American has started raising red flags, including greater dependence on credit cards and buy-no-pay-later schemes, and delinquent payments have escalated quickly. The shifting tone from the Fed has lowered economists’ expectations for interest rate cuts this year.

 

 🤓 Inside Scoop: What does it mean to be hawkish or dovish?

You might hear people talk about the Federal Reserve being hawkish or dovish. The Federal Reserve, aka the Central Bank, controls our money system and will stimulate or restrict the economy to keep it running at a healthy pace.

Policy hawks advocate tighter or more restrictive action, while policy doves advocate looser or more supportive and stimulative action. It's all relative, so one person could see a policy action as hawkish if they feel the economy needs more help. In contrast, another person could call the same policy dovish if they think the economy is overstimulated and overheating.

🏠 Housing trends

30yr Mortgage Rate: 7.0%
That’s up from 6.7% a year ago. (MBA)
Median Home Price: $407,600
That’s up from $386K a year ago. (Existing homes - NAR)

Low inventory, rising prices, and high mortgage costs are still stifling the housing market. According to the National Association of Realtors, the number of existing homes sold in the US declined for the third straight month last month. Home sales are down 1.9% from a year ago. Generationally high borrowing costs and a low supply of available homes are driving away buyers and prompting current homeowners to wait on selling. The available homes on the market are nearly half of what they were pre-pandemic. This has pushed home prices higher for the past four months. Most of the inventory growth has been for higher-end homes. Nearly a third of all sales were done in cash. The median existing home sold last month cost $407,600. Existing home sales make up most of the US housing market and are a crucial indicator of its overall health.

 

 📈 Investment trends

The Market: ⬇️ -0.3%
S&P 500: 5,307.01
1Mo: +6% | 1Yr: +27% | 5Yr: +88%

The market contracted from its record high on Wednesday as investors fretted over the Federal Reserve's last meeting minutes. Policymakers raised new concerns about the economy's health and the risk of rising living costs.

 

🏭 Companies worth watching

👍👎 APPROVAL RATINGS

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Target

Breaking Points

Target's sales and profits slumped last quarter as shoppers cut back spending on essential goods and groceries, not just toys, clothes, and splurge items.

This week, the superstore cut prices on thousands of items to appease shoppers.

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TJ Maxx

Tried and True

TJ Maxx's approach to providing affordable clothing and home items with a treasure-hunting experience continues to succeed with budget-conscious shoppers. It reported sales growth again last quarter.

The discount retailer also boosted profits with better inventory and shipping management.

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 💭 Broader perspectives… (+ 2pts)

Do you feel like prices are still getting worse?

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Alphabet

Sharing Warmth

Google's getting creative to minimize the environmental impact of exploding energy demands for artificial intelligence and plans to repurpose its data center heat exhaust to power local communities.

The AI giant's new $1.1B data center in Finland will provide 80% of the town with clean-energy heat.

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Nvidia

Taking Off

The dominant market leader in artificial intelligence computing chips has more than tripled its sales over the past year, and its CEO expects faster growth ahead as more industries adopt AI.

Nvidia also plans to split its stock 10-for-1 to make stock ownership more accessible to employees.

Tell Nvidia's CEO how you feel

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Snowflake

AI Accelerant

Snowflake surprised investors with strong sales growth for its cloud data analytics services after releasing more artificial intelligence features.

The cloud company just acquired an AI observability platform to help monitor and error-check AI software to improve trust and performance.

Tell Snowflake's CEO how you feel

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