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- 🧭 The Weekly Scoop
🧭 The Weekly Scoop
The good and the bad
Hey friends, Happy Friday. It’s been a busy week of building our platform and interviewing new engineers so we can build faster.
Welcome to our 115 new subscribers this week! Take a second and share the scoop!
Here’s what you need to know this week.…
Catch up on the conversation:
It was a short week, and the buzz was light. This could be the story for next week too. July will heat things up again after the month and quarter end with more economic and corporate data. Last week, investors jumped into stocks with FOMO. This week, they settled down a bit or moved into crypto. Crypto markets have been surging for a few reasons, but it’s almost always just an indicator of whether investors are ready to take more risks.
So what’s been happening this quarter? The economy is slowing, but not as dramatically as people expected. Because of that, the stock market has drifted a lot higher this year without too many investors really shouting from the rooftops.
Why? Because investors have been more pessimistic than ever. As a money manager, telling your clients that you were prepared for an economic collapse that turned into a market rally is much better than forecasting the other way around and losing a ton of money.
The economy is doing fine. A recession, or whatever you want to call it, is very likely coming or already here. As we’ve been talking about for over a year now, the one clear thing is this isn’t going to look like a typical recession. We might just be in for a bumpy ride back to a standard, slow-growing, mature economy. The boom was a short-term thing, and there’s always a hangover, but no signs point to another global financial collapse.
As we always remind you, no one can predict the future. Will there be another pandemic? Will the real estate market crumble under the weight of the TikTok-hustler, Airbnb-ification of residential real estate? Will climate events present economic risks no one is prepared for? Stay tuned for the next season of humanity. Until then, we try to take the emotions out of investing.
🐂 Reasons to be optimistic:
The stock market is still riding high, up 15% this year.
The housing market may be due for a comeback. The Commerce Department said new single-family home construction surged last month by the most in over thirty years. Groundbreaking for single-family homes was up 18.5%, and multi-family projects of five units or more climbed 28.1%. The supply of available homes has been meager, keeping prices high.
The surge in new construction might be the start of a new trend. The Commerce Department reported permits for future building projects also jumped 5%, and the National Association of Home Builders said sentiment among homebuilders turned positive for the first time since July 2022. The NAHB sentiment index has been trending higher for months.
Bitcoin’s price has surged this past week as investors build hope for the first-ever Bitcoin index fund. Last week, the world’s largest asset manager, BlackRock, filed for regulatory approval for a Bitcoin ETF. Assuming BlackRock knows something, several other asset managers also filed applications this week. Thirty other attempts at approval have already failed.
China’s pumping more money into electric vehicles. The government announced $72B in tax breaks for people buying electric vehicles. It’s the biggest subsidy yet for the biggest EV market in the world.
🐻 Reasons to be pessimistic:
Layoffs were fairly high last week for the third week in a row. The Labor Department reported initial jobless claims remained unchanged at 264,000, the highest level since October 2021. Layoffs and unemployment have been extremely low until this month. We’ll wait to see whether the high volume of job openings will keep absorbing these layoffs.
Policymakers still think they might raise interest rates again this year, according to new remarks from the Federal Reserve Chairman. Last week, the Fed decided to pause its most extreme policy in decades aimed at restricting the economy: raising interest rates by 5% in twelve months. [🤓] So far, it looks like it has been effective at slowing business activity enough to stop the breakneck surge in prices of everything from homes to eggs and cars. If inflation picks up again, expect higher rates and more expensive borrowing.
Expensive mortgage rates have kept homebuyers on the sidelines. The National Association of Realtors (NAR) said the number of existing homes sold in May rose only 0.2% from April, down over 20% from a year ago. The Mortgage Bankers Association reported the average interest rate for a 30-year fixed-rate mortgage is 6.7%, down slightly from recent highs of over 7% but nearly double the rate at the start of last year.
Home prices haven’t dropped much because there’s so little supply. High rates have also prompted sellers to hang onto their homes with cheaper mortgages. The NAR said the number of available homes for sale is half of what it was before the pandemic. Redfin reported the most significant shortage on record in May. Despite the stark drop in transactions, the median price of an existing home sold in May rose by 2.6% from April to $396,100, down only 3.1% from a year ago.
China's trying to stimulate its lagging economy. After recently lifting covid restrictions, China’s consumer spending and industrial output haven’t rebounded as quickly as expected. Chinese policymakers cut interest rates this week to encourage more borrowing and spending from consumers and businesses.
Numbers that matter:
🏡 For your home
6.7% = Average 30-year mortgage rate
That’s up from 6.6% a month ago and up from 5.7% a year ago. Mortgage Bankers Association, 6/15/23
$396,100 = Median existing home sales price
That’s up from $386K a month ago and down from $409K a year ago. National Association of Realtors, 5/31/23
💼 For your work
264,000 = Layoffs Last Week (Initial jobless claims)
That’s unchanged from the week before and about 20% higher than pre-covid averages. Labor Dept., 6/15/23
339,000 = New jobs added last month
That’s up from 294K the month before and above pre-covid averages. Labor Dept., 5/31/23
3.7% = Unemployment rate
That’s up from 3.4% the month before and still near the lowest rate in 50+ years. Labor Dept., 5/31/23
10.1M = Available jobs
That’s up from 9.7M the month before and well above pre-covid averages of ~7M. Labor Dept., 4/30/23
Who’s hiring: Retail, healthcare, and transportation
Who’s firing: Manufacturing and business services
👜 For your wallet
4.0% = Cost of living increase (1-Year Inflation)
Living costs are 0.1% 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, 5/31/23
5.8% = Groceries cost increase (1-Year inflation)
Groceries are 0.1% more expensive than a month ago. Bureau of Labor Statistics, 5/31/23
$3.58 = National Gas Price/Gallon
That’s up from $3.54 a month ago and down from $4.96 a year ago. AAA., 6/22/23
💰For your savings
0.42% = Average interest banks pay on a savings account, FDIC, 6/20/23
5.25% = Interest rate banks earn on their savings accounts, Federal Reserve, 6/14/23
The Federal Reserve has raised baseline interest rates from 0% to 5.25% in the past year. Make sure your bank is paying you higher interest on your savings.
💸For your investments
+0.4% = This past week’s change in the US Stock Market
+5% past month, +17% past year, and +58% over 5 years. S&P 500 Index, 6/22/23
3.80% = The yield on the 10-Year US Treasury Bond
Yields are +2% this past week, +3% this past month, and +20% over the past year. US Government Bonds, 6/15/23
+17% = This past week’s price change for Bitcoin
+12% in the past month and +50% in the past year. Coinbase, 6/22/23
+12% = This past week’s price change for Ethereum
+3% in the past month and +78% in the past year. Coinbase, 6/22/23
Inside Scoops 🤓
Federal Reserve
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.)
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 had 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.
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