Market Update

Fed keeps interest rates steady

The Federal Reserve stayed put on Wednesday after two days of meetings. However, data shows that the hiking campaign is not over and one more increase is expected by the end of the year. The industry calls this move a “hawkish” pause, meaning the central bank is still in support of raising interest rates even at the cost of economic and employment growth. Even though economic data was better than expected, this news caused a ripple through the market, with the S&P 500 down .94%. Some analysts insist that the pause is an attempt to hold rates steady for longer, rather than hiking the rates again towards the end of the year. We’ll be keeping an 👁️ on it.

We understand this is confusing, what does it mean for you?

Well for one, things aren’t getting any cheaper, and it’s not getting any easier to borrow money. This means that consumers will likely carry their debt month to month, with not much relief in sight.

If you’re in the market for a home, good f@*%ing luck. Rates remain north of 7%, so shoppers don’t have nearly the same purchasing power. Woof.

Auto loans are the highest they’ve been in 15 years at 7.46%. For instance, if you were to purchase a $50,000 car at that rate over 60 months and a $10,000 down payment, your monthly pay comes out to just …..$800.

Two lighter sides: For those with student loans, most rates are fixed, so the Fed isn’t kicking you while you’re down (at least in this arena). Savings account rates are the highest they’ve been in 15 years at over 5%. If you’re looking for a safe place to park your money for the time being, take a look at opening a high-yield account while the market finds direction.

Instacart fizzles

Instacart shares closed at $30.10 on Wednesday, down nearly 11% after climbing up to $42 on its IPO day. While this movement is typical for an IPO, Instacart joins the likes of Airbnb, Doordash, and Uber as tech companies attempting to reinvent traditional markets. Here’s a quote for thought courtesy of Gene Munster of Deepwater Asset Management,

“The question investors should ask today: Do you believe order growth will reaccelerate?"

It’s a good question for any investor to ask themselves. Easier asked than answered of course. But, take into account the competition and obstacles Instacart faces as online grocery sales are still struggling post-pandemic. With the high cost of groceries, consumers are probably less likely to decide to tack on extra delivery costs. Plus, Instacart now has to battle the likes of Walmart and Target who are now in the grocery delivery game.

Quick Hitters

Airbnb

Naba Banerjee has developed an AI system to reduce partying by a whopping 55% globally over the past two years. The technology accounts for hundreds of factors such as the user’s birthday, length of stay, weekday or weekend, and much more. To date, over 320,000 users have been blocked or redirected from bookings. 🚫 No fun zone. 🚫 

Wingstop

CEO Michael Skipworth attributes company growth to reinvesting. Over the last year, 90% of the restaurants opened have come from reinvestment. With over 2,000 restaurants globally and plans to open 250 this year, it’s safe to say the model is working just fine.

Deep Sea Mining

Much needed minerals such as nickel, cobalt, and copper lie on the bottom of the seafloor. Mining the ocean floor has become a controversial issue as there are so many unknowns about the sea. However, some argue that deep sea mining impacts are a fraction compared to on-land mining. Either way, there is a lot of money to be made, so it’s interesting that a few major tech companies have signed off on pausing activity until we know more.

Quote of the Day

“It is better to be roughly right than be precisely wrong.”- John Maynard Keynes, AKA the father of modern macroeconomics

Meme of the Day