📈 The FED is Wrong

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Good Morning!

After a couple of months of up only, the markets are cooling. The S&P dropped by 1.2% making it the worst day in 2 months, the reason? It’s all down to comments made by a FED member yesterday.

Grab your flat white and let's get into it! ☕️👇️

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Markets

Wall Street sees its worst day in weeks on rate concerns as jobs report looms (3 minute read)
Wall Street was hit with a reality check on Thursday and it's not pretty. U.S. stocks took a nosedive, and we're not talking about a gentle dip. The S&P 500 dropped 1.2%, marking its worst day in almost two months. It was so close to its record high from last week too.

The Dow Jones Industrial Average, plummeted 530 points or 1.4%, completely reversing its earlier 300-point rise. The Nasdaq wasn't spared either, also down by 1.4%. What's behind this dip?

A Federal Reserve official hinted that interest rate cuts might not happen this year, especially if inflation decides to linger. And let's not forget the suspense building up to Friday's jobs report—traders are on edge, waiting to see if it will stir the pot even more.

The Fed Is Wrong About How Low Interest Rates Will Go (2 minute read)
The big debate? Where interest rates are headed. It's the Fed vs. the markets, and it's about as harmonious as cats and dogs in a sack. Both sides are thinking differently over what the future holds for interest rates, crucial for both asset prices and economic growth.

Here's the catch: Betting against the Fed is usually as wise as bringing a knife to a gunfight. But this time, the markets might have the upper hand. By 2024, both parties are singing the same tune, expecting about 75 basis points of cuts in the federal funds rate. But fast forward to 2027, and it's a different story.

Markets are betting on rates bottoming out at around 3.75%, while the Fed's guess is more optimistic at 2.6%—that's over a 1% difference. Why the gap? Two main reasons. First, market players are betting on inflation staying stubbornly above the Fed's 2% target. The logic? The Fed's commitment to balance low inflation with higher rates doesn't swing both ways. Fed Chair Jerome Powell isn't exactly preaching about pushing inflation below 2% to make up for recent high numbers. So, it looks like the markets are betting on a less rosy picture than the Fed's forecasts.

Reason number two? Keep reading..

Investing

Gold prices fall from record highs (2 minute read)
Gold's shining a little less brightly today. In the Asian markets, the price of gold took a bit of a tumble, backing down from its recent dizzying highs. It's like gold's got cold feet ahead of the big U.S. jobs report that's set to shake up interest rate forecasts.

Technical indicators are also whispering that gold's buying frenzy might be losing steam, after a pretty impressive race upwards in March and early April. But, with the Middle East tensions simmering – specifically tensions between Iran and Israel – gold might still be the go-to for jittery investors looking for a safe haven. Spot gold slipped 0.6% to $2,277.10 an ounce, a step back from Thursday's record-breaking $2,305.31.

Despite the dollar flexing its muscles and some stern talk about U.S. interest rates, gold was riding high on the back of those Middle East tensions. Now, though, it seems traders are cashing in their chips, playing it cautious before the U.S. drops its nonfarm payroll data. And with U.S. consumer price index inflation data lurking around the corner next week, it makes sense for gold to take a breather.

Up 19% YTD, How High Can Amazon Stock Go in 2024? (2 minute read)
The "Magnificent 7" stocks, are now showing us a bit of a mixed bag in 2024. We're seeing Apple (AAPL) and Tesla (TSLA) getting a bit of a reality check, dipping into the red even as the Nasdaq Composite struts its stuff with an over 8% gain. But it's not all doom and gloom. Amazon (AMZN), Nvidia (NVDA), Alphabet (GOOG), and Meta (META) are keeping the party going with their continued rallies.

Amazon, in particular, is showing off with a near 19% uptick this year, flirting with its July 2021 peak of $188.65. Now, analysts – are pretty smitten with Amazon. They're seeing a mean target price of $202.49, a sweet 12% jump from yesterday’s close. The most optimistic among them are even whispering about a potential 27.2% rise to $230 over the next year.

Government pensions have investments in TikTok owner ByteDance (3 minute read)
It turns out that government pension funds across the U.S. are inadvertently tangled up in the future of TikTok. Congress is playing hardball, considering a move to force TikTok's parent company, ByteDance, to either sell its U.S. operations or shut them down. And guess who's on board? President Biden himself.

Well it turns out that at least 21 state and local retirement funds have a piece of the ByteDance pie, albeit indirectly, as revealed by the Equable Institute, a group that doesn't shy away from crunching pension numbers. These investments mostly hide out in private equity holdings, which represent a hefty 17% of public pension assets.

Institutional investors, like pension funds, are increasingly finding themselves in hot water over investments that activists label as problematic.

Money

Should You Rent or Buy a House? (5+ minute read)
To buy or not to buy (a house, that is). We all know this isn't just choosing between paper or plastic—it’s the heavyweight champion of life decisions. Renting a place or signing up for a mortgage? That's the million-dollar question.

This post isn’t about drowning you in the swamp of renting vs. buying logistics. Nope, it’s about cutting through the clutter, focusing on those game-changing variables that will stick with you in the long haul. By the end of this no-nonsense guide, you’re not just going to have a bunch of numbers and theories.

You’re going to get a crystal-clear view of what really matters when you're making the decision. Should you rent or buy?

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