The Bears are Out.
Every local news channel, paper, and radio station is talking about a stock market crash. All because the Stock market officially entered into Bear Market territory. Which is a fancy way of saying the market is down 20% this year. This happened because the Fed increased interest rates in order to fight inflation (more on this below).
But my question to all of you, if you are around my age (27) or younger than 55, is “Does it really matter for us?”
I will answer on your behalf
NOPE!
Because we do not need (or at least you should not need) the money you are investing for at least 5 years. So things happening right now are meaningless in the grand scheme of things. Look at the charts below and compare the returns for the week versus the returns over the last 5 years. It makes a difference when you look long-term.
What you have to remember when the market goes down is you are buying an ownership stake in businesses that produce things. As the market declines, you get the opportunity to buy a larger ownership stake in these businesses or the economy. If the business or the economy continues to grow and make more money, you get a larger portion of that money. This is also why people love the idea of dividends because as long as you own good dividend-paying companies, you’ll keep getting those checks in your account of profits as an owner of the business. So ignore the headlines and focus on finding ways to better yourself in your career or in relationships or emotionally or spiritually. Spen little to no time lamenting over the random gyrations of the Stock Market.
Market Last Week Results:
Market 5 Year Results:
Tale of the Tape
Economy
Fed brings the Big Guns
The Fed announced interest rate hikes of 75 basis points which is a fancy way of saying 0.75%
This is the highest interest rate hike since 1994
Jerome Powell said "We thought that strong action was warranted at this meeting. And today we delivered that."
The Fed is no longer playing games and is fully positioning itself to hike more strongly if they don't see inflation calm down.
The more shocking news is that Fed Officials also now see a stagflationary environment in the short term.
This basically means we get no economic growth but inflation keeps going crazy.
Aka NO BUENO, it’s the worst of both worlds.
The only issue I have with the Fed raising rates at this pace is the risk of going into a recession and the fact that it would end up not actually doing much
Monetary policy is not directly going to do anything to oil prices which is what is driving up prices right now.
All the Fed can do is nudge people in certain directions. Right now they want to nudge everyone to spend less and they can do that:
BY making borrowing much more expensive (The US is a credit-based society aka everything is based on loans)
However, it will cause unemployment to rise. As consumers pull back from spending and businesses from investing
Remember when businesses invest they hire people.
Also, one man’s expense is another man’s income
This is what I worry about. Typically it is those at the bottom of wages that face the worst in these situations.
Random Interesting Facts
A 30-year mortgage rate was as high as 6.28% as of last week
This is more than double what it was at the beginning of this year!
This is the highest rate since 2011
I am so glad I bought my house now lol
Credit Card rates rose from 16% last to 16.7% this year and will continue to grow for the rest of this year
If you have credit card debt, GET RID OF THAT THING!!
Looking Ahead
There is not really much to look forward to this week. Jerome will go before Congress to talk about why the Fed is doing what the Fed is doing. But he will basically say the exact same thing that he has been saying. Which is "Inflation is our number 1 focus."
Sports I Care About Update
Congratulations to the Golden State Warriors on winning their 4th NBA championship. Congratulations to Steph Curry on winning his first Finals MVP.
Congratulations to the city I reside, Atlanta, on being selected as one of the 11 US cities that will cost a World Cup game in 2026. Needless to say, I'M PUMPED!!
Other cities on the list: Seattle, San Francisco, Los Angeles, Kansas City, Dallas, New York/New Jersey, Boston, Miami, Houston, and Philadelphia
Canada and Mexico also have 5 cities that will be hosting games as well: Vancouver, Toronto, Monterrey, Mexico City, and Guadalajara
Thank you for Rocking With ME
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Remember GENEROSITY > greed
God bless Each and Everyone of y’all
✌🏾