Weekly Good Reads: 5-1-1
Inflation, Implied Earnings, Money Lessons, Greetings Cards, Impact Investing
Welcome to Weekly Good Reads 5-1-1 by Marianne O, an investment practitioner and author of
about investing, economy and wellness ideas. Every week I include 5 links to relevant economic and investment, finance and wellness/idea pursuit as well as 1 important chart and 1 term to know. All the Weeklies are here and here is the index of charts and terms. You can easily subscribe to my newsletter by clicking below.Thank you for reading this Weekly and supporting my work 🙏.
Weekly Good Reads 5-1-1 will be back on January 6, 2024. Wishing everyone a happy and cozy holiday season and good cheers, good health, and prosperity in 2024🎈🎀🎁!!
Market and Data Comments
First, from the US: (1) the November PCE deflator declined 0.1% and was 2.6% yoy (2.9% yoy in October). PCE core inflation (Fed’s preferred inflation indicator) fell to 1.9% yoy.
(2) The November personal spending increased by 0.2% (helped by lower energy costs), much slower than the average monthly increase of 0.5% (May to July), and the real disposable income rebounded to 0.4% from a slump during summer, exceeding real PCE spending growth (+0.3%).
(3) The December University of Michigan consumer sentiment index surged to 69.7 (61.3 in Nov and the consumer expectations index rose to 67.4 (Nov 56.8), with the improvements rooted in how consumers view the inflation trajectory (expectations plunged to 3.1% from 4.5% in Nov).
The chart above shows decidedly positive news on global inflation - the G10 economies (ex-Japan) plus emerging markets’ early hikers’ month-on-month annualized inflation is dropping towards 1% and yoy towards 2%. Japan, which has seen core CPI jumping to over 4% yoy in December saw the latest core inflation at 2.5% yoy. The market keenly watches if the Bank of Japan will axe its negative interest rates policy (mostly expected by April); so far demand-led inflation is not there.
Economists like Bank of America predict “152 interest rate cuts from global central banks in 2024, representing the highest amount of rate cuts since 2020.”
Bitcoin topped the performance of stocks and gold this year, rallying 164% YTD to $43,747 (still 36% below its Nov 2021 $69,000 peak). Investors are awaiting if the SEC will approve the first Bitcoin spot ETF(s) by Jan 10, 2024. In addition to ETF demand, one bullish argument for Bitcoin is next year’s halving event (curb of supply) that happens every 4 years. More about the supply argument by
here.Back to stock market expectations, the press like NYT has chaffed Wall Street forecasters for their recession calls and S&P 500 forecasts. Based on Bespoke Investment Group’s data from 2000 through 2023, the author found “the median Wall Street forecast from 2000 through 2023 missed its target by an average of 13.8% annually”, considering the extreme cases of failure.
Forecasting is futile, as proven by the data. I believe a better exercise is for investors to look at what is priced in the market and make a decision if they believe those assumptions and the market price or not and make adjustments.
For example, currently, simply looking at the forward (next 12-month) PE from market consensus compared to trailing 12m PE, we can derive that the S&P 500 is implying 16% earnings growth (a bit bullish given the past 20 years annual average earnings growth at around 8.8%). As of the end of 2022, that implied earnings growth number was 4%. According to YCharts, the EPS of the S&P500 increased by 22.6% from Dec 2022 to June 2023.
Next 2 weeks, we will monitor the US December ISM manufacturing and FOMC minutes on Jan 3, the December nonfarm payrolls, unemployment rate and earnings reports on Jan 5, the ECB Economic Bulletin on Dec 28, Euro Area Dec Manufacturing PMI on Jan 2, and Dec inflation on Jan 5, and China’s NBS Manufacturing PMI and Caixin Manufacturing PMI on Dec 31 and Jan 2.
P.S. For a terrific sum-up of what happened in the US economy in 2023 with relevant links, check out
2023 in Review:
Economy and Investments (Links):
These Stock Forecasters Nailed This Year’s Rally. Here’s What They See for 2024 (Bloomberg or click here)
NY Times Missed These 12 Trailblazers: Meet the Women Transforming AI (Medium)
…people are an asset, not a liability. On a human level, more people means more family relationships and friendships…On an economic level, more people means more potential for innovation and therefore more, rather than less, prosperity. ~ Joseph Sternberg, WSJ
Finance/Wealth (Link):
23 Money Lessons We Learned in 2023 (Sallie Krawcheck, Founder of Ellevest)
+ (CFO Brew, a publication of Morning Brew) - from Finance Cheat Sheet to 100 Excel Tips
Wellness/Idea (Link):
Greeting Cards (The Economics of Everyday Economics podcast)
Like the Oscars and the Grammy, cards have their awards, too - welcome to Louie Awards! While the $7 billion industry has been declining, the Millenials have been saving the card industry but with their specific requirements. If you send a card, you need to pay for a stamp, and Hallmark (probably should not surprise you) has been one of the biggest advocators for the forever stamp in the US (thank you!). Get some inspiration from the wealth of cards here.
+ For fun, why not spend some time with loved ones to fold Origami Ornament (courtesy of Marie Kondo)? I tried it and it works (I did practice once with craft paper).
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One Chart You Should Not Miss: The Hottest Year
As of late November, months of sweltering global temperatures easily put 2023 on track to be Earth’s hottest year since record keeping began about 150 years ago. The 12-month period from November 2022 through October 2023 is officially the hottest such period on record — a record that’s likely to be broken in 2024, according to the nonprofit group Climate Central (SN: 11/9/23).
Extreme heat waves baked many regions, which in turn fueled catastrophic wildfires. Ocean heat was off the charts, with global average sea surface temperatures sustaining record highs for much of the year. And in the water surrounding Antarctica, sea ice reached new lows.
From January through September, Earth’s average global surface air temperature was about 1.1 degrees Celsius (nearly 2 degrees Fahrenheit) higher than the 20th century average of 14.1° C (57.5° F).~ Science News
🍖 As an individual, I will work on minimizing food waste as that contributes about 10% of global greenhouse gas emissions. One of Mary Hunt’s readers said they scout the fridge and make a great soup from whatever is inside - sounds like a great idea!
One Term To Know: Impact Investing (and it is not equal to ESG)
It is easy to confuse the 2 terms and use them interchangeably, but they are not equivalent. ESG (Environmental, Social, and Governance) describes the various factors (or guidelines) considered in investing. It originates (and was coined in 2004) from the socially responsible movement or SRI, largely driven by governments.
Impact investing was coined by the Rockefeller Foundation and other philanthropists, entrepreneurs, and investors (i.e., the private sector) in 2007 and refers to investments intended for generating measurable social or environmental impact in addition to financial gain.
There are 3 principles for impact investing to fulfil: (1) there needs to be a return on capital alongside social and/or environmental impact (2) such impact needs to be intentional (3) there is a need to measure the change using targeted performance metrics compared with the stated objectives. The key point about impact investing is “intentionality” to generate specific social or environmental impact. Impact investing is an investment strategy aligning with one or more of the UN Sustainable Development Goals.
So ESG is a framework (what has the company done) whereas impact investing is an investment strategy (forward-looking). ESG refers primarily to public securities while impact investing happens mostly in private markets.
Please do not hesitate to get in touch if you have any questions! If you like this weekly, please share it with your friends or subscribe to my newsletter.