December 20, 2022

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TOGETHER WITH

Good Tuesday to you. The Gist team here at Finny will be taking a 2 week winter break, and we'll be back here on January 5th. In the meantime, happy holidays & happy new year to you all!

Can you guess what percent of Americans are planning to buy fewer gifts this holiday season because of inflation? a. 40%, b. 50%, c. 60%. 🌊 Check below for the answer.

Here are today's topics:

Can we pull off a soft landing?
The end of the FANG era
Dodging the rising cost of home insurance

ECONOMY

Can We Pull Off a Soft Landing?

It's difficult to land a plane delicately in any conditions, let alone in the midst of strong crosswinds, and it takes a mix of experience, some outside guidance, and a little bit of luck to do so successfully.

Getting historic inflation in check while avoiding a recession might as well be the same thing. It's hard to aggressively throttle down the economy without bringing it to an abrupt halt, but that's what the Fed has been tasked with. And they might just pull it off.

Checking our altitude

What is a soft landing? Most agree it's a scenario in which we're able to bring down inflation without going into a recession. It's basically a goal of Central Banks when increasing rates just enough to fight inflation without causing a severe economic downturn.
What we've accomplished: CPI inflation peaked at 9.1% in June and has meandered downward since. Markets have been roiled by pessimism involving the cost of financing and growth fears, crypto has been checked, and even lofty housing prices are beginning to slowly decline. Not a perfect execution by any means, but not bad either.
The dangers ahead: The Fed is expected to continue slowing their rate hikes, now down to 0.5% a month, and eventually end up around 5% to 5.25% by the end of 2023. Hefty job losses are anticipated, up to 175,000 per month next year, and overall growth is expected to slump temporarily.

Happy ending or not?

Whether or not we'll be able to navigate the remainder of this landing smoothly depends a lot on if more complications arise. So far we've successfully made a dent in our inflation, curtailed lofty market valuations, deflated some bubbles, and even brought down the white-hot housing market. But there's still a lot of elevation left to lose before things are "normal" again.

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

About Recessions

Investing Basics

6 mins

MARKET OUTLOOK

The End of the FANG Era

2022 has humbled the entire market, but perhaps the biggest blow was delivered to an area previously assumed invincible — FANG stocks, the tech giants.

These high-flying tech stocks have been a buoy to the market's growth throughout the 2010s, but it seems the hype might've finally culminated in 2021. Many are viewing this as more than just a doldrum, but maybe the end of an era.

Taking damage

FANG defined: FANG is supposed to refer to Facebook, Amazon, Netflix, and Google, but in truth, the definition encapsulates more than those companies. What the outdated acronym is truly trying to describe is the broader big tech, big growth portion of the market, and it's more inclusive than it gives on.
The losses: Traditional FANG members have had it rough this year. Facebook (now Meta) is down -66%, Amazon -47%, Netflix -46%, and Google fairing the best at -36%. These old guards are just the tip of the iceberg, and the damage is much more widespread.
Contagion: Losses have bled over into the rest of the tech industry as well, with almost all mega caps suffering big losses. Microsoft is down -25%, Apple -21%, Nvidia -43%, Cisco 23%, Taiwan Semiconductor is down -38%, and the list goes on. Leading the way and overarching the entire ecosystem is the tech-heavy Nasdaq, which is down -30% on the year and leading all major indexes in losses.
Future worries: Sectors that have dominated one cycle don't usually dominate the next one. What was once a beloved high-growth sector has now become a maturing one, and investors are wary that haughty growth may not continue in an already contracting environment. It's easy to multiply a smaller revenue, but not so much so with a mega one.

The outlook

Most analysts still expect the sales and revenue growth of these giants to beat out pessimistic expectations in the next couple of years, but the numbers will probably never be as gaudy as they once were.

It's not the end of the world for tech, but more so just a natural and inevitable shift. There's no doubt the sector will remain a stalwart of the market for years to come, but the growth expectations surrounding them must undergo a pruning.

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

Growth vs. Value Investing

Investing Basics

7 mins

FEATURING FARMTOGETHER

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MONEY TIP

Dodging the Rising Cost of Home Insurance

While the housing market has been white hot the last couple of years, it's given rise to price jumps in all its underpinnings too. From little things like heating and repairs to big items like the mortgage and insurance, homeowners have been doling out more cash every month for all the necessities of owning a home.

Up 9.3% from January 2021, insurance premiums might be the worst of the bunch, now costing homeowners $2,777 per year on average. And states like Texas, Kansas, and Oklahoma are averaging more than $4,000 annually.

A few ways to ease the burden

The basics — bundle: This is perhaps the most common advice out there, but it rings true. The average bundler saves about 14% when they combine coverages, and some insurers offer even more. The key here is to make sure you're not compromising on your coverage to a detriment for those savings.
Switch around: Ask your insurer for hidden discounts that can oftentimes come from something as simple as installing water-use sensors. Look into competitors too. Many insurance companies will offer a set savings bonus for homeowners who switch, and you can often take those offers back to your current provider.
Make sacrifices: Cutting coverage isn't always a good idea, especially as home prices have risen. However, there are savings to be made in the way of raising your deductible, reducing coverage on home contents, or eliminating miscellaneous coverages you might have and not need. Reducing coverage within your "other structures" bucket is an often overlooked way to save.

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

Buying Home Insurance

Housing

6 mins

🌊 BY THE WAY

🎁 Answer: About 60% of Americans plan to buy fewer gifts and to purchase presents for fewer people as inflation hits, according to a Harris poll. A similar percentage is reducing holiday travel. And more than one-third are skipping gift-giving completely due to cost (FA Mag)
🗓️ 'Early filers' should wait to submit their tax return in 2023, the IRS warns—here's why (CNBC)
💰 ICYMI. Tax breaks before the year is up (Finny)
⚜️ Spain just announced a digital nomad visa for remote workers (apartment therapy)
🏡 Inside the rent-to-own startup that's putting aspiring homeowners in financial jeopardy (Fast Company)
⚖️ Finny lesson of the day. We've covered this before, but it's back as we soon close out the tax year:

Capital Gains & Losses

Taxes

7 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.

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