🧭 The Weekly Scoop

Hey friends, thanks for reading. We hope you have a lovely weekend!

Welcome to our 188 new subscribers this week!! Take a second and share the scoop!

Note from the Founder: There will be no scoops next week, starting July 30th. For the first time since founding Share Scoops, I will be going offline for the next week to get married and enjoy some time with my amazing future wife. Thank you all for believing in this mission. The next stage of Share Scoops starts when I return!

Here’s what you need to know this week.…

This week was a big one - not because there was a massive shift, but because there wasn’t. Each week’s new economic data calms investors’ recession fears one by one, and the stock market keeps rising.

This week we hit the peak of earnings season. That’s what the cool kids call the period at the end of each quarter when stock market companies are required to report on their financial performance. We get a peek into their expenses, sales, and profits, aka earnings.

If you’re seeing the headlines or watching CNBC and having trouble making sense of the “beats” and “misses,” don’t worry. It’s not you. It’s a lot of jargon nonsense. We’ll often see the headlines change as the stock price reaction shifts. News outlets have about 30 seconds to read the earnings report and publish a story about it - if it’s even humans writing them anymore. They compare the company’s reported stats - revenue, profits, earnings per share, etc. to the average of a range of Wall Street projections. Comparing three months of sales to the average of a range of projections is as useful as you want to believe it to be. The confusing part: comparing to an estimate doesn’t tell you anything about the direction of the results. If analysts think the company will lose $10B in three months, but it only loses $9.5B, that will earn a “huge beat” headline. But, the company still lost nearly ten billion dollars. It works the opposite way too. And sometimes, the “expectations” aren’t even the actual expectations. Microsoft posted double-digit sales growth this past quarter (it made $56B in three months 🤯) and BEAT expectations. But the stock sank because investors expected it to beat expectations by a wider margin. Good isn’t good enough for a company like Microsoft - a victim of its consistent success. So, make sure to take the headlines and one-day stock moves with a grain of salt. It takes a little time to cut through the noise. So far, 81% of the biggest companies have delivered more profit than investors projected.

What else? The economy is doing really well. Jobs are plentiful, layoffs are low, and the economy accelerated in the second quarter instead of slowing into a recession. Policymakers are no longer forecasting a recession at all. That’s a significant shift that’s happened very gradually.

Why does it feel like a recession? We touched on this a bit a couple of weeks ago. Small businesses and people on the lower half of the income spectrum are getting left behind. It’s turning into a massive labor movement. Unions are gaining power again, threatening massive strikes and winning colossal pay and benefit increases. UPS drivers won big. So did pilots at United, American, Delta, and soon FedEx. Strike threats are getting so real it has customers scared. Trucking giant Yellow faces bankruptcy if it can’t patch things up with its drivers soon.

The summer’s still heating up.

🐂 Reasons to be optimistic:

• Americans are feeling good about the economy. The Conference Board’s Consumer Confidence Index rose to the highest level in two years this month, far exceeding expectations. People are less worried about inflation and aren’t having trouble finding jobs. Many expect a recession, but not necessarily a bad one. Consumer spending powers two-thirds of the economy, so our feelings matter.

• Policymakers aren't expecting a recession anymore. The Federal Reserve said there's a good chance this will be the last interest rate increase, signaling confidence that they've done enough to cool inflation. After forecasting a mild recession for a while now, economists at the Fed think we should be able to avoid one.

• Companies keep cutting back on layoffs. The Labor Department reported initial jobless claims fell for the third straight week last week to 221,000. That’s fewer weekly layoffs than in 2019. Unemployment remains near historic lows.

• The US economy accelerated into summer. The Commerce Department reported US real GDP [🤓] grew at a 2.4% annualized pace from April through June, faster than the 2% pace in the first quarter. Even though consumer spending, which powers two-thirds of the economy, slowed down from the boom at the start of the year, businesses started investing in more machinery, especially planes and vehicles.

• Inflation keeps trending lower, meaning living costs are still rising, but not at the unmanageable pace of the past couple of years. Policymakers’ preferred inflation gauge showed core living costs rose only 3.8% in the second quarter. That’s down from the 4.9% pace of the first three months of the year and the lowest reading in two years. Wages have recently started growing faster than the cost of living, providing more hope for things to get better for the average American.

• Rents have stopped rising so quickly. Realtor.com reported national median rents rose slightly in June from May, but were 1% cheaper than the year before for the first time since 2020. Rent is still 24% more expensive than before the pandemic.

• Unemployment is extremely low, especially for Americans in their prime working years. The June Jobs Report, analyzed by the Wall Street Journal, showed the highest labor force participation from those aged 25 to 54 in over twenty years. The increase in people either employed or looking for jobs was driven heavily by women returning to work.

🐻 Reasons to be pessimistic:

• The US economy weakened a bit in July. S&P Global’s index of economic activity reported a pickup in the manufacturing sector, which has been struggling for months, but a slowdown in services. Consumers shifted from buying stuff to spending on things like travel and experiences, but that may be cooling too.

• Home prices keep rising. Expensive mortgage rates have deterred homebuyers and encouraged homeowners to hang on to their homes with cheaper mortgages. The Federal Housing Finance Agency reported median home prices rose by 0.7% for the second straight month in May. Prices were 2.8% higher than they were twelve months ago.

• Interest rates are going up. The Federal Reserve raised baseline interest rates by 0.25% to 5.25%, continuing the most extreme policy in decades aimed at slowing the economy and reducing inflation. [🤓] This will make savings accounts pay more but also make debt more expensive - credit cards, auto loans, mortgages, etc.

• Expensive mortgage rates have deterred home buyers. The Mortgage Bankers Association reported applications to purchase a home fell 3% last week, down 23% from a year ago. The average 30-year fixed-rate mortgage sits at about 6.9%. The Commerce Department said there were 2.5% fewer homes sold in June than in May. Low supply in the market has kept prices from falling much.

🏡 For your home

6.9% = Average 30-year mortgage rate

That’s up from 6.8% a month ago and up from 5.8% a year ago. _{Mortgage Bankers Association, 7/20/23}

$410,200 = Median existing home sales price

That’s up from $396K a month ago and down from $414K a year ago. _{National Association of Realtors, 6/30/23}

💼 For your work

221,000 = Layoffs Last Week (Initial jobless claims)

That’s down from 228,000 the week before and in line with pre-covid averages. _{Labor Dept., 7/20/23}

209,000 = New jobs added in June

That’s down from 306K the month before and above pre-covid averages. _{Labor Dept., 6/30/23}

3.6% = Unemployment rate

That’s down from 3.7% the month before and still near the lowest rate in 50+ years. _{Labor Dept., 6/30/23}

9.8M = Available jobs

That’s down from 10.3M the month before and well above pre-covid averages of ~7M. _{Labor Dept., 5/31/23}

Who’s hiring: Education and government organizations

Who’s firing: Healthcare and finance

👜 For your wallet

3.0% = Cost of living increase (1-Year Inflation)

Living costs are 0.2% higher than the month before. Normal inflation sees prices rise by 0% to 0.2% per month, 1-2% per year. _{Bureau of Labor Statistics, 6/30/23}

4.7% = Groceries cost increase (1-Year inflation)

Groceries are about the same price they were a month ago. _{Bureau of Labor Statistics, 6/30/23}

$3.71 = National Gas Price/Gallon

That’s up from $3.56 a month ago and down from $4.30 a year ago. _{AAA., 7/27/23}

💰For your savings

0.42% = Average interest banks pay on a savings account_{, FDIC, 7/17/23}

5.50% = Interest rate banks earn on their savings accounts_{, Federal Reserve, 7/26/23}

The Federal Reserve has raised baseline interest rates from 0% to 5.50% in the past year. Make sure your bank is paying you higher interest on your savings.

Find a high-yield savings account here.

💸For your investments

-1% = This past week’s change in the US Stock Market

+5% past month, +15% past year, and +60% over 5 years. _{S&P 500 Index, 7/27/23}

4.04% = The yield on the 10-Year US Treasury Bond

Yields are +7% this past week, +7% this past month, and +42% over the past year. _{US Government Bonds, 7/27/23}

-2% = This past week’s price change for Bitcoin

-5% in the past month and +27% in the past year. _{Coinbase, 7/27/23}

-2% = This past week’s price change for Ethereum

-2% in the past month and +14% in the past year. _{Coinbase, 7/27/23}

Gross Domestic Product (GDP) is how we track how much stuff the economy is producing. The actual number (~$26 trillion) doesn't matter as much as the direction and magnitude. We track the growth rate of real GDP (inflation-adjusted) to know whether the economy is expanding or contracting from the previous quarter.

The reporting style can be a bit confusing. The main number you hear will be an annualized growth rate (+2.4%), representing how much the GDP would increase/decrease if the economy hypothetically grew at that rate for an entire year. It's different from how much our production increased/decreased quarter-to-quarter (+0.6%) and not representative of the growth/decline over the past year (+2.6%). Annualizing the past quarter’s change makes the backward-looking number a little more forward-looking.

The Federal Reserve, aka the Central Bank, aka The Fed, is in charge of our whole money system. When the economy is struggling, the Fed lowers baseline interest rates to make it cheaper for consumers and businesses to borrow and spend (lower rates on business loans, mortgages, credit cards, car leases, etc.), encouraging more business.

The Fed also pumps more money into the system by buying bonds with new dollars that it essentially speaks into existence. The additional cash keeps the pipes flowing as the borrowing and spending heats up, stimulating economic activity.

Once the economy's strong enough to stand on its own, the Fed starts to raise interest rates and pull back some of that money to ensure the economy doesn't overheat. Inflation is the Fed's heat gauge. The gauge was reading very hot but has been cooling lately.

So everyone's watching how long the Fed will keep restricting the economy with high rates if inflation keeps cooling. The Fed hopes to get living costs under control without sparking mass unemployment.