TOGETHER WITH  | Good day. Based on a recent survey, can you guess which of the following expenses is contributing the most to credit card holders who carry a balance? a. day-to-day expenses like groceries, b. retail purchases like clothes, c. emergency expenses like a car repair. Follow the wave 🌊 below for the answer. Today's finance & investing topics are: - Growth fears return
- Volatility is out of style
- It’s FAFSA time again
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ECONOMY Growth Fears Return | | | | The markets have been pounded by heaps of disparaging news over the last several weeks. Preceded by news of a consecutive quarterly decline in US GDP, more data has since piled up, indicating that this growth slump might be more than just a blip. The culprits — bears of bad news - Resilient inflation: July’s inflation report gave us a little hope, August’s let us down, and it presently appears that it might not drop as quickly as we previously hoped. Inflation is stiff elsewhere too, with the UK logging 9.9% in August’s report while Canada notched 7%, Mexico 8.7%, India, 7.6%, and Germany 7.9%.
- Aggressive central banks: Inflation is stubborn, but so is the Fed, and central banks around the world are willing to play chicken with rising costs and see who folds first. The US Fed reinforced its stiff posture on inflation, noting that “no one knows if there will be a recession or how severe and that achieving a soft landing was always difficult." Other central banks across the world have followed suit.
- The dollar's growing strength: The dollar continues to rise, and is now up over 21% over the last year. While that might seem like a positive, it creates a drag on both the domestic and global economy when it's exacerbated. USD’s strength is dampening profits, exports, and potentially other economies too.
- An overall slowdown globally: US GDP has declined through the first two quarters of 2022, Europe underwent a sharp decline in activity last month after also posting lower GDP numbers, and a large swath of developed nations have lost some momentum in the wake of war, inflation, and reactionary monetary policy.
Where’s the light? All of this has thrown the global economy into a disarray of sorts. As a result, the Organisation for Economic Co-operation and Development (OECD) has reigned in global growth estimates to 3% this year, further dropping to 2.3% in 2023. All of this leaves us with more questions than answers, and the one thing that’s certain right now is uncertainty as the world tries to correct its elongated tailspin that started back in 2020. Take this related lesson on this topic and earn Dibs 🟡 while you're at it:
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INVESTING Volatility is Out of Style | | | | Volatility has entered the limelight over the last 24 months as meme stocks and retail traders took the markets on a wild ride. And it’s still here too, with the volatility index ($VIX) sustaining its heightened levels all year. Despite the bumpy ride, volatility is falling a bit out of favor. Investors are tired of the roller coaster and just want a little safety nowadays. Watch the money - Shelter from the waves: Our most recent data shows that $6.5B has flowed into low volatility funds thus far in 2022, putting them on track to log their first net inflow since 2019. Despite their lackluster performance in 2020, it’s easy to see why investors and money managers are giving them another chance.
- What are these LV funds? Low volatility funds are at their best when markets are at their worst. Their holdings and the weight of those holdings are designed to mitigate volatility and give investors a smoother ride over rough terrain. Think of them as the Cadillac of ETFs.
- The downside: It’s hard to have your cake and eat it too. Although these funds protect against big volatility waves, they’ll also leave investors out of bull runs. Between June 2020 and December 31st, 2021 when the S&P rose 49%, the top min vol fund by assets, the iShares MSCI USA Min Vol Factor ETF ($USMV), climbed about 27%, lagging the market by 22%.
- Their resolve: The inverse is also true. While the S&P has fallen almost 10% in the last month, $USMV and others (depending on their holdings) have dipped about 8%. Over a longer span, the S&P has fallen 20% this year, while low volatility funds like this one have fallen 13%.
Peaking ahead Is this “bullish” for these kinds of funds? Not really, more like less bearish. But hey, losing by 10 is better than losing by 50. Going forward, we can reasonably expect this level of volatility to continue, making it likely these funds will continue to rake in new cash at least for the remainder of the year. Take this related lesson on this topic and earn Dibs 🟡 while you're at it:
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TOGETHER WITH ON DECK Join The Most Helpful Operator Angels Around The World | | | | On Deck Angels (ODA) is a continuous community for the world’s most helpful operator angels. Kickstarting with an 8-week immersive onboarding, they combine a world-class curriculum, exclusive deal flow and an incredible network of peers to help you win deals, define your investing craft and build long-lasting relationships in the ecosystem.
ODA will help you meet your angel investing goals whether you’re just getting started, a prolific angel investor or an emerging fund manager. Here’s what Caroline Gash (Early-stage investor and operator) had to share about her ODA experience: “I came to ODA because I was looking for the peer group to grow the next ten years of my career with. As investors we can become really siloed and function in echo chambers. I strongly believe that having diverse opinions, geographic regions, industries makes us all stronger in investing and that was a core set of ODA.”
To join the next cohort, apply by October 9. Limited spots available. | | | |
MONEY TIP It’s FAFSA Time Again | | | | Filling out a FAFSA isn’t a requirement for attending university, but it certainly could make it a lot cheaper. Sure, it might seem a little intimidating and intrusive on the surface, but once you get the hang of it, this annual process becomes much easier. Filling out your FAFSA form could get you access to potentially thousands in dollars of aid — and that’s life-changing for anyone. The application period for the 2022-23 school year opened on October 1st, and it’s best to get started early. What to know this year - You likely qualify for aid: Data from 2020 shows that about 85% of undergraduates received financial aid. Even if you think you might not qualify, there’s a good chance you do. The formula for calculating this is a little complex, but it takes into account more than just income.
Annual data not available before 2015. Source: National Center for Education Statistics
- If you need a student loan, you need a FAFSA. Students applying for a Federal loan are required to fill out a FAFSA form even if they’re not eligible or applying for financial aid, and doing so is worth it. If taking out a loan, Federal student loans usually offer much lower interest rates compared with private lenders, plus, they allow the option of securing a subsidized student loan too, which doesn’t accrue interest during school.
- Otherwise, still do it: Even for students who don’t plan on taking out a loan, FAFSA can still be important to you because many universities use this information in conjunction with their own to determine the awards and compensation they give out.
Take this related lesson on this topic and earn Dibs 🟡 while you're at it:
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🔥 TODAY'S MOVERS & SHAKERS | - Peloton (+15.3%) on yesterday's news that the company will put bikes in all 5,400 Hilton-branded US hotels in the U.S. The partnership includes all 18 of Hilton's subsidiaries, including Hampton Inn and Doubletree.
- Poshmark (+13.3%) following news that Naver, a South Korean internet company, will buy the online retail site for $1.2B in an all-cash deal.
- S&P 500 Index (+2.9%) to $3,785.17 (1D)
- Bitcoin (+1.9%) to $20,001.00 (1D)
- Ethereum (+1.9%) to $1,349.05 (1D)
This commentary is as of 8:30 am PDT. | | | |
🌊 BY THE WAY | - 🚨 Answer: emergency expenses came out on top with 46% of respondents saying they’re carrying a balance because of an emergency expense like a car or home repair; 24% said it's due to everyday expenses like groceries and 11% pointed to retail purchases as their main reason (CNBC)
- 🛒 Amazon debuts new shopping portal for customers on government assistance (CNN)
- 📈 ICYMI. Relief rallies in a bear market (Finny)
- 🚀 Turkey’s inflation hits 83% as Erdogan vows to keep cutting interest rates (CNBC)
- 🏠 Arrived makes it easy to buy shares of rental homes, allowing anyone to earn passive income starting with $100. Real estate investment returns have proven to be remarkably stable over time and are a great hedge against stock market fluctuations. View available investment properties (Arrived)
- 🚝 These 3 European countries will soon be linked to the rest of Europe via high-speed rail (Travel Awaits)
- ☔ Finny lesson of the day. If you haven't yet started to save up for your emergency savings, get started by going through this bite-sized learning on the topic:
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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. We're thankful for the support of today's sponsor & partner—On Deck, Arrived—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. | | | | | | | |
