Weekly Good Reads: 5-1-1
Oil price jump, 4% rate world, higher and faster hike
Welcome to another issue of 5-1-1! I am Marianne O, writer of The Learner’s Mind on investing, economy, and wellness ideas. In this weekly, I will include 3 links to relevant economic and investment news, 1 link to finance, and 1 to wellness/idea pursuit based on what I read (5 links). I will also include 1 important chart and 1 investment term to know. You can easily subscribe to my newsletter by clicking below.
Two events in the past week raised the market expectations that the U.S. Fed will continue to raise rates in May. One, crude price oil futures jumped almost 6% for the week after OPEC announced last Sunday their surprise cut of oil output by collectively 1.66 million barrels per day starting in May. Second, the U.S. nonfarm payrolls (jobs) rose at a solid pace at 236,000 in March, compared to 326,000 in February, with the unemployment rate falling by 0.1% to 3.5%. Average hourly earnings rose 0.3% (3.8% annualized), still a respectable gain.
Recently. the IMF projects global growth will be around 3 percent over the next five years—the lowest medium-term growth forecast since 1990. Rising geopolitical tensions and still-high inflation make a faster recovery elusive. Let’s hope the Chinese consumers further step up to the plate after the COVID re-opening.
This week’s J.P. Morgan’s CEO Jamie Dimon’s said in his annual letter to shareholders the current crisis “involves far fewer financial players and fewer issues that need to be resolved” than in 2008. While he thinks the recent bank failures have changed the economic outlook and tightened financial conditions, it is not clear U.S. consumer spending may slow down. He says interest rates are extraordinarily important and affect all things economic and believes the regulators need to rework annual stress tests on banks in response to rising interest rates.
Economy and Investments:
Surveillance: Banks In 4% Rate World (Bloomberg Surveillance Radio; podcast starting @1:00 min)
Big Tech, Big Returns? (The Big Picture)
Finance/Wealth:
Financial Literacy Month: Complimentary Resources, Participation Options, Tips & History (especially on personal finance) (National Financial Educators’ Council)
Wellness:
One Chart You Should Not Miss:
This chart shows in this rate hiking cycle, the Fed has raised rates higher and faster than ever, especially since we came from a zero interest rate. Things can break, and some clearly have. As this ex-IMF economist who foresaw the 2008 crisis said,
The entire concern is that very easy money (and) high liquidity over a long period creates perverse incentives and perverse structures that become fragile when you reverse everything.
Source: Social Capital
One Term to Know: Compound Interest.
Compound interest is when you add the earned interest into your principal balance, which then earns you even more interest, compounding your returns.
I would say this is the most important investing and savings principle to grasp well.
Please do not hesitate to get in touch if any questions!