Morning Market Preview for September 3, 2024

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Note: Economics is the study of how society uses resources for the development, production, procurement, distribution, and consumption of tangible products (such as iPhones) and intangible services (such as Apple Music).

John Maynard Keynes

The most important name in today’s worldwide economic system is John Maynard Keynes. Keynes is the one who developed economics as we know it. He wrote “The General Theory of Employment Interest and Money” in 1936 in the UK. Similar to Copernicus seeking to understand the movement of the Sun, planets, and stars, Keynes wanted to understand unemployment because The Great Depression was such a problem in the 1930s, and the existing understanding of economics did not explain what was happening (or what could be done about it) very well enough for governments to partake in righting the economic ship during the storm.

Note: Come back later for more articles about other economists across the ages, such as The Austrian School of economics (also very significant).

Keynes wanted to understand

He wanted to know what existing economics at the time could not explain about The Great Depression – but he did so with an emphasis on unemployment and by taking snapshots of the economy, as if it was static. So what he developed is useful, but lacks usefulness on growth or inflation issues.

More specifically, Keynes wanted to understand how employment and prices affect each other; how government affected employment and prices; and more than anything, he wanted to know how to “control” (or at least influence economies/money), such as how to drive employment up. 

More or less, Keynes used existing approaches that microeconomists used when evaluating businesses, plus some new approaches to expand economic knowledge into something bigger: macroeconomics

Simply put, Keynes took what was small or local and made it big – big enough for governments to use. Naturally, macroeconomics includes microeconomics since the economy of each piece would be part of the economy of the whole.

Milton Friedman came later

He pointed out that Keynesian Economics could not explain the relationship between price levels and economic output. He called this “the missing equation.” Friedman melded classical economics understandings of Adam Smith (and others) with Keynesian Economics. Friedman concluded that the classic theories worked in the long-run, but Keynesian Economics works in short intervals.

Local isn’t universal

“What goes up must come down” is right locally (in your backyard), but on a bigger scale it is wrong . The meteorites from space that have landed on Earth did not come back down to their origin when they “went up.” They never came back down.

Building on Friedman’s work

An economist from New Zealand began working with 100 years of UK data on the relationship between unemployment and inflation. The economist’s name was AW Phillips, and his work became known as The Phillips Curve. This curve was adopted by economists worldwide and is now a major contributor to economics. It shows that as unemployment rises, wages increase, and when unemployment falls, wages decrease.

Friedman and fellow economist Edmund Phelps felt that manipulating monetary policy (such as managing inflation) was not the right way to manage unemployment and that unemployment should be left “natural” and unaltered by central banks, the banks of governments.

Then in the 1970s and 1980s the US experienced both high unemployment and high inflation. Phelps and Friedman then clarified the understanding to show that The Phillips Curve was true if inflation was unanticipated. If it was anticipated, then the conditions were different. This ushered in a whole new element to economics: Expectations are part of the equation in a significant way.

Nowadays, we see expectations set by world governments very deliberately so they can use it as another way to manage economic systems. Something like “a period of somewhat-higher inflation can be expected in the next two quarters,” is common to hear from a Fed Chairman (Federal Reserve Chairman) since this economic understanding came to be.

Of note, since the late 80s/early 90s, economic growth theory is what has dominated economist efforts (since inflation, employment, and prices were already being managed with Keynesian and Friedman understanding), and GDP expansion continued as a top priority.

Back to The Great Depression

Let’s not forget how the interest and need for macroeconomics got started: The Great Depression. The Great Depression was not just in the US. It was global. It started in the US in 1929 though, and by 1930 it had reached the UK. Half of Britain’s trade (sales around the world) disappeared, and in some areas unemployment reached 70%! No wonder efforts were made to understand economics better.

The US had an awful time through The Great Depression too of course, as did countless other countries. For the US, The Great Depression did not end until we entered WWII in 1941. The statistics and the stories are really sad, and to this day people and governments study, fear, and work to avoid the conditions that led to The Great Depression.

Note: The Industrial Revolution followed by The Great Depression followed by WWII followed by The Cold War firmly cemented Keynesian Economics into world governments for a variety of reasons.

Boom and bust

Economic booms (a hot economy) and busts (a cold economy) are now known as business cycles. You may think that you always want your economy hot, but that is actually not true. Booms can lead to bubbles and bubbles pop and you get busts. Understanding business cycles is just one piece of the economy. Another piece of the economy is understanding growth.

Note: As investors, if we understand where things have been we can better understand where things are going — and that’s a major strategic advantage.

Let’s talk about GDP

When you add up all of the goods (such as iPhones) and services (such as Apple Music) you get GDP (Gross Domestic Product). GDP is measured as Total County Production measured in dollars (if you’re the US). GDP has been growing for 200 years for capitalist countries.

Note: there is no purely capitalist country, but each country has rules and people that are more capitalistic than others.

GDP across decades has a very obvious upward trend

But GDP throughout the weeks, months, quarters, and a year can (and do) have significant ups and downs. It is within these ups and downs that successful investors thrive and profit.

Let’s talk about inflation too

The last concept to introduce in this article is inflation. For most people the word has nothing but negative connotations. But in the world of Keynesian economics inflation is a given, and it's managed with government actions. 

Simply put: inflation is a rise in prices. 

Often people think inflation is simply a devaluing of currency by printing too much currency, but consider this: if currency was devalued then prices would go up, no? They would. So devaluing currency is a type/cause of inflation, but there are other types/causes too.

It’s right to monitor and take appropriate action against inflation

When prices go up enormous amounts this is called hyperinflation. For instance, between WWI and WWII Germany had inflation of 230% per month at times! That means every day prices went up 4% on average. So if milk cost $1 on Monday, it cost $1.04 on Tuesday, $1.08 on Wednesday, $1.12 on Thursday, and $1.17 on Friday. By the end of the month milk would cost $2.30. By the end of the year milk would cost $8.20. And a $25,000 car would cost $180,020.60 if those hyperinflation rates happened to us today. No wonder it scares people.

Historically, the US has managed inflation well

In the last 100 years, our worst experience had been in the 1970s when inflation reached 7% from 1973-1975. However, in 2022 inflation met or exceeded 7.5%. 

The US government used many tools and decision-makers to keep it down and return to the 3-4% average we have had since 1946 (on the heels of WWII). Before WWII, the US averaged about 1.7% inflation.

Around the world though, countries have been far more adversely affected by inflation. As mentioned, Germany experienced 230% inflation per year. Israel saw 400% inflation in 1985; Argentina has seen 700% inflation; Bolivia saw 12,500% in 1984. There are many more examples, but Keynesian economics does indeed have the understanding, tools, and systems that manage inflation well.

Inflation is like cancer to economies — and it must be detected early and expertly managed. When inflation is detected, it gets everyone’s attention!

So that’s the introduction to economics. There is a lot more to follow, but we hope you liked what you read, and we hope you have learned something too. Is this enough understanding for you to go start investing in stocks with great success? No. But we can build to that.

The key concepts in this article to remember are:

• John Maynard Keynes “invented” macroeconomics for governments
• Government using macroeconomics to influence and manage a country’s economy
• Milton Friedman identified the relationship between prices and economic output
• AW Phillips identified the relationship between Unemployment and inflation, known as The Phillips Curve
• Phelps-Friedman established expectations as a key component of an economy
• Business cycles, GDP, and inflation as the major factors government considers
• Since the late 80s/90s, economic growth has become the priority for economists

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 24th, 2024
Read, or listen relaxingly for a few minutes – whichever you prefer!

Key Economic Reports

• At 9:00 am S&P Case-Shiller Home Price Index reports for 20 cities, giving insight into housing markets in those areas.
  
  
• At 10:00 am the Consumer Confidence report drops, which gives insights into consumer sentiment and concerns. The Consumer Confidence report is anticipated with an expected index of 103.8, reflecting slight optimism in consumer spending intentions. This data, crucial for market sentiment, comes amidst a backdrop of economic recovery signals, influencing sectors like retail and consumer goods.

Key  Earnings Reports & Events Today

• KB Home, Progress Software Corp, Stitch Fix, and Worthington Industries all report today.
  
  
• Boeing’s strike continues, and the company has furloughed thousands of workers. Mechanics are saying they are ready for a long strike. The strike began on September 13th. More details from the last 24 hours:
  
  
• New Offer Details: Boeing has proposed a 30% wage increase over four years, which includes an immediate 12% raise, up from a previously rejected offer of 25% overall raises. This new proposal also includes doubling the signing bonus to $6,000 and enhancing contributions to employees' 401(k) plans.
  
  
• Strike Duration: The strike, which involves about 33,000 union members, has entered its second week, significantly impacting Boeing's commercial aircraft production, particularly in the Seattle area.
  
  
• Company's Stance: Boeing labeled this new offer as its "best and final," indicating urgency to resume production. The company has also introduced rolling furloughs for non-union staff to manage costs during the strike.
  
  
• Union's Response: While the union has not immediately commented on the new offer, there's an indication that they are reviewing it. The previous offer was overwhelmingly rejected by union members, reflecting deep-seated issues beyond just wages, including job security and past concessions.
  
  
• Implications: If the strike continues, it could lead to further financial strain for Boeing, already dealing with multiple crises. However, ending the strike with this offer could potentially restore some stability, though at a higher cost for labor.

The Fed

• The Fed Reserve Governor Michelle Bowman speaks at 9:00 am, and can give insight into The Fed’s pivot from fighting inflation to fighting an economic slowdown.

Stocks

Year-to-Date Performance:

• Up Most: Tech is now up 27.44% this year. Utilities is second-best on the year, up 25.61%.
  
  
• Down Most: Important to know, no sectors are negative on the year. The smallest gain has been in Energy, up 5.69% this year. Second-to-last is Materials, up 9.59%.

5 Day Moving Average: 

• Up Most: Now 91% of Energy Large Cap stocks are now above their 5 day average. Utilities is second now with 87% of its Large Caps above their 5 day average.
  
  

• Down Most: Health Care is down, and only 37% of Large Caps are above their 5 day average. Consumer Staples are also down, and only 37% of Large Caps are above their 5 day average. 

Crypto

• Bitcoin: Bitcoin continues to cook,  now over $63,360, which puts it at a staggering 51% gain on the year.
  
  
• Ethereum: Ethereum’s nice run continues,, and is over $2,660 now, which means a 15.8% gain on the year.
  
  
• Top Gainers Recently: BNB and BAT have performed well recently, up about 4.4% to 4.2% in the last 24 hours.
  
  
• Important to note: Crypto markets are always open and prices change constantly.

Bonds

• 2-Year Treasury:  Yields continue to come down, now at 3.601%.
  
  
• 10-Year Treasury: Up a tick again to 3.756%, but overall it’s had a decline this year too.
  
  
• The yield curve is no longer inverted, having un-inverted in late August, 2024.

Gold

• Price: Gold reaches a new all time high mid-day yesterday, now up to $2628, and is up 27.43% on the year.

Real Estate

• 30-Year Fixed Mortgage Rate: Up just a bit again, now to 6.2%. The mortgage rate has dropped about 7.05% this year.

Geopolitical Aspects

• Asia: Tensions in the South China Sea affecting trade routes, potentially impacting oil prices and global trade.
  
  
• Europe: Energy prices in Europe remain elevated, contributing to inflationary pressures and concerns over winter supply.
  
  
• Global Tensions: Ongoing trade negotiations and regional conflicts could sway investor sentiment, particularly affecting oil prices and defense stocks.

‍

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.

• 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.”

‍

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