TOGETHER WITH  | Good Tuesday to you all. Can you guess what's the highest US inflation rate on record? a. 13.7%, b. 23.7%, c. 33.7%. Follow the wave 🌊 below for the answer. Here are the money topics for today: - Inflation falls, markets record rally
- Hoarding cash at the wrong times
- Student loan forgiveness update
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ECONOMY Inflation Falls, Markets Record Rally | | | | Economists and consumers alike have been awaiting inflation reports like lottery results all year. Likewise, investors have also begun to use this news as a buy/sell indicator. An inflation report that yields positive results often triggers a green wave in the markets, whereas the opposite can be said about a sour outcome. The latest happenings - CPI report: The latest CPI report missed the mark in a good way. Economists expected a 7.9% number but were instead greeted with a 7.7% year-over-year increase. It might not sound like much, but those two-tenths meant a lot. Core inflation also rose at a slower pace, down to 6.3% from 6.6% in September's report. During the month, inflation rose by 0.4% — shunning a 0.6% projection.
- Into the numbers: What items were adding to and subtracting from inflation? Detractors include energy services (-1.2%), piped gas services (-4.6%), commodities (-0.4%), new vehicles (-2.4%), used vehicles (-0.7%), and medical care (-0.6%). Stubborn price points remained in areas like fuel, shelter, and food.
- Markets' reaction: This news meant a lot to the markets. Indexes enjoyed their best rally in over two years with the Dow rising 1,200 points, the S&P 500 moving up 5%, and the Nasdaq jumping by a hefty 7.35% during November 9th's trading session.
We have a way to go Admittedly, the market's excitement might've been a little short-sighted. While it's great to see inflation consistently receding from our summer peak, inflation is still stubbornly high, and there's still a long way to go. There's also a growing expectation that the Fed will trigger an economic downturn as it aggressively raises interest rates to catch up with runaway inflation. As Jerome Powell summed it up, "It is very premature to be thinking about pausing. When people hear lags, they think about pauses. It's very premature, in my view... we have a way to go." Take this related lesson on this topic and earn Dibs 🟡 while you're at it: | | | |
SAVING & INVESTING Hoarding Cash At The Wrong Times | | | | This year, a lot of people have been saving more money in fear of the red we've seen in the markets and the general uncertainty that abounds. Recent surveys show that just 1 in 4 people think now is a good time to invest, and a whole 65% say they're keeping more cash out of the markets than they should. It's often the case that our base instincts are the exact opposite of what's most beneficial, and it can be very easy to get led astray by those natural inclinations. And the stock market is a prime example of this. Investors tend to flee when tickers are red and come back when they're green—the exact opposite of a profitable strategy. It's herd mentality at its finest, and a natural reaction that can be overcome. Fix it with intentionality - Save for the right reasons: If you're someone who's keeping money out of the markets because you've been dedicating it to building up an emergency fund or some short-term concrete expense, that's a good reason to be hoarding cash. On the contrary, if you've already established those baselines for yourself and you're still holding out, that could be costly.
- Invest for the decades, not days: Many of us are scared off from investing during tumultuous markets like this one, mostly due to just how bad and uncertain it looks. But, what's important to remember is that you're not investing in this market, you're investing for 5, 10, 20, even 30 or more years from now, and it's compounding that will help drive those returns higher the longer you invest consistently.
- Don't miss out on a good sale, right? When we find an item on sale, we see it as saving money, but when we see stocks on sale, we see it as a potential for loss. Fear of loss has been found to outweigh the potential of gain in the mind, and this makes a lot of sense as to why we're so fearful of down markets. The reality is that millions are made in recoveries, and investing when everyone is fearful is likely to benefit us in the long run.
Take this related lesson on this topic and earn Dibs 🟡 while you're at it:
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MANAGING DEBT Student Loan Forgiveness Update | | | | Over 3 months ago now, the Biden administration formally announced plans to forgive up to $20,000 of federal student loan debt per borrower — with the hopes of rolling out the program by year's end and knocking out over $500M worth of debt. Things rarely go according to plan in politics though, and this is a prime example. Biden's forgiveness plan is currently tied up in federal court, with some judges ruling the order unconstitutional. While the administration is continuing to try and see the plan through, everything is on pause at the moment. What to do in the meantime - Prepare to apply: Applications for loan forgiveness are currently on hold while the legal and political matters get sorted out on the backend. When or if the application center will reopen remains unknown at this time, but you should still be preparing to apply by gathering your income and personal information, and have it ready when the time comes.
- Keep making payments if: If you were expecting to receive less loan forgiveness ($10K-$20K) than your outstanding balance, it probably makes sense to keep making payments if you owe more than that and can still afford to do so. The student loan moratorium ends on December 31st, after which payments will again be due and interest accrued.
- Get your finances in order: Student debt forgiveness is, unsurprisingly, a pretty political matter. Because of this, it was always far from a certainty, and that uncertainty is playing out in real time right now. This is all out of our control, but the best thing we can do in the meantime is to get organized and have the rest of our finances (and debt) in order.
Take this related lesson on this topic and earn Dibs 🟡 while you're at it: | | | |
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🔥 TODAY'S MOVERS & SHAKERS | - Abercrombie & Fitch (+15.7%) after the apparel retailer reported unexpected profit & revenue for the current quarter; it saw a jump in sales as consumers went back to work and social events.
- American Eagle (+18.1%) stock is also trading higher after reporting better-than-expected quarterly sales (thanks to high demand for dresses) and inventory management improvements.
- Dollar Tree (-9%) on lower guidance for the full year, despite beating profit and revenue estimates for the current quarter.
- S&P 500 Index (+0.7%) to $3,979.31 (1D)
- Bitcoin (+2.7%) to $16,182.50 (1D)
- Ethereum (+2.2%) to $1,130.15 (1D)
This commentary is as of 8:30 am PDT. | | | |
🌊 BY THE WAY | - 🔥 Answer: US inflation reached a record high inflation rate of 23.7% in June 1920 and a record low of -15.8% in June of 1921 (Trading Economics)
- 🎊 Get ready for the most expensive holiday travel season ever (CNN)
- 📈 ICYMI. Inflation & the rule of 72 (Finny)
- ⚡ Coinbase shares tumble as investors fear contagion from FTX collapse (CNBC)
- 📝 Finny lesson of the day. Every employee is required to fill out Form W-4 so that the IRS (Internal Revenue Services) can determine how much in taxes should be withheld from an employee's paycheck. With 2023 right around the corner, it's worth reviewing your form as it could help your monthly cash flow. And since the IRS updated the form in 2020, update your form if you haven't since:
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| Finny is a financial wellness platform on a mission to make your money work for you. The Gist is Finny's twice-a-week (Tues & Thurs) newsletter covering personal finance & investing insights and money trends. The content team: Austin Payne, Carla Olson, Chihee Kim. Finny does not offer investment and stock advice. Please support our brand sponsor—Charityvest, Composer—as they make rewards on our platform possible. If you're interested in sponsoring The Gist, please reach out to us. And if you have any feedback for us, please contact us. | | | | | | | |
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