Understanding Burn Rate

Here's the overview:

Economic Growth and Inflation

• GDP Growth: The U.S. economy experienced a notable slowdown, with GDP growth coming in at 1.6%, significantly lower than the previous quarter's 3.4%. This deceleration was attributed to various factors including a drop in federal spending, a widening trade deficit, and inventory liquidation. Despite this, there was an underlying resilience in private domestic purchases, suggesting not all was gloomy.
• Inflation: Inflation remained a hot topic, with the Core PCE Price Index, which the Federal Reserve watches closely, showing a year-over-year increase of 3.6%, slightly below some expectations but still signaling persistent inflationary pressures. This figure, along with other inflation metrics like the GDP Price Index rising by 3.1%, indicated that while inflation might be cooling, it was still above comfort levels for many policymakers.

Market Performance

• Stocks: The stock market, particularly the S&P 500, set 22 new highs in Q1, showcasing strong investor confidence in the U.S. economy's ability to achieve a soft landing. This optimism was broad-based but led by technology sectors, which continued to benefit from AI-related advancements. Financials also performed well, reflecting confidence in the banking sector despite rising delinquencies in lower-income segments.
• Bonds: The bond market saw yields on 10-year U.S. Treasuries rise to 4.20% by the end of March, indicating expectations of sustained or slightly higher inflation and economic growth. This movement in yields was partly due to the anticipation of the Federal Reserve's policy decisions, which were closely watched for signs of rate cuts.
• Currency and Commodities: The U.S. dollar strengthened against major currencies like the euro and yen, reflecting the relative strength of the U.S. economy. Oil prices also surged by over 16%, driven by OPEC+ production cuts and renewed optimism in global growth prospects, despite geopolitical tensions.

Federal Reserve's Stance

The Federal Reserve's communication throughout Q1 was pivotal. While there was a strong signal towards a potential rate cut in June, the actual decision was delayed, influenced by the economic data which showed a robust economy but with inflation not declining as rapidly as hoped. This led to a mixed market reaction, with initial disappointment followed by a recalibration of expectations towards later rate cuts.

Global Market Sentiment

Internationally, while U.S. markets showed momentum, European and Asian markets also performed well, sometimes outperforming the U.S. on a currency-adjusted basis. This global market performance suggested a broadening of economic recovery or at least stabilization beyond just the U.S., influenced by similar monetary policy shifts in other major economies like the ECB hinting at rate cuts.

Looking Forward

As Q1 closed, the market's forward-looking indicators like the P/E ratio for the S&P 500 increased, signaling high valuations driven by expectations of future earnings growth or lower interest rates. However, this also hinted at potential overvaluation risks if earnings growth didn't materialize as expected.

Conclusion

The first quarter of 2024 was marked by a complex interplay of economic growth, inflation, and market expectations. While the economy showed signs of slowing down from its previous pace, the underlying consumer and business spending remained resilient. Markets, buoyed by tech and financial sectors, continued their upward trajectory, though with increasing attention to when and how monetary policy would adjust. Inflation, though showing signs of cooling, remained a central concern, influencing both market movements and Federal Reserve actions. This quarter set the stage for what could be a pivotal year, where economic policies, global growth, and technological advancements would continue to shape market dynamics.

Built for The One in the Arena

Arena Investor is on a mission not only to help with financial planning, and investment management, but also with education. Keep reading, watching, following, and sharing great Arena Investor content. And as always if you want professional advice, we are glad to be your teammate – along a financial journey you can actually enjoy.

You’re the Hero.
    We’re the Guide.

‍

Arena Investor is modern planning and investing built for the busy, hardworking professionals who know their money needs more attention but don't have the time, or simply want better work-life balance

Good morning, Heroes!

Here’s your Morning Market Preview for September 26th, 2024
Read, or listen relaxingly for a few minutes – whichever you prefer!

Key Economic Reports

• Tons of economic reports today. Let’s dig in:
  
  
• At 8:30am Initial Jobless Claims reports, previously 219,000, expected to be up to 223,000.
  
  
• Also at 8:30am Durable Goods Orders reports, previously 9.8%, expected to be down big to -3.0%.
  
  
• The GDP Second Revision for Q2 is at 8:30am as well, previously 3.0%, expecting 3.0%.
  
  
• At 10:00am Pending Home Sales reports, previously -5.5%, expecting an increase to 1.0%.

Key  Earnings Reports & Events Today

• Costco, Blackberry, Scholastic, and Vail Resorts all report today, with particular attention on Costco for consumer staple spending and Vail for consumer discretionary spending.
  
  
• Boeing’s strike continues, the union dislikes the 30% pay raise offer, and would like the company to stop negotiating in public. The strike began on September 13th. 

The Fed

• Many Fed representatives speak during the day: Fed Governor Adriana Kugler, Boston Fed President Susan Collins, Fed Governor Michelle Bowman, Fed Chair Jerome Powell, NY Fed President John Williams, Fed Vice Chair for Supervision Michael Barr, Fed Governor Lisa Cook, and Minneapolis Fed President Neel Kashkari. 

Stocks

Year-to-Date Performance:

• Up Most: Tech is up again, now up 28.35% this year. Communications passes Utilities as second-best on the year, up 25.91%.
  
  
• Down Most: Important to know, no sectors are negative on the year. The smallest gain has been in Energy, down yesterday, up overall to 6.77% this year. Second-to-last is now Real Estate, up 12.04%.

5 Day Moving Average, Percent of Large Caps above their 5 day average:

• Up Most: Materials and Utilities are at 68%. Consumer Discretionary is second now at 60%.
  
  

• Down Most: Energy is down big, now at 14%. Health Care is down second-most, now at 21%. 

Crypto

• Bitcoin: Bitcoin down a touch in the last 24 hours, now over $63,200, which puts it at a staggering 50.2% gain on the year.
  
  
• Ethereum: Ethereum is down a bit the last day too at about $2,575, which means an 11.8% gain on the year.
  
  
• Top Gainers Recently: Ox is up 4.7% on the day; Shiba Inu up 4.3%.
  
  
• Important to note: Crypto markets are always open and prices change constantly.

Bonds

• 2-Year Treasury:  Yields came down a tad, now at 3.561%.
  
  
• 10-Year Treasury: Up a tick again to 3.791%, but overall it’s been coming down this year too.
  
  
• The “spread” is opening, and the yield curve is no longer inverted, having un-inverted in late August, 2024.

Gold

• Price: Gold prices remain elevated, now up to $2661, and it’s up 28.8% on the year.

Real Estate

• 30-Year Fixed Mortgage Rate: Up just a tick, now to 6.19%. The mortgage rate has dropped about 7.2% this year.

Geopolitical Aspects

• Investors should brace for volatility due to OPEC+ hinting at cuts.
  
  
• US indexes poised for minor adjustments amid Fed's dovish signals on rates.
  
  
• Watch geopolitical noise with Middle East potentially flaring, affecting oil.
  
  
• Gold might seesaw against dollar softness.
  
  
• X chatter buzzes with potential Boeing strike action impacts.
  
  
• Stay alert for reactionary trades. And keep a long-term mindset.

‍

Built for The One in the Arena

Arena Investor is on a mission not only to help with financial planning, and investment management, but also with education. Keep reading, watching, following, and sharing great Arena Investor content. And as always if you want professional advice, we are glad to be your teammate – along a financial journey you can actually enjoy.

You’re the Hero.
    We’re the Guide.

P.S.

Continue reading, if you would enjoy some simple explanations of key concepts to level up your financial education

Each of these elements interacts, creating the dynamic we call 'the market'.

Understanding these aspects of the investing arena can help investors in making informed investment decisions.

You’re the Hero.
    We’re the Guide.

• Initial Jobless Claims: The report measures the number of people who filed for unemployment benefits for the first time during the past week, indicating labor market strength or weakness.
• Consumer Confidence: The Consumer Confidence report measures how optimistic consumers are about the economy's short-term future, influencing spending and investment decisions. It's based on surveys about income, business, and employment conditions.
• PMI (Purchasing Managers' Index): This is like a health check for businesses. A number above 50 means more growth, below 50 indicates contraction. It's crucial because it shows if companies are buying more stuff, which suggests they're confident about future sales.
• Economic Reports: Data like jobless claims help predict economic health. For instance, rising claims might suggest economic slowdown.
• Jobless Claims: These are weekly reports that show the number of people filing for unemployment benefits. Higher numbers can indicate a weakening labor market.
• Housing Starts: This measures the number of new residential construction projects and is a key indicator of real estate market health.
• The University of Michigan's Consumer Sentiment Index measures consumer confidence through surveys, reflecting optimism or pessimism about personal finances and business conditions.
• Federal Reserve Rate Decisions: The Fed adjusts interest rates to either stimulate the economy (by lowering rates) or control inflation (by raising rates). Rate cuts can make borrowing cheaper, while rate hikes aim to curb inflation.
• Treasury Yields: The return on U.S. government bonds, often used as a measure of investor sentiment about future inflation and economic growth.
• Stock Sectors: Different sectors thrive in different economic conditions. Tech might boom during innovation, while energy could struggle with green shifts.
• Bonds and Yields: Bonds are safer than stocks but yield reflects risk or inflation expectations. Higher yields could mean investors demand more return.
• Cryptocurrency: Digital currencies like Bitcoin and Ethereum have been volatile but offer significant returns in 2024.
• Gold: A traditional safe-haven investment that often rises during times of uncertainty or when inflation is high.
• Real Estate: Influenced by rates, economic health, and demographic trends. Lower rates can inflate home prices due to increased buying power.
• Mortgage Rates: Higher rates make borrowing more expensive, which can cool down housing demand and affect real estate prices.
• 1 Basis Point (BPS) equals 0.01%. It’s easier to say “5 bips” than it is to say “zero point zero five percent.”

Data Sources

Key Economic Reports: https://www.marketwatch.com/economy-politics/calendar
Consumer Surveys: https://data.sca.isr.umich.edu/reports.php
Key Earnings Reports: https://www.earningswhispers.com/calendar/
Key Events: https://x.com/i/grok and fact-checking
The Fed: https://www.federalreserve.gov/newsevents.htm
Stocks, Year-to-date Performance: https://digital.fidelity.com/prgw/digital/research/sector
Stocks, 5 Day Moving Averages: https://www.barchart.com/stocks/market-performance#google_vignette
Crypto, Bitcoin: https://www.cnbc.com/quotes/BTC.CM=
Crypto, Ethereum: https://www.cnbc.com/quotes/ETH.CM=
Crypto, Top Gainers: https://www.cnbc.com/cryptocurrency/
Bonds, 2 Year: https://www.cnbc.com/quotes/US2Y
Bonds, 10 Year: https://www.cnbc.com/quotes/US10Y
Gold: https://www.cnbc.com/quotes/XAU=
US 30-Year Fixed Mortgage Rate: https://www.cnbc.com/quotes/US30YFRM
Geopolitical Aspects: https://x.com/i/grok, https://chatgpt.com, and fact-checking
Simple Explanations: https://x.com/i/grok, https://chatgpt.com, and fact-checking
The article itself is written by Arena Investor humans, not AI
The article audio is generated by https://elevenlabs.io
The article images are generated by https://chatgpt.com using DALL-E

‍We can use different mindsets for different conditions

There are a number of personality types. One type is the transactional individual. A highly transactional person seeks mostly transactional relationships and interactions. And they seek out “the process” because they like to understand a system or a network and leverage it. Like many things, this is a spectrum. Some people are somewhat transactional and some are purely transactional. A transactional personality leads to a transactional mindset. Typically, a transactional mindset means you are looking for something in return. This for that. 

There are pros and cons to transactional mentalities and relationships. Perhaps you are not very transactional, but you have a transactional relationship with someone. For instance, “When Mike and I get together, we drink a coffee and talk about sports.” It’s a true friendship, but it’s transactional. So just because an individual’s personality, or a particular relationship, is a this-for-that one doesn’t make it good or bad. It is what it is. 

But if you were in a sales position, you would be wise to add transactional skills.

Beware though: If you are not a transactional person naturally, then there is a certain amount of friction that occurs when you act transactionally. Decide if that’s okay for you. 

You’re almost certainly adding skills and participating in the workplace in ways that create some friction for you already. When there’s too much friction though, you want to quit your job or change your field. But having a transactional skill set can be valuable when under the right conditions. Most times people think of personalities as set, and that may be correct. But you can certainly add skills that transactional people naturally have.

So what’s “The Investor Mindset” then?

The Investor Mindset, briefly, is what investor-types use. You may already know the people in your life that think and act like investors naturally. Some of their characteristics are: analytical, delayed gratification and thinking long, re-investing, builders or curators, value-measurers, value-adders. 

These are pretty positive characteristics. Again, like many things, it is a spectrum. If you are so analytical that you cannot make a decision, that is bad. You don’t want “paralysis by analysis,” as they say. 

Another thing to watch out for is delaying gratification too much. Someone who overdoes this may become unhappy. Perhaps it is useful when managing money, but it isn’t great if you overuse it in your life. What if you never eat a cookie? It sounds funny when talking about cookies, but be careful about persistently delaying gratification. Discipline is great, but find appropriate treats for yourself too along your journey. 

So whether the previously described investor characteristics come naturally to you or not, you want to treat it like a skill, and use it when appropriate.

At Arena Investor we use “The Investor Mindset” to help us perform our jobs well serving financial planning and investment management clients, as well as providing financial education.

Simply put, The Investor Mindset treats almost everything like a portfolio and only things that make that portfolio better should go in it. At Arena Investor this can mean: stocks, crypto, ETFs, mutual funds, bonds, real estate and so on.

But The Investor Mindset can be used at large too – well beyond finances. For instance, it can also apply to nutrition, fitness, friendship, your subscription TV “watch later” list, and on and on. Investor-types don’t naturally take-on things that don’t make their portfolio better. At a minimum, they try to decide if it is on-par with what they already like, or better. If it is sub-par then good luck talking them into doing it.

A Lot of People Can Relate to This Already

Believe it or not, a lot of people can relate to this as sports fans. Good luck convincing a Cleveland Browns fan that the Arizona Cardinals vs the Seattle Seahawks fits their “entertainment portfolio.” They may watch because they like football at large, but they aren’t truly invested in that game. It isn’t as good or better than their AFC North matchups against the Pittsburgh Steelers, Cincinnati Bengals, or Baltimore Ravens. They believe those matchups do make their entertainment portfolio better though.

The suggestion is this:Add “The Investor Mindset” to your life. You don’t have to re-create yourself and try to be someone you’re not though. Simply start to see the world with Investor-tinted glass a bit more each day. 

It can help you get started as an investor too

Perhaps you’ve wanted to invest for a long time now. But you are afraid to get started. With The Investor Mindset realize that an empty portfolio would be made better with one quality company in it.

Now you’ve started. 

And you’ve used The Investor Mindset – you upgraded your portfolio!

Do that a second time, and continue until you are diversified.

Remember: You only want to put stocks into your portfolio that make it better. So say you want to build a portfolio of 10 stocks. Well at the beginning you are really just laying a foundation. Don’t lay a crappy foundation. 

If you wouldn’t leave the portfolio alone for 5 years and be happy with your picks with minimal intervention (say, less than once per quarter), then do not add that stock. 

But remember, while we say stock we really mean company. You should be happy with the company you pick for 5+ years. You should believe in it, the work it does, the role it plays, and be able to sleep at night. That way, you will get through the ups and downs that The Business Cycle (here) intrinsically experiences. 

Be sure to think long when you build the foundation. You wouldn’t swap out parts of your foundation every day, week, or month would you? Perhaps over time you make an upgrade though because it makes sense.

“The Investor Mindset” is large and encompassing. So is a transactional mindset. But you can use the skills that naturally come with those mindsets to your advantage. And you don’t have to become a different person to do it. Pick something in your life to try out The Investor Mindset on. At the start of the new year health and wealth are at the top of many people’s minds already. Maybe choose one of those. Nutrition is a great way to add it to your life: Does this thing I’m about to eat or drink make my body-portfolio better or worse? 

Note: There’s a key difference with nutrition though in that a splurge for an hour on a Friday night isn’t as long-lasting as a financial splurge or investing splurge – that money is spent indefinitely.

Built for The One in the Arena

Arena Investor is on a mission not only to help with financial planning, and investment management, but also with education. Keep reading, watching, following, and sharing great Arena Investor content. And as always if you want professional advice, we are glad to be your teammate – along a financial journey you can actually enjoy.

You’re the Hero.
    We’re the Guide.