Morning Download 

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Good morning, investors! The market has entered into correction territory and it is time to be cautious.

Fun fact: In 1792, 24 stockbrokers and merchants signed the Buttonwood Agreement under a buttonwood tree on Wall Street in New York City. This agreement marked the founding of what would later become the New York Stock Exchange. The buttonwood tree, now long gone, served as an early meeting place for traders.

Today we cover:

• The US GDP is growing by impressive numbers.

• Big tech causing the market to tank.

• Investing but not in stocks.

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📊 Economy and News 

US GDP grew at a 4.9% annual pace in the third quarter

U.S. GDP grew at a 4.9% annual pace in the third quarter, higher than the expected figure of 4.7%. The figure is adjusted for inflation and it’s the biggest gain since the fourth quarter of 2021.

Why? The increase came due to a variety of reasons, including increased inventories, exports, residential investment and government spending.

Consumer spending increased 4% for the quarter, responsible for 2.7 percentage points of the total GDP increase. Inventories contributed 1.3 percentage points. Gross private domestic investment surged 8.4% and government spending and investment jumped 4.6%.

The impact: Consumer spending numbers came as a surprise but experts believe we have seen enough hikes this year.

Global hits:

• Mortgage rates climb higher, edging closer to 8%.

• United Auto Workers union and Ford have reached tentative labor agreement.

• Siemens Energy shares slide 35% as the company seeks support from the German government.

• Turkey’s central bank raised rates from 30% to 35%.

📈 Stocks

S&P 500 4,137.23 (-1.18%)
DJIA 32,784.30 (-0.76%)
NASDAQ 14,109.57 (-1.89%)
BRENT CRUDE 90.16 (2.54%)
* Prices as of Oct 27th, 12:20 AM UTC

S&P 500 and Nasdaq are now in correction territory

High Treasury yields combined with lower-than-expected numbers from tech firms caused US stocks to fall Thursday.

Here are some of the biggest losers from yesterday:

Amazon announced earnings yesterday. The company’s adjusted earnings per share of $0.94 topped the $0.58 expected, as did revenues of $143.1 billion ($141.4 expected). Advertising was a bright spot, with revenues of $12.1 billion vs. estimates of $11.6 billion.

However, Amazon Web Services revenue of $23.1 billion missed expectations by $0.10 billion. The company remains focused on cost optimization as it navigates the slower growth environment. It’s laid off 27,000 employees over the last year, also closing down many of its unprofitable initiatives.

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🔐 Crypto

Bitcoin $34,177 (0.01%)
Ethereum $1,790 (0.78)
Total market cap $1.26T (-1.22%)
* Prices as of Oct 27th, 12:20 AM UTC

Here’s what’s happening in the world of digital coins:

• Binance founder CZ loses $12 billion on crypto-trading slump.

• FTX: 'Crypto King' tells judge he acted on legal advice.

• Taiwan crypto regulation gets going with the first reading of the digital asset bill.

💵 Personal Finance

Are stock portfolios going out of fashion?

Things are changing quickly. Back in the day, investing in stocks and bonds was considered the winning formula. However, that isn’t the case anymore now that we have better (and more) options to choose from.

Longer-term Treasury yields have hit their highest levels in 16 years, causing their value to plummet, and stocks are expensive as well. It is time for investors to look elsewhere.

Is the stock market a bad choice? Not really, the S&P 500 Index is still offering great results. But, most experts agree that it has peaked. The chart below highlights the last few years:

It stands at 10.48% so far for 2023. Also, UBS said it now expects the S&P 500 (.SPX) to hit 4,700 points only by December 2024, instead of the middle of the year as it forecasted earlier, due to expectations of higher-for-longer U.S. interest rates.

Stocks versus real estate: From March 1992 to March 2022, the U.S. average growth rate was 5.3%. The S&P 500 returned 9.65% annualized from the beginning of 1992 to the same period in 2022. The inflation-adjusted appreciation on the Dow Jones Industrial Average over the same 30-year period was 5.565% per year, and that's just for asset value. If you assume that dividends are reinvested, the returns are better than 8.044%. Over time, stocks outperformed real estate.

Here are some great alternative options :

Real Estate Investment Trusts

REITs invest in a range of real estate, including housing, commercial buildings, hotels and warehouses, and then distribute the rental proceeds to the owners. This is a clever way of benefitting from the real estate industry without investing millions.

Comparison: Over a 25 year period, the index returned 9.05% compared to 7.97% for the S&P 500 and 7.41% for the Russell 2000.

Gold

Gold can be a great investment option in today’s environment. You can invest in gold bullion, gold coins, gold mining companies, gold futures contracts and mutual funds that invest in gold. You may, however, need a safe place to store the investment like a safe deposit box at a bank if you choose physical gold.

Comparison: The S&P 500 Index of stocks had a 10.43% average annual total return between 1970 and 2022, according to an analysis by Securian Asset Management. Gold had a 7.7% return over the same period.

Commodities Futures

Commodities are risky but very rewarding. Options include grain, corn, and cotton. However, you have to be careful because external conditions can impact commodity prices.

Comparison: Commodities can be very rewarding but also risky. Lithium, for example, offered 72.49% returns in 2022, in comparison crude oil offered 6.71% returns, and copper offered -14.13% returns.

Don’t give up on stocks altogether. They should remain a part of your portfolio but keep your expectations lower because we may not again see the numbers seen in 2019 to 2021.

💰 Be a Better Investor

👩🏽‍⚖️ Legal Stuff
Nothing in this newsletter is financial advice. Always do your own research and think for yourself.