Updated June 24, 2023
Bill Chen, CFA
The Piggy Bank
📈 In a data-heavy week highlighted by the FOMC rate announcement, equity markets got a bit frothy, with the Nasdaq 100 up 3.8% (its eighth weekly gain in a row) and broad equities up 2.5%.
A new report showed inflation slowed to 4% for the month of May. This was the lowest rate in two years and prompted the Federal Reserve to skip its first rate hike in 10 months. We dive deeper in our inflation update below.
👀 What to Be on the Lookout for This Week
This week, be prepared for multiple speeches from Federal Reserve Presidents, including Chicago’s Austan Goolsbee, Cleveland’s Loretta Mester, and the Federal Chair himself, Jerome Powell. Investors will seek further insight into the central bank’s decision to place a pause on rate hikes in June. Additionally, they will be looking for clues as to what that decision means for the rest of the year. Namely, will the Fed hold off on rate hikes for the rest of the year? Or was this a one-time event?
It will be fairly slow as far as earnings reports go, but keep an eye out for reports from these major companies:
📰 In Other News
In a major move, the European Union has charged Google with breaching antitrust rules. Regulators allege Google dominates all aspects of the advertising supply chain. It collects internet users’ data, sells advertising space, and acts as an intermediary between the two parties. The EU’s executive arm says Google, through its overwhelming influence, creates an anti-competitive environment. The tech goliath will have time to respond to the charges before any more decisions are made.
The country’s two biggest logistics operators, UPS and FedEx, have been working to stave off strikes from their respective unions. The UPS Teamsters Union is currently deciding whether or not to strike. If it does, the 330,000-person strike would mark the largest single-employer strike in US history. Meanwhile, FedEx has agreed to a tentative new contract with its pilot union. The deal includes a 30% pay bump, major improvements to the pilot pension program, and a retroactive recovery payment plan for the 18 months in which the contract was open for amendment.
In addition to strikes, boycotts were also back in style this past week. Modelo topped Bud Light as America’s top-selling beer, dethroning the legacy brewery for the first time in more than two decades, following the right-wing boycott of Budweiser for its partnership with a trans influencer. Additionally, Redditors boycotted the forum platform to protest its decision to start charging fees for third-party apps to access the platform.
Finally, fast-casual Mediterranean restaurant Cava went public last week. Its shares soared on the first day of trading. This could provide some much-needed momentum for other companies looking to follow its lead and reheat a stale IPO market. Other restaurant chains weighing an IPO include Fogo De Chão, Twin Peaks, and Panera Bread.
Reflects performance at market close 6/16/23
🎉 Inflation Hits Lowest Rate in Years
Inflation Still Slowing
Americans breathed a collective sigh of relief this week as the annual inflation rate slowed to just 4% for the month of May. While this is still more than double the Federal Reserve’s 2% goal, it’s a significant decrease in the context of the past year.
In fact, inflation is at the lowest point seen in two years.
A rise of 4.4% in used vehicle prices, 0.8% in transportation services, and 0.6% in housing contributed to the persistent increase in prices. But, on the other end of the spectrum, a 3.6% drop in energy prices helped inflation cool.
The Bigger Picture
After hitting a towering 9.1% last June, the rate of inflation has recently slowed consistently. In fact, the May report marked the 11th straight month of decreasing inflation.
Measuring inflation in the economy is not an exact science. But many economists believe inflation got out of hand during the pandemic due to supply chain issues caused by the lockdowns. In layman’s terms, companies were forced to temporarily stop producing goods since factories did not follow social distancing procedures. The result was a shortage of many different goods, which, in turn, led to higher prices for those goods. To make matters worse, simultaneous contributing factors such as the Russian invasion of Ukraine further reduced the supply of staple goods like oil.
In an effort to combat this high inflation, the Federal Reserve has been raising interest rates at the fastest pace in decades. However, given the positive implications of this latest inflation reading, the Fed has decided to skip a rate hike for the month of June.
It’s easy to get caught up in the weeds when discussing things like inflation, interest rates, and economic policy. But what does it all mean for you? Here are the three biggest takeaways for the average American following the May inflation report:
Stable prices: Over the past few years, Americans have witnessed some truly jaw-dropping price instability. At different points, gas, rent, and even egg prices seemed to triple overnight. However, with the latest reading, it looks like most prices are continuing to level out and revert to normalcy.
Higher interest rates: The federal funds rate currently sits at 5%-5.25%. Even though the federal reserve didn’t raise rates in June, the average interest rate on things like credit cards, auto loans, and mortgages remains much higher than you might remember it being a year or two ago.
Greater economic stability: Many economists believe the US has been on the brink of a recession for months. However, this reading is a sign that things are going according to the Fed’s plan. If the Fed was raising interest rates rapidly but inflation still rose to 10%, America would have a serious problem. Instead, analysts and average Americans alike have cause for cautious optimism.
With all that said, remember it’s impossible to be sure what will happen next when trying to predict something as complex as the economy. Although signs are positive, it’s still a good idea to continue padding your rainy day fund and preparing for the worst-case scenario while hoping for the best.
🤔 How Do You Measure Wealth?
Being Rich vs. Wealthy
When visualizing a “rich” person, most people will conjure mental images like Scrooge McDuck doing a swan dive into his endless pool of gold coins. But when asked to envision a “wealthy” person, the image becomes a bit more muddled. What exactly does it mean to be wealthy?
Charles Schwab tried to get to the bottom of this tricky question. In a recent survey, the financial services firm found 62% of adults stated enjoying healthy relationships with their loved ones was most important to being wealthy. Comparatively, only 38% felt that having a lot of money was a main contributor to feeling wealthy.
That said, the majority of respondents agreed money still played a vital role in feeling wealthy. 70% of respondents stated wealth is about not having to stress over money — and not having more than you need.
Wealth by Generation
If wealth is about prioritizing your relationships and well-being, a subsequent question becomes: “Which generation feels the most wealthy?”
According to the same survey, millennials were overwhelmingly the generation that feels the wealthiest. Out of all the millennials surveyed, 57% stated they feel wealthy. For baby boomers, Gen X, and Gen Z, the percentage of the generation feeling wealthy was only around 40%.
Notably, for millennials who say they feel wealthy, their average net worth was about $530,000. While this might sound like a lot, it’s only ¼ of the $2.2 million typically considered “rich.” It’s refreshing to see that even those who aren’t millionaires may still feel wealthy.
What’s “Wealth” to You?
The responses to this survey offers a gentle reminder that “wealth” can mean very different things to different people.
As a general rule, there are four ways you can be considered wealthy: in time, health, relationships, and money. Ironically, of these four pillars, most consider monetary wealth the least important. All the money in the world won’t mean a thing if you don’t have good health, free time to enjoy your hard-earned cash, or friends and family to spend it on.
That said, not having to worry about money is still an important part of the wealth equation. If you are still trying to get your finances in order, that should take top priority until you’re back on top of your bills. But once you’re feeling confident in your ability to meet life’s expenses, it’s a good idea to sit down and consider what’s most important to you.
This could include making new friends, spending time traveling or outdoors, or aggressively pursuing a hobby or passion. These are the things that will ultimately make the biggest difference when it comes to feeling wealthy. Once you know what your wealth pillars are, make a conscious effort to prioritize these pillars in your day-to-day routine.
By making a conscious daily effort to pay attention to your wealth pillars, you can ensure you’re not rushing through life just to pad your bank account, while accidentally ignoring the things most important to you.
😨 The Surprising Resurgence of Check Crime
New Take, Old Crime
The use of written checks as a way to send and receive money has been largely declining for years. Last year, Americans wrote only 3.4 billion checks, a significant decrease from 19 billion in 1990.
However, while the use of checks is down, check fraud is up dramatically in the past year. This is likely due in part to the use of checks to send out pandemic stimulus payments in 2020 and 2021.
The most common form of check fraud is “check washing.” This is when a criminal steals a check from the mail, changes the payee’s name and cash amount, and tries to cash the check themselves. For movie fans, this might conjure images of Leonardo DiCaprio in Catch Me If You Can. However, today’s check fraud operations are much more sophisticated than a movie star in a hotel.
By the Numbers
In 2022, banks reported roughly 680,000 instances of check fraud to the Financial Crimes Enforcement Network, or FinCEN. This is nearly twice the 350,000 cases that were reported the year prior. At the same time, reports of general mail theft also more than doubled from 2020 to 2021.
As cases of check crime rise, victims will need to wait longer and longer to recover their stolen money. If you’re only sending $20 through the mail for a loved one’s birthday, that might not seem like the end of the world. But if you’re a small business owner who relies heavily on check payments, it’s a much more serious risk. Having a batch of payments or income stolen could be potentially fatal for your company.
Avoiding Check Crime
Even if you aren’t sending much money on your check, it’s still worth doing your best to protect it. Criminals can also use your check as a way to steal your information. Once they’ve stolen your check from the mail, they will know your name, bank, and account number. With this information, they can also attempt to open up lines of credit in your name.
With that said, the easiest way to avoid having a criminal steal your check is simply to stop using checks altogether. Digital methods like PayPal, Zelle, Venmo, or Cash App are safer when it comes to avoiding fraud. But there are two other means of curbing check crime risk:
Avoid mailboxes: Instead of mailboxes, drop your checks off directly at the post office.
Use “positive pay: services: See if your bank offers “positive pay” services. This will let you pre-authorize your check with a predetermined amount and number. That will make it much harder for people to wash since the check will be voided if the information doesn’t match.
Whether checks are crucial to your finances or you’re just stuck in your ways, it’s always better to be safe than sorry.
Home Depot and Lowe’s are embracing “soft DIY” products. This category mainly includes home décor, such as throw pillows, candles, and clocks.
New York City will start charging cars between $9 and $23 to drive through Lower Manhattan. The proposed toll is an attempt to ease congestion in the area and encourage the use of public transportation.
Coworking spaces are surging in popularity as employees seek a healthy medium between traditional offices and working from home. As of May, 28% of US companies were fully flexible to remote work.
The pause on student loan payments is set to end on September 1st. Further extensions to the pause were recently prohibited by the debt ceiling bill.
Instant Brands, the owner of Instant Pot and Pyrex, has filed for bankruptcy. The home appliance company cited a tighter credit environment and high interest rates for the decision.
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