🎇 Inflation as expected

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Good morning investors! The Nasdaq breached the 20,000-point mark on Wednesday (for the first time).

Today we cover:

• Inflation report comes satisfactory

• Rents come down

• Adobe beats yet falls

Reminder: Experts think this stock can offer up to 20% returns per year for the next few years.

📊 Economy and News 

Inflation comes as expected

Consumer prices rose faster in November, signaling that inflation remains a concern for both households and policymakers. The Consumer Price Index (CPI) showed a 2.7% annual inflation rate, slightly up from October, with a monthly increase of 0.3%. Core CPI, which excludes food and energy, remained steady at 3.3% annually and 0.3% monthly.

The Federal Reserve is expected to lower its benchmark interest rate by a quarter point at next week’s meeting, with markets anticipating gradual easing into the new year. However, inflation remains above the Fed's 2% target, prompting cautiousness among policymakers.

What Rose in November

• Shelter Costs: Increased 0.3% monthly and 4.7% annually, contributing 40% of the total CPI rise.

• Vehicle Prices: Used cars surged 2%, while new vehicles climbed 0.6%.

• Food Prices: Rose 0.4% monthly and 2.4% year over year.

• Energy Index: Up 0.2% monthly, though down 3.2% annually.

What Fell in November

• Cereal and Bakery Products: Dropped 1.1%, marking the largest monthly decline since 1989.

• Real Wages: Average hourly earnings, adjusted for inflation, remained flat for the month but increased 1.3% annually.

Despite progress, inflation’s persistence suggests the Fed may slow rate cuts if substantial improvements are not achieved.

Global hits:

• Bank of Canada cuts rates by 50 bps says more gradual approach to follow.

• TikTok's Canada unit seeks judicial review of shutdown orders.

• Albertsons sues Kroger after judge rules against grocery merger.

Rents decline: In November, the median U.S. asking rent fell to $1,595, marking a 0.7% year-over-year decline and a 1.1% monthly decrease, according to a report by Redfin. This represents the lowest median rent since March 2022 and is 6.2% below the August 2022 peak of $1,700.

The report noted that rental affordability continues to improve, with the price per square foot (PPSF) dropping 2.2% year-over-year to $1.79 in November. This marked the 19th consecutive monthly decline and the first time the PPSF dipped below $1.80 since November 2021.

The slight downtrend in the rental market is attributed to a surge in new apartment completions, which rose 22.6% year-over-year in Q2, pushing vacancy rates for larger buildings to 8% in Q3, the highest since early 2021.

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📈 Stocks

S&P 500 6,084.19 (+0.82%)
DJIA 44,148.56 (-0.22%)
NASDAQ 20,034.90 (+1.77%)
BRENT CRUDE 73.52 (+1.84%)
* Prices as of Dec 12th, 12:20 AM UTC

Adobe announces earnings as Nasdaq hits a new high

The Nasdaq Composite rallied Wednesday following an inflation report aligning with economists' expectations, paving the way for a potential Federal Reserve rate cut next week.

Tech stocks led the charge, with the Technology Select Sector SPDR Fund (XLK) climbing over +1%, bringing its year-to-date gains above 24%. Alphabet advanced for a second consecutive day, buoyed by Google’s breakthrough in quantum computing. Other tech giants like Meta and Amazon also posted gains.

Nvidia and Tesla were among the standout performers, with Nvidia rising over +3% and Tesla jumping more than +4%. Year-to-date, these stocks have soared over 181% and 68%, respectively, cementing their status as market leaders.

Adobe: Adobe easily beat revenue and EPS expectations yet plunged -9% after the bell due to poor guidance.

It expects first-quarter revenue of $5.63 billion to $5.68 billion, which is significantly less than the $5.72 billion consensus estimate from Wall Street.

Adobe is projecting sales for fiscal 2025 to be between $23.3 billion and $23.6 billion, which is less than the analyst's $23.8 billion prediction.

Exciting: Nike renews its contract with the NFL after league briefly courted other bidders. Elsewhere, the valuation of Elon Musk’s SpaceX hit $350 billion based on a secondary share sale. Lastly, Ro to offer lower-price vials of weight loss drug Zepbound by teaming up with Eli Lilly.

💵 Personal Finance

Things to consider when buying a home (for investment)

Real estate is a great investment. It offers high returns, not only in the form of rent but also capital appreciation.

However, you have to be careful when buying a property. Here’s what to remember:

The location

This factor decides your rental income, the type of people you will work with, and your vacancy rate. Some neighborhoods are more in demand than others, and you should ideally look for a neighborhood that’s in demand so that your home doesn’t stay vacant for too long.

Also, remember that some towns discourage rental conversions by imposing exorbitant permit fees and piling on red tape.

Taxes

You will have to pay a variety of taxes on your property. There is no way to avoid taxes but you can play smart by doing some research and knowing about expected tax increases.

Avoid regions that are known to put excessive tax pressure.

Facilities

You should ideally buy a home in a neighborhood that offers facilities such as schools, hospitals, parks, and more. Homes closer to such locations tend to generate more interest. Furthermore, also look at what kind of developments are expected.

• Are new buildings such as big malls being constructed?

• Is the government spending on new metro system?

Such changes can boost value and help you in the future.

Safety

Nobody wants a house in a neighborhood that isn’t safe, so do your research and look at factors such as homicide rate, theft rate, etc. Look whether such activity is on the rise or decline.

In addition, you should also look at how prone the region is to natural disasters. Storms, for example, are very common in some parts of the US, Canada, etc. The same goes for fires in Australia. You should ideally stay away from neighborhoods that

Other than this, pay attention to the job market. Towns that pay well and offer good jobs are more in demand than towns where jobs are scarce. In fact, some cities are losing college graduates due to a poor job market. You don’t want to make the mistake of investing in such towns.

Next, consider the type of property. Do you want a commercial property or do you wish to invest in a residential property? Each may have more options, i.e.: a condo, a villa, or an office.

Note: see if you are eligible for discounts, i.e. if you are buying for yourself or if you are a first time home buyer.

Here’s an interesting video on the topic:

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Nothing in this newsletter is financial advice. Always do your own research and think for yourself.

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