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  • Wednesday's Scoop: Drifting🌤️

Wednesday's Scoop: Drifting🌤️

American Airlines deals with discrimination & Abercrombie flies

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

 

🌎 Big picture

  1. Rising mortgage rates keep deterring buyers.

  2. Home prices keep climbing, but less quickly.

  3. Policymakers think the economy is still strong but slowing.

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)

Policymakers think the economy is doing fine but not great. The Federal Reserve's bi-quarterly Beige Book report indicated that living costs aren’t rising as quickly anymore, consumer spending is losing some willpower, and hiring has slowed. Across the country, most regions reported slight or modest growth in business activity, while some reported no growth. Americans continue to cut back their spending, sensitive to rising prices. However, travel and tourism spending is still strong. People are much more selective with their budget.

 

🏠 Housing trends

30yr Mortgage Rate: 7.1%
That’s up from 6.9% a year ago. (MBA)
Median Home Price: $407,600
That’s up from $386K a year ago. (Existing homes - NAR)

Mortgage costs keep climbing and deterring homebuyers. The Mortgage Bankers Association reported the number of mortgage filings to purchase a new home fell 1% last week, down 10% from a year ago, as the average 30-year fixed-rate mortgage increased to 7.05%. The Federal Reserve’s efforts to slow inflation have driven borrowing costs to the highest level in decades. The average mortgage costs nearly double what it did just a few years ago.

Home prices keep climbing but at a slower pace. The Federal Housing Finance Agency said US home prices rose only 0.1% in March after climbing 1.2% in February. A shortage of homes on the market remains the main culprit behind rising home prices. New home construction has picked up over the past year but accounts for less than a fifth of the overall market. Existing homeowners have resisted selling due to the high cost of a new mortgage, keeping the resale supply low. Most people locked in low rates a few years ago and want to hang on to their cheaper monthly payments.

 

 🤓 Inside Scoop: What exactly is a mortgage?

A mortgage is a loan you take out to buy a home. The collateral, the thing you lose if you don’t pay back the money, is the home itself. The collateral reduces the risk for the lender. Borrowing on a credit card is expensive because there’s no collateral.

Mortgage rates can be fixed or floating. A fixed rate means you’ve locked in that percentage of the loan you need to pay back in interest each month, and it won’t increase. A floating rate is usually tied to the movement of a benchmark interest rate. So, as broader interest rates rise, your rate increases, and you pay more each month.

Whether fixed or floating, banks determine their mortgage rates by taking a baseline low-risk lending rate like US Treasury bonds, then marking it up based on how risky you are as a borrower. Banks say, OK, we can lend to the US Government (considered no default risk) for ten years at 4% interest. You’re more likely to default than the US Government, so you must pay us higher interest to make it worth the risk, maybe 7%. As baseline rates rise, your rates will increase.

 📈 Investment trends

The Market: ⬇️ -0.7%
S&P 500: 5,266.95
1Mo: +3% | 1Yr: +25% | 5Yr: +91%

The market wavered lower today as investors worried more about the economy's path forward. There's waning optimism that policymakers will reduce borrowing costs anytime soon, which could lead to a slow economy with above-average inflation and high interest rates.

 

🏭 Companies worth watching

👍👎 APPROVAL RATINGS

Vote and practice your board member voice. It accelerates your comprehension and comfort with these topics. (+2 pts)

American Airlines

Passenger Discrimination

American Airlines faces a discrimination lawsuit for removing several Black passengers from a flight due to complaints about possible body odor, though the plaintiffs exhibited no odor.

The airline has a pattern of racial discrimination allegations recognized by the NAACP.

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 💭 Broader perspectives… (+ 2pts)

Have you ever felt discriminated against while flying?

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Dick’s Sporting Goods

Sneaker Surge

Dick's Sporting Goods more than doubled the sales growth investors expected amid strong demand for sneakers and athletic gear.

The retailer raised its sales and profit projections, signaling a rebound in the footwear and apparel markets.

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Walgreens

Getting Cheaper

Walgreens announced price cuts of as much as 20% on over 1,300 items in recognition of customers' resistance to persistently rising price tags across the industry.

The pharmacy chain reported a loss and slowing sales at the start of the year.

Tell Walgreens' CEO how you feel

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Frontier

Tense Negotiations

Frontier's flight attendants' union has requested federal mediation to help negotiate worker protections against the airline's operational overhaul, which aims to cut $200M in costs by streamlining routes.

The union says the model will unfairly burden workers, reduce compensation, and increase work hours.

Tell Frontier's CEO how you feel

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Abercrombie & Fitch

New Brand Boom

Abercrombie & Fitch's renewed brand strategy delivered another record-breaking quarter of surging sales and nearly 7x higher profits than last year.

The fashion giant has spent several years on a strategic shift toward inclusivity and marketing through influencers.

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