Money Matters- Inflows in the Market?
Good afternoon, friends and investors. 💰
A lot happened this week, so let's dive into it.
Out of every stock in FAANG (Facebook, Apple, Amazon, Netflix, & Google)
Only Apple has outperformed both top and bottom-line revenue in the third quarter. Shares are also down around -12% compared to the S&P 500, down ~22%.
Meta Platforms, formerly known as Facebook, also dropped out of the trillion-dollar club this week and other less-than-ideal earnings reports. Shares are trading at levels not seen since 2016.
The Fed Raised Rates, Again.
J-Pow and the Federal Reserve raised rates by 75 basis points for the fourth time in a row on Wednesday.
In days leading up to the FOMC meeting, markets rallied in anticipation of a potential slowing in the aggressive nature of rate hikes.
However, Jerome Powell said that in order to return inflation to the benchmark of 2%, a restrictive stance on monetary policy is a must. Meaning the fed does not plan to back off anytime soon.
Not shockingly, the markets tanked in sync after those words were said.
☀️On the bright side, Some of the fed did say that they were thinking about slowing the rate hikes to a 50 basis point hike in December.
Some economists believe a smaller rate hike would be in everyone's best interest.
"You can't go 75 basis points every time the data doesn't go your way," said Neil Dutta, an economist at research firm Renaissance Macro. "Fifty basis points is still an aggressive pace of tightening after you've taken the funds rate over 4%." -- Source WSJ.com
The Jobs Report isn't helping either.
Companies added 239,000 jobs in October (more than expected). Not only that but wages rose by 7.7% from a year ago.
This might sound like good news, but if you want inflation to come down, it's not.
The fed wants to loosen up the historically tight job market to the point where job openings outnumber available workers by a 2-to-1 margin.
Fed officials are nervous that a tight labor market could fuel continued wage growth, boosting prices in the labor-intensive services sector.
The tricky part is markets rising in anticipation of cooling rates directly undermines the slowing of the economy the fed wants.
Inflows are coming in 👀
Equity mutual and exchange-traded funds (ETFs) notched three consecutive weeks of inflows this month. The longest streak since June, According to Refintiv Lipper.
Investors added $9.6B to these funds leading up to the recent FOMC meeting.
The highest weekly total since March.
I'm not trying to say that the markets may be in for a rebound. But I always like to follow where big money goes.
Inflation overseas 🌊
The annual rate of CPI in the Eurozone increased 10% from a year ago, reaching a record and challenging the European Central Banks' effort to slow the rise of interest rates.
Energy prices were 41.9% higher in October than a year ago, mainly due to the sanctions put on Russia. At the same time, food prices increased 13.1% from a year ago.
The primary headwind for the Eurozone had been energy prices this year. Leaving consumers with less money to spend on goods and services & raising the cost of business, contributing to inflation.
Most economists expect its economy to contract in the final three months of the year and the early months of next year.
Life & Lessons
A book that has been monumental in my understanding of how money works in the world is "The Psychology of Money" by Morgan Housel.
He talks about the way people think, feel, and spend money in short stories that make you re-examine your worldview.
I highly recommend reading it if you have not already. But if you want a quick glimpse into what it's all about... I made this Twitter thread highlighting the best seven lessons I learned.
Disclaimer:
Nothing said in this newsletter is meant to be taken as financial advice, do your own research before making any investment decisions.