Understanding Financial Planning

Good morning, Heroes!

Here’s your Morning Market Preview for September 5, 2024
Read, or listen relaxingly for a few minutes – whichever you prefer!

Key Economic Reports:

• ADP Employment Report at 8:15 AM ET will offer insights into private sector job growth, setting the stage for Friday's Non-Farm Payrolls.
• Initial Jobless Claims at 8:30 AM ET, alongside Productivity and Costs, will provide a snapshot of the labor market's health.
• S&P Global Services PMI at 9:45 AM ET and ISM Services PMI at 10:00 AM ET will gauge service sector activity, crucial for economic recovery insights.

5 Key Earnings Reports Today:

• Broadcom (AVGO):
  • Importance: Reflects semiconductor demand, particularly for AI and data centers.
  • Expectations: Analysts predict a 46% year-over-year revenue increase but a decline in net income.
• NIO (NIO):
  • Importance: Key for EV market trends, especially in China.
  • Expectations: Strong financial results with record deliveries expected.
• FuelCell Energy (FCEL):
  • Importance: Insights into clean energy tech, impacting future energy solutions.
  • Expectations: Focus on operational efficiency and new project announcements.
• Samsara (IOT):
  • Importance: Indicates IoT adoption across industries.
  • Expectations: Growth in subscription services and customer base expansion.
• Smartsheet (SMAR):
  • Importance: Reflects demand for collaborative work management software.
  • Expectations: Continued revenue growth, insights into AI tool adoption.

The Fed:

• No direct actions today, but market participants will dissect economic data for hints on future rate decisions. The next FOMC meeting is scheduled for September 17-18.

Stocks:

• Markets are cautiously optimistic after recent volatility, with tech stocks in focus due to earnings.

Bonds:

• 2-Year Treasury Yield Opened at: 3.75%
• 10-Year Treasury Yield Opened at: 3.755%
• Bond yields are closely watched as economic data could sway inflation expectations and Fed policy predictions.

Crypto:

• Bitcoin (BTC): in the $57,000 - $58,000 range, up 34.76% this year.
• Ethereum (ETH): in the $2,300 - $2,400 range, down from its 50 day moving average of $2972, up 4.46% this year.
• Top gainers last week included smaller cap altcoins like Solana and Cardano, showing a rotation towards high-risk, high-reward assets.

Gold:

• Opened at: $2,495 per ounce, up 22.08% this year.
• Gold prices rose, often seen as a safe-haven investment during times of economic uncertainty or when inflation fears rise.

Real Estate:

• The current 30-Year Fixed Mortgage Rate: 6.38%, down 4.35% this year.
• While not directly reported today, real estate markets are influenced by interest rates, which are closely tied to the Fed's actions and economic indicators like employment.

Geopolitical Aspects:

• No major geopolitical events directly affecting markets today, but ongoing global tensions could always influence investor sentiment.

Worldwide Market News:

• APAC markets showed mixed results, with a cautious approach ahead of U.S. economic data, indicating a globally interconnected market sentiment.

And that’s your Morning Market Preview for the day. As always, we wish you a happy, healthy, and fruitful day!

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.

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    We’re the Guide.

Note: Growth in a national economy is measured in Gross Domestic Product (GDP). If GDP goes up 3%, then the economy grew 3%. When GDP is adjusted for the effects of inflation it is called Real GDP. So, Real GDP is the better measure of whether or not a country's economy is growing.

It wasn’t going well in Europe for a while

In Europe, there was little to no quality of life improvements economically for the general population for hundreds of years between the collapse of the Roman Empire and the formation of capitalist nations in the 1800s. 

Since capitalism and the Industrial Revolution, a 1-2% Real GDP growth rate has occurred in most countries. But, before the formation of capitalist nations institutions of many types were formed, which were essential in developing and sustaining market economies. For instance, printing and the press became an institution after Gutenberg's press was invented; this allowed the promotion of ideas further and more consistently than by voice alone.

The spreading of good ideas and best practices was critical to the world economy.

Real GDP growth enables increased standards of living for masses of people 

Note: This has historically been true for those individuals and states (countries) that have been able to fully participate.

To determine a country’s standard of living, Real GDP is divided by the number of people in a country to get Real GDP/person. There is an index of goods and services used to calculate Real GDP, and the population of a nation is determined during the census by counting everyone. 

There are other economic ways to measure standard of living too, but they correlate highly (match closely) with Real GDP/person, so economists continue to use Real GDP and make decisions with it. 

Since Real GDP/person is good and useful, but not perfect, it is important to add in additional measurements to determine the healthiness and desirability of an economy. The number of measurements is really endless. Perhaps we will write more about them in the future.

There are economic trade-offs

In economics, there are trade-offs like there are in health care. For instance, there are “side effects” that are observed in economics. 

Healthy economies are not simple. But remember, it is within the complexities and inconsistencies that opportunities live — so if you want investment opportunities you need an environment you can trust (the market goes up over time), but is also dynamic (but it is an up-and-down climb along the way).

What is Nominal GDP?

Aside from Real GDP economists also use Nominal GDP, which is a measure of the dollar value of goods (such as iPhones) and services (such as Apple Music) sold. 

Nominal GDP does not consider inflation. If you want inflation considered you use Real GDP.

Note: When you see or hear “Real” used in economic terms it means that inflation has been considered in that number or statistic.

So how do economists do their work? 

One way they do their work is by measuring GDP in two consecutive years. The first year they consider “a basket of items” or “a basket of goods” (maybe it’s milk, eggs, coffee, rent, sweaters, etc.) and add them up. This basket helps economists calculate the CPI (Consumer Price Index). This is then called the base year.

The next year they evaluate a basket of goods and see if it costs more or less. If it costs more then there is inflation. (If it costs less then there is deflation.) If it costs 2% more then there is 2% inflation. So when economists measure current prices it is called Nominal GDP, and when they measure versus base year prices it is called Real GDP since it considers inflation. This process can get complicated, but those are the basics.

Economists don’t stop there

They don’t just want to know if we had a good year of growth, and an increase in standard of living. They want to compare it against many countries and across time. After all, if you had 2% growth and Mantanistan (a made up country) had 5% growth, you should evaluate why. You may have felt good about your 2% until you realized you missed a lot of growth that others were experiencing. This is a major concept to understand as an investor:

Putting it into perspective 

It is not simply about if you are up or down, but moreso it’s about whether or not you maximize your gains without exceeding your comfort level.

Similarly, economists look around to see if the economy maximized its performance relative. In the US, it is also important to do so because the US economy is so dynamic, global, and intertwined that looking around helps you see opportunity or avoid economic problems.

Measuring GDP across countries

Measuring GDP across time is done by using Real GDP, as mentioned. Measuring GDP across countries is done by comparing Real GDPs with each other. To do so you would need to determine if that other country is presenting an accurate Real GDP. Remember, there is a basket of items to be measured.

When looking at data from another country are there items that were not counted in the base year, but then counted in the next year? That could present the world with a Real GDP that is higher than it really is. For this reason and others, investors get shy about investing around the world, and if they do they set limits on how much of their money they will invest abroad. That’s wise. 

Investors (and economists) need accurate data

If they feel like the data is questionable, they invest less in those countries – or they’d be wise to use much more caution. Heck, there are investors that only invest in one industry! Maybe they are experts in that industry and only feel comfortable investing there.

With standard of living the increases compound

Even small differences in Real GDP make a big difference in standards of living because the increased standards of living compound. So it turns into gains on top of gains on top of gains. Countries that have even 5% Real GDP growth will double the size of their economy in 14 years. Wow. Now investors start looking abroad again. Ensure the associated risk (Is their data accurate?) versus reward (Their economy will be 2x’d in just 14 years!) is suitable for your financial situation though.

The Penn World Tables

economically.

Historically, there have been shifts in which countries and regions have had the biggest and most powerful economies. After the fall of the Roman Empire, China became the economic leader; during the 1600s Europe transitioned to becoming the economic leader; during the 1800s the UK became the economic leader; and during the 1900s the US became the economic leader. Nowadays, the US, China, and the EU are the 3 biggest economies, but India is set to pass the EU by 2030.

If you go abroad as an investor, do so in a suitable way for your financial situation – and perhaps keep India in view as you look.

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 19th, 2024
Read, or listen relaxingly for a few minutes – whichever you prefer!

Key Economic Reports

• Initial Jobless Claims reports at 8:30 am, with 230,000 expected, and 230,000 previously.
  
  
• Philadelphia Fed Manufacturing Survey reports at 8:30 am as well, with 2.7 expected, and -7.0 previously
  
  
• At 10:00 am, Existing Home Sales get reported, with 3.88 million expected, and 3.95 million previously

Key Events & Earnings Reports Today

• Cracker Barrel, FactSet, MoneyHero, Endava, and Darden Restaurants all report today.
  
  
• Boeing’s strike continues. The strike began after union members overwhelmingly rejected a proposed contract, leading to a work stoppage that has now extended into its sixth day. The strike began on September 13th.

The Fed

• The Fed made the healthy 50 point cut that many analysts were calling for, which reduces rates, signaling The Fed believes inflation is coming under control and the economy is slowing.

Stocks

Year-to-Date Performance:

• Up Most: Tech leads the pack, up 24.26% this year. Utilities is still the second-best on the year, up 23.03%.
  
  
• Down Most: Important to know, no sectors are negative on the year. The smallest gain has been in Energy, up 4.77% this year. Second-to-last is Materials, up 8.68%.

5 Day Moving Average: 

• Up Most: 95% of Energy Large Cap stocks are now above their 5 day average. Financial is second now with 77% of its Large Caps above their 5 day average.
  
  

• Down Most: Real Estate stocks have had a bad 5 days, and only 29% of Large Caps are above their 5 day average. Next closest is Utilities at 39%. 

Crypto

• Bitcoin: Over the past day, it is up about $62,981, which puts it at a staggering 50.2% gain on the year.
  
  
• Ethereum: It’s been a good day for Ethereum again, and is up to about $2,444, which means a 6.02% gain on the year.
  
  
• Top Gainers Recently: Bitcoin Cash is leading the pack, up a whopping 11.5% on the day. Solana did great too, up 8.2%.
  
  
• Important to note: Crypto markets are always open and prices change constantly.

Bonds

• 2-Year Treasury Yield:  Yields continue to come down, now at 3.586%.
  
  
• 10-Year Treasury Yield: Up a tick to 3.719%, but overall it’s had a decline this year too.
  
  
• The yield curve is no longer inverted, having un-inverted in late August.

Gold

• Price: Gold is up a bit the last day, now about $2,589 per ounce, and up 25.57% on the year.

Real Estate

• 30-Year Fixed Mortgage Rate: Up just a bit, now to 6.15%. The mortgage rate has dropped about 7.8% this year.

Geopolitical Aspects

• Market Sentiment: Positive movement in major global indices following the Fed's decision, with a focus on tech and renewable energy sectors.
  
  
• U.S.-China trade tensions remain a focal point, affecting technology and manufacturing sectors, while the Russia-Ukraine conflict continues to influence energy prices globally.
  
  
• Concerns about China’s slowing economic growth and rising energy prices in Europe are adding to market volatility.

‍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.

Some Simple Explanations of Key Concepts to Level Up Your Financial Education

• Interest Rates: Controlled by central banks, these rates affect borrowing costs. Lower rates encourage spending and investment, potentially leading to inflation.
• Stock Sectors: Different industries thrive in different economic climates. Tech might boom during innovation, while energy could slump with green energy shifts.
• Geopolitical Events: Political stability or conflicts sway markets by affecting investor confidence, trade, or resource availability.
• Economic Reports: Data like jobless claims help predict economic health. For instance, rising claims might suggest economic slowdown.
• 1 Basis Point (BPS) equals 0.01%. It’s easier to say “5 bips” than it is to say “zero point zero five percent.”

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.