December 06, 2022

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TOGETHER WITH

Good day. If you're a US-based employee, do you know how much of your annual pay goes to fund Social Security? a. 3.1%, b. 6.2%, c. 12.4%. 🌊 Check below for the answer.

Here are today's money & finance topics:

Stocks are down, but funds are up
Carefully consider that store credit card offer
A white collar recession

You'll be seeing a few changes here and there as we look to update The Gist over the next couple of weeks. If you have any suggestions for us, we'd love to hear from you! Email feedback@askfinny.com.

MARKET OUTLOOK

Stocks Are Down, But Funds Are Up

Amid red days, bear rallies, and volatility, it becomes way too easy to miss the forest for the trees. Yet despite our short-sightedness, there's still an overarching truth that's prevailed throughout all the mayhem — the US stock market remains unmatched globally.

Dollars, not donuts

A monopoly: The US stock market holds roughly 62% of the global stock market capitalization or put another way, almost two-thirds of the world's public companies' market value.
Funds watch: US-based mutual and exchange-traded funds house over $14T in funds right now, and about 78% of that money is in US-based stock funds. Investors have added $93B to US and international funds combined this year, but 90% of those dollars went to US equity strategies.
Look abroad: From an aerial view, international indexes seem to have faired much better than the US markets, with Europe's major exchange down just 10%, the UK FTSE 100 barely up, and Japan's Nikkei 225 slightly down. Yet if we look at unhedged, dollar-based international funds like the iShares MSCI Japan ETF, and the iShares MSCI Eurozone ETF, to name a few, we see the losses mounting quickly. Why? The dollar's strength has so far devalued these unhedged funds.
Long-term: Search up the keywords "US stock market only game in town" and you'll find articles dating back more than a decade declaring the same thing. Since bottoming in 2009, the S&P 500 has outperformed most other developed nations' top indexes by a long shot, up 484% despite 2022.

Does this mean anything?

The reality is that the US stock market has been one of the most reliable horses in the race for a long time, and that's not to devalue international investing. There's room for both domestic and international exposures within our portfolios.

An object in motion tends to stay in motion, so unless the stock market is suddenly acted on by an unbalanced force, it's best we remain calm.

Take this related lesson on this topic and earn Dibs 🟡 while you're at it:

Create a Simple 3-Fund Portfolio

Investing Basics

6 mins

MONEY TIP

Carefully Consider That Store Credit Card Offer

Store credit cards are one of those polarizing financial instruments that can go one way or the other. In some instances, maybe the specific benefits combined with your use case make it worthwhile, whereas other times… it's just straight-up bad.

These cards get pushed even harder during the holidays and are often paired with some tantalizing offers to help sweeten the pot, but is it worth it? That really depends.

Things to consider before signing up

The obvious — your finances: If you have a dicey record with credit cards, a lot of outstanding debt, or just too many inquiries lately, the simple solution here is to just say no — adding some specialized store credit card fuel to a debt fire is always a bad idea. If you're in the position to take on a new card though, read on.
Pros to consider: If you've got good credit and don't mind a single inquiry, the discounts and perks offered by the store might just be worth it. Whether it's a big, one-time purchase or you're a frequent buyer, the rewards juice might just be worth the squeeze if used responsibly.
Negatives too: The average annual percentage rate (APR) on general purpose credit cards has climbed to 22.66% this year, but that's nothing compared to store cards' average rate of 26.72%. Combine this with a store card's lower credit limit and often restricted, specialized reward structure, and you've got a card that just isn't worth it unless you have a real plan for it.

Take this related lesson on this topic and earn Dibs 🟡 while you're at it:

Improve Your Credit Score

Credit Scores

7 mins

FEATURING STACKIN

Budgets, like diets, don't work for everyone. Instead, Stackin focuses on helping you do the emotional work of finding what you truly value.

Then, they provide insights to help you understand the connection between your emotions and your money, so you can reach your goals.

Start today by taking this money relationship quiz for free on Stackin.

ECONOMY

A White Collar Recession

In the wake of our pandemic unemployment spike, the jobs market has undergone some drastic changes over the last couple of years. In the process, the labor market has gotten extremely tight while simultaneously still being in need of employees — a rarely seen phenomenon.

But recently we've been seeing warning signs that this could change. Fears of a recession and the onset of layoffs from some of the economy's biggest companies seem to be signaling a pending jobs market contraction, one that may focus on white-collar positions.

Looking into it

Slowdown: The labor market has remained unnaturally tight amidst GDP declines, high inflation, and stimulus. This is unusual, but it can partially be chalked up to a shrinking labor force and resilient consumer demand. Nevertheless, most economists still anticipate the other shoe to eventually drop, and it's looking like 2023 will be the year.
Warning signs: We've seen an estimated 85,000 layoffs from tech companies from 2022 alone, with names like Amazon, Netflix, Meta, Cisco, Redfin, Asana, and countless more leading the pack. These tech-oriented layoffs take up a sizable portion of the total layoffs we've seen in an already tight year.
A white-collar recession: It's not an official economic term, but essentially it means that white-collar employees are most at risk of layoffs. Generally its because they're viewed as less essential than some blue-collar workers during times where money is tight. And as tech companies are more prone to bloat, white-collar excess is then ripe for the taking.
Likely aftermath: A recent BofA report warned that US job growth could fall sharply next year, losing up to 175,000 jobs a month during parts of 2023. And it's very likely a large portion of those will be WC workers. December and January are the two most layoff-laden months of the year too, so we're bracing ourselves for a reality check very shortly.

🌊 BY THE WAY

💰 Answer: A US-based employee will pay 6.2% of their wages towards social security. In fact, employers and employees each pay 6.2% of wages up to the taxable maximum of $147,000 (in 2022), while the self-employed pay 12.4% (SSA.gov)
💵 $65 Trillion in Dollar Debt Sparks Concern (Yahoo Finance)
⏰ ICYMI. Don't forget to use your FSA (Finny)
🥤 PepsiCo to lay off hundreds of workers in headquarters roles (WSJ)
🤖 AI bot ChatGPT stuns academics with essay-writing skills and usability (the Guardian)

🌴 Finny lesson of the day. More and more employers are now offering the Roth 401(k), alongside the traditional 401(k), giving us yet another way to save for retirement. And deciding which option is best can seem, on the surface, a lot of work to figure out. But, it doesn't have to be:

401(k) vs. Roth 401(k)

Retirement Planning

9 mins

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Finny is on a mission to simply finances & benefits for employees. 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. Finny does not offer investment and stock advice.

Please support our brand sponsor⁠—Stackin—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 about this edition or anything else, please email us and we'll be sure to respond.