Morning Download 

Personal finance + economics + markets

Good morning, investors! If you’ve been following the news (and our letter) you must be aware of how yesterday went – exactly how we had predicted - a pause. You don’t have to prepare for an interest rate hike this month but the danger is still there.

Fun fact: It is possible to negotiate interest rates, including mortgage rates.

Today we cover:

• No interest rate hike.

• Opportunity to buy?

• Benefitting from the current environment

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📊 Economy and News 

A hike isn't coming but rates will stay high

The Federal Reserve is not planning to hike rates this month but it expects another hike before the end of the year. If it happens, we'll hit 12 hikes since the policy tightening started in March 2022.

This was expected: As covered in yesterday’s issue, we didn’t expect a price hike.

However, we're not sure where the decision makers will go next. The bias appears toward more restrictive policy and a higher-for-longer approach to interest rates, especially with the price of oil going up.

In fact, the Fed’s median estimate shows rates falling to 5.1%, compared to a projection in June of 4.6%.

Our take: If inflation has come down, why are so many people still struggling to make ends meet?

Inflation around the world has come down, but it still persistent. Even though inflation isn’t as high as before prices are still going up and staying up. A lower rate of inflation is still inflation. Prices would only come down if we had deflation - a sustained fall in general prices, which ain’t happening any time soon.

The Fed also forecast:

• Unemployment peaking at 4.1% next year, down from 4.5%

• GDP growing faster - revising from 1% in June to 2.1% now.

• Inflation, excluding food and fuel (because who needs those), of 3.7%. Down from 3.9% projected. (Fed report for the nerds)

Global hits:

• Another Chinese giant about to go bankrupt.

• Food inflation continues to worsen in India.

• Japan's trade deficit falls as exports to China slump.

📈 Stocks

S&P 500 4,402.20 (-0.94%)
DJIA 34,440.88 (-0.22%)
NASDAQ 14,969.92 (-1.46%)
VIX 14.15 (7.30%)
* Prices as of Sep 21st, 12:20 AM UTC

Netflix continues to go down

Netflix is now down more than 17% from its mid-July closing high of $477.59, setting up a potential dip-buying opportunity.

The largest streaming company in the world has been struggling due to slower consumer spending and a sluggish macro environment. However, it is focused on reducing costs and increasing customer choice, a strategy which may pay hefty dividends.

The company plans to increase spending, which may reduce net profit, but can be beneficial in the long-run, proving Netflix may be a horse you should bet on, especially now that it is close to the buying point.

(Not financial advice. Do your own research and decide it it’s right for you.)

Bank of America lifts S&P 500 2023-end target by 7%

The S&P 500 is up 15.7% so far this year, largely driven by a rally in power houses such as as Nvidia and Meta that have ridden the artificial intelligence (AI) boom.

However, the rally doesn't seem to be over yet, if Bank of America is to be believed.

The Wall Street brokerage now expects the index to end the year at 4,600 points, higher than its previous estimate of 4,300 and 4.4% higher than its close of 4,402.20 on Wednesday.

"Tech companies shifting focus to shareholder return, efficiency and right-sizing cost structure could be their path to outperformance from here," said the bank emphasizing big stocks are expected to continue to do well.

🔐 Crypto

Bitcoin $27,096.30 (-0.44%)
Ethereum $1,624.52 (-1.15%)
Total market cap $1.07T (-0.52%)
* Prices as of Sep 21st, 12:20 AM UTC

Here’s all that you need to know about cryptos:

• A bill to ban the Fed from issuing a CBDC has passed the Finance Services Committee. It’s a step.

• Discord crypto trading bot shuts down after ‘critical exploit. According to an official statement from Non Trading, it had “lost a significant amount of funding” as well as “team tokens” crucial for its operations.

• Bitcoin may continue to remain low after Fed rate decision and most don't expect it to not move more than 3% this week in either direction.

• Toncoin, the native cryptocurrency of The Open Network, makes it to the list of top 10 cryptocurrencies, briefly topping Dogecoin.

💵 Personal Finance

Invest here to benefit from rising rates

We want you to save your money, so let’s walk you through a few great ways to make more money in these times:

1. Invest in fixed-income securities

Turn to fixed-income securities that offer quick returns. Examples include short-term bonds, including government and corporate bonds.

The United States 10Y Government Bond currently offers a yield of 4.341%. Those who want higher returns can consider these options:

• iShares iBoxx $ High Yield Corporate Bond ETF with a yield of 8.5%

• iShares 0-5 Year High Yield Corporate Bond ETF with a yield of 8.3%

• SPDR Bloomberg High Yield Bond ETF with a yield of 8.9%

• SPDR Blackstone Senior Loan ETF with a yield of 9.9%

These bonds are considered safe as they have little exposure to interest rate risk.

2. Buy Dividend-Paying Stocks

As seen this year, the stock market typically declines when interest rates go up. This pushes more companies to offer dividends. Thus, it’s considered a good time to invest in companies that pay dividend. Here are some of the best picks today:

• Dorian LPG Ltd. (LPG) with a payout ratio of 80.9% and a forward dividend yield of 15.6%

• Berry Corp. (BRY) with a payout ratio of 49.7% and a forward dividend yield of 15.3%

• Ready Capital Corp. (RC) with a payout ratio of 63.1% and a forward dividend yield of 15.2%

This will protect your income and ensure you have a regular flow of cash. However, we must mention that dividends aren’t guaranteed.

3. Choose a good savings account

Higher interest rates mean more free money in the form of interest. Here are some of the highest paying accounts:

• BluPeak Credit Union – 5.33% APY

• TotalDirectBank – 5.26% APY

• Newtek Bank – 5.25% APY

• Valley Direct – 5.25% APY

In addition, you can benefit from being a lender. Give money to others and earn interest, which may go higher than the rates quoted above. However, remember that it can be a risky adventure.

4. Invest in Treasury Inflation-protected Securities (Tips)

Inflation-protected securities such as TIPS can help protect against inflation, which typically increases when interest rate increases.

TIPS offers fixed returns and can be a great way to have a regular flow of cash as they make payments twice a year. Moreover, since these are government backed, TIPS are considered safe and reliable.

5. Refinance Your Debt (at a Fixed Rate)

This is tricky because we aren’t sure when rates will go down. However, since they’re epected to continue to rise, we believe refinancing your debt at a fixed rate can be beneficial in today’s scenario.

This can be beneficial for those with a variable-rate debt. Refinancing at a fixed rate ensure you pay low rates even if there’s a hike. However, remember that refinance comes with additional costs, such as origination fees.

Check this video for more:

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