Stocks Down, Always Go Up 😉

1. Genevieve’s Corner

STOCKS DOWN, ALWAYS GO UP 😉

S&P is down -1.69% this week...

Let's recap: 👇 

-Gold hits a new record high of +$2,400/oz. Now up +23% over the last six months (+40% higher than S&P)

-Costco is selling as much as $200 million in gold bars monthly

-VIX is up +25% today. Up +50% from a low three weeks ago

-JPMorgan beats earnings (+6% YoY), but the outlook for Net Interest Income is lower than analysts expect for 2024. Stock down -6.47% today

-Citigroup beat Q1 estimates (but profits down -27% YoY on higher expenses)

-Wells Fargo beat Q1 estimates (but EPS down slightly YoY)

-March CPI +0.4% MoM above expectations of +0.3% MoM (up +3.5% YoY vs +3.4% expected). The third month of “hotter than expected” readings

-WSJ analysis found that a commonly purchased basket of supermarket goods increased in price by +36.5% over the past four years (+8.1% per year), much higher than US Government CPI figures, which show food price inflation of +24.9% (+5.7%/year)

-U.S. gas prices +16% so far this year ($3.71/gallon)

-U.S. auto insurance rates up +22% YoY. Most significant 1-year spike since 1976.

-U.S. 10-year yield hit +4.54%, the most since November 2023

-U.S. 30-year average mortgage rates hit 7% again

-The average interest rate on US credit card balances is now 21.6% (The highest rate since data started in 1994)

-Jamie Dimon, CEO of JPMorgan, says interest rates could hit 8% or more

-Larry Summers, Former Treasury Secretary: “You have to take seriously the possibility that the next rate move will be upwards rather than downwards”

-Money-market fund assets hit a new record high of +$6.11 trillion

-Interest rate futures are pricing in a 13% chance of ZERO rate cuts this year. Now, only two cuts are expected in 2024, down from 7 cuts projected just a few months back.

-Elon Musk says that AI will be smarter than the smartest human by next year

-VC funding in the U.S is down 30% YoY in Q1

-Billionaire Steve Cohen says his financial firm can already save $25 million by using AI

-U.S. office vacancies hit a record high of +19.8%

-Largest office building in St.Louis sold for $3.5MM, in 2005 it sold for $205MM. Probably nothing

-Norfolk Southern to pay $600MM to settle a class action lawsuit over Feb. 2023 East Palestine, Ohio train derailment that spilled toxic chemicals

-JPMorgan says stocks are so crowded they may crack at any time

-Ken Griffin of Citadel says: “It is irresponsible for the U.S. government to incur a deficit of 6.4% when unemployment is hovering around 3.75%. We must stop borrowing at the expense of future generations.”

-Interest payments on U.S. debt continue to hit record highs.

Have an amazing weekend, everyone! 🤩

Genevieve Roch-Decter

2. Matt Allen’s Corner

Interest Rates and Inflation

Hi Everyone! One of my favorite sections in GRIT VIP is the beginner’s section. I have the same mindset about investing as Michael Jordan did with basketball. 🏀 You should always practice the basic fundamentals. In my corner this week, I’m discussing interest rates and inflation!

If you follow the stock market and financial news, you have heard the chatter about interest rates and inflation. This subject is discussed in everyday circles. The Fed has raised rates to lower inflation.

So, how does raising interest rates control inflation? Raising interest rates can send a shockwave throughout the whole economy, sinking consumer confidence, reducing jobs, and lowering stock prices. 📉

If the Fed moves too fast, the economy will enter a recession. So why would they raise interest rates?

Let's start with the basics:

If you borrow money, you will have to pay back a little extra (interest) to make it worthwhile for the bank to lend you the money. If you are taking out a loan, you want the lowest interest rate possible. If you save money, you will be given money (interest) as a reward for keeping money in the bank. The size of your reward depends on the state of the economy. There is no single interest rate in the economy. Thousands of commercial banks set their interest rates for their customers. The central bank, the Federal Reserve or the FED in the U.S., influences interest rates.

Central Banks

A central bank is like a bank for banks. Banks have reserves, which act as their cash on hand. Banks can earn interest when they leave their excess reserves with the central bank instead of lending money. This approach is very similar to how your savings account works. The average person doesn't have access to the Federal Reserve rate, but it still affects them daily.

Why do central banks raise interest rates?

When central banks raise interest rates, they try to control inflation. In other words, they attempt to determine how fast prices rise for everyone.

All central banks are trying to achieve an annual inflation rate of 2%. This rate keeps assets growing, wages increasing, and the economy working properly.

Interest rates are a powerful tool to control this number.

The rest of the article can be found here and make sure to check out our other articles 📚 in the VIP Member Hub! 🚀

Have a great weekend!

Matt Allen

3. Comin’ Up

EARNINGS AND ECONOMIC DATA

💰 Earnings:

Monday: Goldman Sachs, Charles Schwab

Tuesday: United Health, Johnson & Johnson, Bank of America, Morgan Stanley

Wednesday: Abbott

Thursday: Taiwan Semiconductor, Netflix

Friday: Proctor & Gamble, American Express

📈 Major Economic Events:

Monday: U.S. retail sales

Tuesday: Housing starts

Wednesday: N/A

Thursday: Initial Jobless Claims

Friday: N/A

The author of this newsletter owns ETF’s (exchange traded funds) that may hold ownership interests in the companies discussed in this newsletter as of the published date of this newsletter.