✂️ No 50bps cut?

Good morning investors! The market did a surprise turn yesterday as more inflation data is awaited.

Today we cover:

• Inflation is coming down

• Stocks go higher

• Bitcoin above $100K?

📊 Economy and News 

The new inflation report meets expectations

Inflation fell to its lowest point since February 2021, as noted in a report by the U.S. Labor Department. Despite this, a key inflation indicator came in higher than anticipated, creating expectations for a modest interest rate cut by the Federal Reserve.

The consumer price index (CPI), which tracks the overall cost of goods and services across the U.S. economy, rose by 0.2% in August, consistent with the predictions of economists surveyed by Dow Jones, according to data from the Bureau of Labor Statistics.

This brought the annual inflation rate down to 2.5%, a 0.4 percentage point drop from July's figure. This rate was slightly below the predicted 2.6% and marked the lowest level in three and a half years.

However, core inflation, which excludes food and energy prices due to their volatility, increased by 0.3% for the month, surpassing the estimated 0.2%. Over the past 12 months, core inflation remained steady at 3.2%, matching forecasts.

The rise in core inflation suggests that the Federal Reserve will continue to be cautious in its approach to managing inflation, reducing the likelihood of a larger interest rate cut.

This expectation is reflected in the federal funds futures market, where traders now see an 85% chance that the Federal Open Market Committee will approve a 0.25% interest rate cut at its upcoming meeting on September 18. Just a month earlier, the market had been expecting a potential 0.50% cut.

Global hits:

• Bank dividends catapult Q2 global payouts to record highs.

• India led the way in global adoption of cryptocurrencies for the second straight year as investors braved the country's tough regulatory stance and steep trading taxes.

• Argentina's monthly inflation rate stood at 4.2% in August, rising from last month and surpassing analysts' forecasts. Inflation in the 12 months through August reached 236.7%, still the highest level recorded in the world, and also above a Reuters poll forecast of 235.8%.

Sad: Restaurant chain BurgerFi files for Chapter 11 bankruptcy protection.

📈 Stocks

S&P 500 5,554.13 (+1.07%)
DJIA 40,861.71 (+0.31%)
NASDAQ 17,395.53 (+2.17%)
BRENT CRUDE 70.6 (+2.70%)
* Prices as of Sep 12th, 12:20 AM UTC

Inflation report sends stocks higher

Stocks experienced gains on Wednesday amidst volatile trading, as investors analyzed the implications of the latest U.S. inflation data on Federal Reserve policy. The rebound was primarily driven by tech stocks, which recovered from earlier sharp declines.

In the afternoon, investors turned to mega-cap tech and semiconductor stocks, with Nvidia rising by +8% and AMD gaining nearly +5%. The VanEck Semiconductor ETF (SMH) also saw an increase of about +5%.

Bank stocks, including JPMorgan Chase and Goldman Sachs, recovered from earlier dips and finished the session with modest gains.

Interesting: OpenAI in talks to raise funds at $150 bln valuation.

🔐 Crypto

Bitcoin $57,599 (+0.01%)
Ether $2,352 (-1.22%)
Solana $132 (+0.21%)
Total market cap $2.07T (-0.55%)
* Prices as of Sep 12th, 12:20 AM UTC

Elections to have no negative impact on Bitcoin?

Despite growing political divisions surrounding the cryptocurrency sector, many believe that bitcoin will continue to flourish in the long run, regardless of the outcome of the upcoming U.S. presidential election in November.

This perspective is gaining traction among crypto investors, particularly as the initial excitement generated by former President Donald Trump's pro-crypto remarks earlier this summer begins to fade.

Concerns that a Kamala Harris presidency would negatively impact bitcoin's price or cause it to drop are exaggerated, according to James Davies, co-founder of the crypto trading platform Crypto Valley Exchange.

While crypto startups may face increased challenges, the overall industry is expected to persevere and continue growing. He added that the institutionalization of bitcoin has strengthened this year, particularly with the launch of U.S. bitcoin exchange-traded funds (ETFs).

💵 Personal Finance

How to invest $100,000

We asked our subscribers a very important question yesterday and here are the results:

As evident, most users seem interested in real estate and stocks. So, in today’s issue, we’ll talk a bit about all these options. In future issues, we’ll provide more information on all these investment options, including the best way to benefit from each.

So let’s get started:

Real estate: Real estate can be an excellent choice as it offers not only passive income in the form of rent but also capital gains. However, real estate profits are taxed and rental income isn’t guaranteed. Still, annualized returns can be as high as 12%.

It might be a good idea to invest about 20% of the amount ($20,000) in real estate. This can be done through crowdfunding or REITs since $15,000 might not be enough to fully own property in most regions.

Stocks: Stocks have proven to be very rewarding. The S&P 500 offers 10% returns on average. But, if you play it smart, and luck is on your side, you can double your money in a few months.

It might be a good idea to invest about 35% of the amount ($35,000) in stocks.

Bonds: With interest rates going high, bonds are back in demand. The United States 10Y Government Bond has a 4.277% yield with commercial bonds offering even more.

It might be a good idea to invest about 3% of the amount ($3,000) in bonds.

Crypto: There’s no investment as risky as digital currencies, yet we cannot neglect them. Most financial advisors do not utilize crypto due to the risks involved. About 45% of advisors say they expect to use cryptocurrencies in the future in response to client requests. Meanwhile, just 7% of advisors say they are currently using these assets based on their own recommendations, and 10% are using it because of client requests.

It might be a good idea to invest about 5% of the amount ($5,000) in crypto. You can increase this based on your risk appetite.

Others: Keep some money in other options such as precious metals and savings accounts. The former will provide a hedge against inflation and the latter can offer guaranteed passive income.

It might be a good idea to invest about 20% of the amount ($20,000) in other investment options. For now, high yield accounts can be very beneficial with some offering over 5% returns.

Spend It: Of course, you must spend the money. After all, what is the point of earning it if you cannot spend it?

It might be a good idea to spend about 10% of the amount ($10,000) on yourself. Book a trip to your favorite destination or buy the TV you have always wanted.

Another option: Consider putting some of the money into an emergency fund (7% or $7,000) so you can have an option in case things go haywire in the future.

Reminder: This breakdown works assuming you have no debt or need for other necessities such as a house or car. If you’re in debt, then use this $100,000 to first get out of debt. Similarly, if you do not have a house then use this money to first make a down payment.

Note: This is just a basic idea, you should divide the amount based on your financial goals and the changing situation. For example, savings accounts might not be as lucrative tomorrow as they are today.

💰 Be a Better Investor

Resources:

• Calculators

• Retirement Resources

• Dividends

• Make Money in Retirement

• Side Hustle Ideas

• Stock Deep Dives

• Investing 101 videos

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

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