Hey Chakkani Fam! Welcome to Your Weekly Financial Briefing! We've got bite sized market moves, big tech bets, and whispers of change from all over the world. Grab a cup of joe (or your preferred drink) and let's dive:

Bears & Bulls: Markets Notes & Numbers

• S&P 500: 5,648.21 +56.25 (+1.01%)

• NASDAQ: 17,713.62 +197.19 (+1.13%)

• Dow Jones: 41,563.08 +228.03 (+0.55%)

• 10-Year Treasury Yield: 3.909 (+0.042)

• Bitcoin: $58,975.88 -414.94 (+0.7%)

  All data as of last trading day's market close time read more…

Market Bites::

1. Wall Street Climbs on Fed Rate Cut Hopes and Strong Economic Data: 

Key Highlights:

1. Wall Street stocks rose on Friday, with the Dow Jones Industrial Average reaching a second consecutive all-time closing high. The rally was driven by strong performances from Tesla, Amazon, and several chipmakers, following fresh U.S. economic data that bolstered expectations of a modest Federal Reserve rate cut in September.

   U.S. consumer spending saw a solid increase in July, suggesting a resilient economy, while inflation remained moderate. This data fueled hopes of a "Goldilocks" economy—one that grows steadily without overheating and triggering excessive inflation. Cameron Dawson, Chief Investment Officer at Newedge Wealth, highlighted the positive sentiment, saying, "Investors are seeing another sign of being in a soft landing."

   Major tech stocks led the rally, with Amazon and Tesla each gaining over 3%. Chipmakers also saw significant gains: Broadcom rose nearly 4%, and Marvell Technology surged 9% after forecasting quarterly results that exceeded analysts' estimates.

   Friday's economic report on personal consumption expenditures was the last major data release before the Federal Reserve's September meeting. Federal Reserve Chair Jerome Powell recently indicated support for a potential policy adjustment, which has led traders to largely anticipate a 25 basis point rate cut in September.

   The stock market ended a volatile month on a high note. Earlier in August, fears of a U.S. recession were sparked by signs of a sudden moderation in the labor market, compounded by the effects of the Japanese yen carry trade. However, stocks have since rebounded, with the S&P 500 trading near record highs.

   Ahead of the Labor Day holiday, trading volume on U.S. exchanges was slightly below the 20-session average. By the end of the day, the S&P 500 had climbed 1.01% to 5,648.40 points, the Nasdaq Composite rose 1.13% to 17,713.62 points, and the Dow Jones Industrial Average gained 0.55% to 41,563.08 points. All 11 S&P 500 sector indexes saw gains, led by the consumer discretionary sector, which was up 1.9%.

   For the month of August, the S&P 500 rose 2.3%, the Dow increased by 1.8%, and the Nasdaq added 0.6%. Nvidia, which had dropped 6.4% on Thursday after failing to meet extremely high investor expectations despite positive results, rebounded with a 1.5% gain on Friday.

   Ulta Beauty shares fell 4% after the company lowered its annual forecasts, citing reduced demand for high-priced cosmetics and fragrances. In contrast, Intel surged nearly 10% following reports of potential merger discussions. Dell Technologies, another AI-related stock, rose 4.3% after raising its annual revenue and profit forecasts.

   Trump Media & Technology Group, majority-owned by former President Donald Trump, dipped 1.7% to a record low, bringing its market value to $3.9 billion.

   Overall, advancing issues outnumbered decliners in the S&P 500 by a ratio of 6.6 to one, with the index posting 79 new highs and two new lows. The Nasdaq recorded 84 new highs and 77 new lows, reflecting a broadly positive day for U.S. equities.

2. Solid U.S. Consumer Spending Curbs Hopes for Large Fed Rate Cut: 

Key Highlights:

• Consumer Spending: Increased by 0.5% in July.

• PCE Price Index: Rose by 0.2% in July; 2.5% year-on-year.

• Core PCE Inflation: Up by 0.2% in July; 2.6% year-on-year.

• Personal Income: Climbed by 0.3% in July; saving rate fell to 2.9%.

U.S. consumer spending increased solidly in July, suggesting that the economy remained strong into the third quarter. This development has tempered expectations for a significant Federal Reserve rate cut in September. According to the Commerce Department's report on Friday, prices rose moderately last month, keeping inflation in check.

The increase in consumer spending, which accounts for more than two-thirds of U.S. economic activity, was 0.5% in July, following a 0.3% rise in June. Adjusted for inflation, spending grew by 0.4%, indicating continued economic momentum from the second quarter, which saw GDP growth of 3.0% on an annualized basis.

Impact on Fed Rate Cut Expectations

Despite a recent uptick in the unemployment rate to 4.3%, which raised fears of a recession, the solid consumer spending report suggests the economy is not heading toward a downturn. The labor market's slowdown has been driven by reduced hiring rather than layoffs, which has allowed wages to continue growing, thereby supporting consumer spending.

Given these conditions, economists believe the Federal Reserve may opt for a modest 25 basis point rate cut instead of a more aggressive 50 basis point reduction. Conrad DeQuadros, a senior economic advisor at Brean Capital, noted, "There is nothing here to push the Fed to a half-point cut. This is not the kind of spending growth associated with recession."

Inflation and Consumer Prices

The report also indicated that the personal consumption expenditures (PCE) price index rose by 0.2% in July, following a 0.1% gain in June. On a year-on-year basis, the PCE price index increased by 2.5%, matching June's gain. Core PCE inflation, which excludes volatile food and energy prices, also rose by 0.2% in July, consistent with the previous month's increase. Over the past year, core inflation has risen by 2.6%.

The inflation data align with economists' expectations and suggest that inflation is on track to meet the Federal Reserve's 2% target. Pooja Sriram, an economist at Barclays, commented, "The data suggest inflation is on track to hit the Fed's 2% target. We maintain our baseline call for three Fed rate cuts this year."

Personal Income and Savings

Personal income rose by 0.3% in July, up from a 0.2% increase in June. However, the saving rate dropped to 2.9%, the lowest level since June 2022, down from 3.1% in June. There is some debate among economists about the implications of the declining saving rate. Some argue that households are drawing down savings to maintain spending, which could pose risks to future consumption, while others believe that strong household balance sheets and rising asset prices are mitigating these risks.

Market Reactions

Stocks on Wall Street traded higher on the news, and the U.S. dollar strengthened against a basket of currencies. U.S. Treasury prices fell as investors adjusted their expectations for the Fed's upcoming policy decision.

The upcoming employment report for August, scheduled for release next Friday, will likely play a crucial role in determining the size of the Federal Reserve's September rate cut.

3. U.S. Consumers' Inflation Expectations at Lowest Since 2020, UMich Data Shows: 

Key Highlights:

• One-Year Inflation Expectation: Decreased to 2.8% in August, the lowest since December 2020.

• Five-Year Inflation Outlook: Remains unchanged at 3.0%.

• Consumer Sentiment Index: Rose to 67.9 in August from 66.4 in July, breaking a four-month decline.

U.S. consumers expect inflation to continue moderating over the next year, according to the University of Michigan's monthly consumer sentiment index survey released on Friday. The survey showed that households' one-year inflation expectations fell to 2.8% in August, down from 2.9% in July and reaching the lowest level since late 2020. The five-year outlook for price growth remained steady at 3.0%.

The overall consumer sentiment index improved modestly to 67.9 in August from an eight-month low of 66.4 in July, ending a four-month downward trend. This increase in sentiment appears to have significant political implications as the U.S. presidential election approaches on November 5.

Political Influences on Consumer Sentiment:

The rise in consumer sentiment was primarily driven by an increase among self-described political independents, while sentiment among Democrats and Republicans largely offset each other. Joanne Hsu, the director of the University of Michigan's Surveys of Consumers, noted that "sentiment this month reflects a slight rise in sentiment among independents, as Democrats and Republicans offset each other almost perfectly."

Hsu explained that the shifts in sentiment reflect a significant change in election expectations, with Vice President Kamala Harris stepping in as the Democratic presidential candidate following President Joe Biden's withdrawal from the race. In July, the University of Michigan data indicated that 51% of consumers anticipated a win for Republican nominee Donald Trump, compared to 37% for Biden. However, this has since reversed, with 36% now expecting a Trump victory versus 54% for Harris.

As the election nears, these shifts in consumer sentiment and inflation expectations may play a crucial role in shaping both economic outlooks and political strategies.

4. Fed Seen Poised for September Rate Cut as Inflation Cools:

Key Points:

1. Film Focus: "Upstream," a new Chinese blockbuster, highlights the harsh realities of the gig economy, focusing on a middle-aged programmer who turns to food delivery after losing his job.

2. Economic Themes: The movie addresses critical economic issues in China, such as job market uncertainty, downward mobility, and the tough conditions faced by millions of gig workers.

3. Depiction of Gig Work: The film portrays the relentless competition among delivery drivers and the dangers they face, including long hours, low pay, and hazardous working conditions.

4. Audience Reaction: While some viewers praised the film for tackling social issues, others criticized the "happy ending" as unrealistic, noting that the film sacrificed authenticity for entertainment.

5. Industry Response: Companies like Meituan and Alibaba, whose branding is subtly referenced in the film, have not commented on the portrayal. Delivery drivers interviewed expressed little interest in paying to see the movie, though they acknowledged the industry's challenging conditions.

Summary:

"Upstream," one of China's most significant summer releases, explores the economic challenges faced by gig workers, particularly food delivery drivers. Directed by Xu Zheng, the film provides a gritty look at the gig economy, addressing issues like job insecurity and the pressures of working in a low-wage, high-risk environment. The movie has sparked discussions among audiences, with some praising its boldness in tackling social issues, while others criticize its lack of realism. Despite its focus on the hardships of gig work, the film's portrayal of the industry's grueling conditions resonates with those who live it daily.

5. Charting the Fed's Economic Data Flow: Key Points:

1. The Federal Reserve (Fed) is closely monitoring various economic indicators as it approaches its next policy meeting on September 17-18. At the last meeting in July, the Fed kept its benchmark interest rate steady in the 5.25%-5.50% range. However, Fed Chair Jerome Powell indicated that rate cuts are likely imminent, signaling a potential shift in monetary policy. The size of the reduction, whether 25 or 50 basis points, will depend on the economic data received leading up to the meeting.

   Here are the key statistics the Fed is focusing on:

   1. Inflation

   • Personal Consumption Expenditures (PCE) Price Index: This index, which the Fed uses to target a 2% inflation rate, showed an annual increase of 2.5% in July, consistent with June's rate. The core PCE, excluding food and energy, also remained at 2.6%.

   • Monthly Inflation Rates: Since April, the monthly inflation rates have averaged 0.12% for the headline rate and 0.17% for the core rate, suggesting inflation is moderating towards the Fed's 2% target. These trends are fostering confidence among Fed officials that inflation is returning to target levels sustainably, allowing them to shift focus towards the labor market and broader economic health.

   2. Employment

   • July Employment Report: The U.S. added 114,000 jobs in July, which was lower than expected. Revisions to previous months also reduced the total number of payroll jobs by 29,000. This has brought the three-month average payroll growth to 170,000, below pre-pandemic levels.

   • Unemployment Rate: The unemployment rate rose to 4.3%, indicating potential labor market softening, which could raise concerns about economic vulnerability to a recession.

   • Wage Growth: Average hourly wages increased by 3.6% in July on an annual basis, slightly down from 3.8% in June. The Fed typically views wage growth in the 3.0%-3.5% range as consistent with its inflation target.

   3. Job Openings

   • Job Openings and Labor Turnover Survey (JOLTS): Job openings remained above 8 million in June, with about 1.2 jobs available for each unemployed person. This is close to pre-pandemic levels, reflecting a cooling labor market. The quits rate has also decreased to 2.1%, aligning with pre-pandemic norms, indicating a balancing of labor supply and demand.

   • Labor Market Dynamics: While hiring rates have slowed, layoff rates have remained stable, suggesting that companies are retaining their workforce despite a softening labor market.

   Conclusion

   The Fed's decision on whether to cut interest rates and by how much will heavily depend on these economic indicators. With inflation appearing to be under control and the labor market showing signs of stability despite some slowing, the Fed may be in a position to adjust its policy to support the economy. The upcoming data releases on employment and inflation will be crucial in determining the exact course of action.

Phew, that's a lot to unpack! Remember, this is just a snapshot of the complex and ever-evolving financial landscape. So, stay informed, diversify your investments, and don't forget to have a little fun along the way!

Bonus Tip: Want to dig deeper into any of these stories? Let me know in the comments below, and I'll be happy to share some additional resources!

And there you have it, folks! Remember, folks, the financial world is like a game of Monopoly—sometimes you’re the banker, sometimes you’re stuck in jail, and occasionally you land on Boardwalk and buy a hotel. Happy investing! 📈💰

 P.S. Did we miss anything major? Hit us up via an email with your hot takes and financial insights!

The Inflation Dilemma: What It Means for Your Wallet

Inflation has become a buzzword, dominating headlines and everyday conversations. But what exactly is inflation, and why should you care about it? Understanding inflation is crucial because it directly impacts your purchasing power, savings, and overall financial well-being. In this article, we’ll explore the causes of inflation, how it affects your wallet, and practical strategies to help you cope with rising prices.

1. Understanding Inflation: The Basics !

Inflation is the rate at which the general level of prices for goods and services is rising, leading to a decrease in the purchasing power of money. In simpler terms, when inflation is high, each dollar you have buys you less than it did before. There are two primary types of inflation: demand-pull and cost-push.

- Demand-Pull Inflation occurs when the demand for goods and services exceeds supply. This can happen in a booming economy where people are spending more money, and businesses can’t keep up with the increased demand.

- Cost-Push Inflation happens when the costs of production for goods and services increase, leading to higher prices for consumers. This can be due to rising costs of raw materials, increased wages, or supply chain disruptions.

2. The Impact of Inflation on Your Daily Life !

Inflation affects nearly every aspect of your daily life, from the grocery store to the gas pump. Here’s how:

- Higher Prices for Goods and Services: As prices rise, your money doesn’t go as far. You might find yourself spending more on essentials like food, clothing, and transportation.

- Reduced Purchasing Power: Inflation erodes the value of money over time. This means that even if your income stays the same, you’ll be able to buy less with it.

- Savings and Investments: Inflation can diminish the real returns on savings and fixed-income investments, such as bonds. If the interest earned on these investments is lower than the inflation rate, your purchasing power declines.

- Wages and Salaries: While some wages adjust for inflation, many do not keep pace, especially in the short term. This means that even if you get a raise, it might not be enough to cover the increased cost of living.

3. Inflation-Proofing Your Finances: Practical Strategies !

To navigate through the inflation dilemma effectively, consider these practical strategies to help safeguard your finances:

1. Adjust Your Budget 

 Action: Revisit your monthly budget and adjust it to reflect the rising costs. Focus on necessities and look for ways to cut back on discretionary spending.

2. Increase Your Income 

 Action: Look for opportunities to increase your income, such as asking for a raise, taking on freelance work, or starting a side hustle. Additional income can help offset the impact of inflation.

3. Invest Wisely 

 Action: Consider investing in assets that tend to outperform during inflationary periods, such as stocks, real estate, or commodities like gold and silver. These investments can help protect your wealth from inflation’s eroding effects.

4. Focus on High-Interest Savings Accounts !

 Action: With rising inflation, it's important to find savings accounts with competitive interest rates. While these might not completely offset inflation, they can help minimize the loss of purchasing power.

5. Reduce Debt 

 Action: Pay down high-interest debt as quickly as possible. As inflation rises, central banks may increase interest rates, making variable-rate debts like credit cards and adjustable-rate mortgages more expensive.

6. Diversify Your Investments 

 Action: A diversified portfolio can help manage risk and protect against inflation. By spreading your investments across different asset classes, you can reduce the impact of inflation on your overall wealth.

Visualizing the Inflation Effect: A Simple Example 

Let’s look at a simple example to illustrate how inflation affects your purchasing power:

- Imagine you have $100 in savings today, and the annual inflation rate is 5%. A year from now, you would need $105 to buy the same goods and services that cost $100 today. If your savings account only offers a 1% interest rate, you’ll have $101 at the end of the year, but your purchasing power will have effectively decreased because you can't keep up with inflation.

This example highlights the importance of seeking out investments or savings options that at least match, if not exceed, the inflation rate to maintain or grow your purchasing power over time.

Conclusion

Inflation is a powerful economic force that affects everyone. Understanding what drives inflation and how it impacts your finances is the first step toward making informed decisions to protect your financial future. By adjusting your budget, seeking additional income, investing wisely, and managing debt effectively, you can mitigate the effects of inflation and keep your financial plan on track.

Remember, while inflation may seem daunting, being proactive and educated about your finances can help you navigate these challenging economic times successfully.

In our next article, "Interest Rates on the Rise: How to Adapt Your Financial Strategy," we’ll explore the current interest rate environment and what it means for your savings, loans, and investments.

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So, there you have it! With a little guidance and the right tools, you'll be a master in understanding (and hopefully master it) financial concepts in no time. Go forth, plant your seeds, and watch your wealth garden flourish!

If you liked this, check out all of past series including and all our previous articles here.

So, whether you are crawling and sprinting, let's do this together!

We will bring the next series to you in the next week episode.

Until next time, wishing a very happy wealthiness (you see what we did there 😃) to you!

📚 Bonus Resources:

1. Investopedia: Investopedia provides comprehensive information on creditworthiness, including factors that impact it, how to check your credit report, and steps to enhance your creditworthiness. Remember that your creditworthiness affects loan approvals, interest rates, and more.

2. The Balance: The Balance explains creditworthiness and emphasizes the importance of monitoring your credit score. You can access your credit score for free through services like Credit Karma, Credit Sesame, or WalletHub.

3. SuperMoney: SuperMoney offers practical steps for managing creditworthiness. You can obtain a free annual credit report from AnnualCreditReport.com or use free credit monitoring services like Credit Karma or Credit Sesame.

Remember to stay informed, check your credit score regularly, and make timely payments to maintain a strong credit profile. 🌟📊💳

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