📈 Student Loan Repayments - Will it start the recession?

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Wednesday’s soft inflation data had big knock on effects as markets began to price in that there may only be one more interest rate rise from the Federal Reserve. But there is another big change happening this summer, and that is student loan repayments restarting - Will it start the recession?

Grab your quadruple shot espresso, let's get into it! ☕️👇️

Markets

Student Loan Repayments – Will It Start The Recession? (5 minute read)
Millions of young Americans will face the end of the student loan payment moratorium this summer. The Biden Administration is prohibited from extending the pause on student loan repayments which have remained in place since March 2020. While, on the surface, the restarting of payments does not sound like a “big deal,” it is. As of the end of Q1-2023, almost $1.8 Trillion in student loan debt is outstanding. That debt carries a substantially higher interest rate than current bank loan rates. When you account for the size of the debt outstanding, the impact on personal spending in the future is significant. That is a significant amount of money consumers have retained to spend on other things. Such is likely why retail spending has remained surprisingly buoyant in the face of higher interest rates and slowing economic growth. However, the question is whether the return of tuition payments will weaken that economic support.

Dollar tumbles after inflation data upends rate outlook (3 minute read)
The dollar tumbled to its lowest since last April on Thursday, heading for its biggest weekly slide so far this year, as traders took a surprisingly cool read of U.S. inflation as a sign U.S. rates could peak as early as this month. U.S. data on Wednesday showed inflation slowed a lot faster than expected last month. That gave rise to the biggest one-day dollar sell-off in five months and left the greenback at its lowest in over a year against the euro and sterling, and at its lowest in over eight years against the Swiss franc. "A lot depends on what we hear from the FOMC in a couple of weeks - that will very much decide the fate of the U.S. dollar and set the tone for the rest of the summer," she said. "If there is any hint of dovishness in the Fed, then the dollar bears are going to jump on that and it will be an excuse to continue grinding the dollar lower,”.

Crude oil stabilizes after soft U.S. PPI data (3 minute read)
Crude oil prices stabilized Thursday, after healthy gains this week after soft U.S. inflation data raised expectations interest rate increases in the world’s largest economy were close to an end. The U.S. crude futures traded 0.1% lower at $75.67 a barrel, while the Brent contract climbed 0.1% to $80.16. Both benchmarks are nearly 5% higher this week to date, and are trading near their highest levels in three months. Data published earlier Thursday showed that growth in U.S. producer prices eased by more than expected in June, easing to 0.1% annually, decelerating from a downwardly revised mark of 0.9% in May. This followed U.S. consumer prices registering their smallest annual increase in more than two years on Wednesday, and pointed to inflationary pressures fading in the world's largest consumer of crude, bolstering the case for the Federal Reserve to step back from its aggressive policy tightening campaign after an expected interest rate hike later this month.

Investing

2 Unstoppable Stocks That Could Join Apple, Microsoft, Nvidia, Amazon, and Alphabet in the $1 Trillion Club (3 minute read)
Crude oil, Artificial intelligence and autonomous driving could catapult AMD and Uber into the stock market's most exclusive club. The American economy has produced the world's largest companies for more than a century. But the biggest value creators have come from different industries as society's needs evolved. Apple is still the largest company today, having just crossed a $3 trillion valuation. But since 2018, Microsoft, Amazon, Nvidia, and Google parent Alphabet have all joined the iPhone maker in the $1 trillion club. The technology sector will likely continue dominating the U.S. economy in the foreseeable future, especially as new industries like artificial intelligence emerge to transform the way organizations do business. There are two more companies that could potentially join the $1 trillion club, and if they do, their respective stocks could deliver astronomical gains for investors.

China's Domestic Automakers Dethrone Western Competition After Decades Of Dominance (3 minute read)
In China, domestic automakers are starting to overtake Western companies, marking a big win for Beijing's domestic industrial policies and signaling the potential end to decades of dominance by Western automakers. In fact, local auto brands produced in China made up 54% of the wholesale car market for the first half of 2023, The Wall Street Journal noted earlier this week. This is up from 48% a year prior and marks the second 6 month period wherein local brands have surpassed foreign ones in a row. It's no secret that NEVs are leading the charge for China's home grown vehicles. We noted just days ago that NEV sales in China were up 25.2% YOY, totaling 665,000 units. Passenger vehicle output fell 0.5% YOY but was up 10.3% sequentially, coming in at 2.2 million units. 9 of China's 10 best selling electric vehicles makers were local companies.

It May Be Time To Ditch Sector Investing And Go Thematic (2 minute read)
If your investing life has spanned more than 15 years, then you’re probably well aware that the recent run of near-zero interest rates was an anomaly. And you’re probably aware that there’s a good chance that rates are going to continue to be a lot higher than that, and this naturally has consequences for how you invest. For one, you’ll need to place more emphasis on portfolio resilience – that is, your investments’ ability to weather market cycles and volatility. Investing in sectors might seem like a good way to ride out business cycles: you could invest in cyclical industries like industrials and financials when the economy is recovering, and move into defensive sectors like healthcare and telecom when you expect a downturn. But if you’re not great at timing cycles, and want more of a “set it and forget it” approach, you might be better off investing in themes instead.

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