✂️ Rate cuts

Good morning investors! While Bitcoin continues to disappoint investors, stocks are still rallying.

Today we cover:

• Three rate cuts this year.

• Tech back in the race.

• Making money with stocks.

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📊 Economy and News 

Everything you need to know about the Fed meeting

As expected, Federal Reserve Board Chairman Jerome Powell reiterated on Wednesday that policymakers still intend to cut rates before the end of this year, assuming economic growth continues.

For now, it has decided to keep its benchmark overnight borrowing rate in a range between 5.25%-5.5%. Along with the decision, Fed officials penciled in three quarter-percentage point cuts by the end of 2024, which would be the first reductions since the early days of the Covid pandemic in March 2020.

The Fed will continue to seek confirmation inflation is moving closer to the central bank’s 2% target, even after a recent spate of hotter inflation readings.

Also, now we know that strong hiring wouldn’t push the Fed to delay rate cuts. However, Powell said that an unexpected weakening in the labor market could warrant a policy response.

Importantly, Fed Chair Jerome Powell said the central bank has not yet come to a decision on how to change the pace of its balance sheet reduction, but he noted that an adjustment isn’t far off.

Global hits:

• Saudi Arabia reportedly in talks with VC firms like Andreessen Horowitz to create a mammoth $40 billion AI fund.

• UK inflation falls more than expected, hits lowest in nearly two-and-a-half years increasing the possibility of cuts in the future.

• Red Sea crisis could lead to global tanker shortage, Kuwait Petroleum CEO warns.

📈 Stocks

S&P 500 5,224.62 (+0,89%)
DJIA 39,512.13 (+1.03%)
NASDAQ 18,240.11 (+1.15%)
BRENT CRUDE 86.35 (+0.45%)
* Prices as of Mar 21st, 12:20 AM UTC

Stocks are soaring

The three major averages rallied to hit all-time closing records Wednesday after the Fed meeting.

Almost all sectors saw improvement, including banking. American Express added 2.8%, while the SPDR S&P Regional Banking ETF gained more than 3%.

Tech was among the biggest winners as investors think a rate cut could help the industry. Alphabet, Microsoft, Nvidia, and Amazon, rose about 1% each, while Meta gained 1.9%. Recent market laggards Tesla and Apple jumped 2.5% and 1.5%, respectively.

One of the biggest gainers was Samsung that soared more than 5% after report of Nvidia considering its next-gen chips.

In another interesting news, Chipotle Mexican Grill advanced 3.5% after declaring a stock split. Paramount Global skyrocketed 11.8% following a report that Apollo Global Management offered $11 billion for its film and TV studio.

Also, Micron Technology surged to new record highs (after the bell jumping +18%) following its announcement of third-quarter revenue and earnings projections, both significantly exceeding expectations. It expects to achieve record sales in 2025.

Paramount Global's stock surged by 12% following the announcement that Apollo Global Management, a private equity giant, has made an $11 billion bid for its Hollywood film and TV studio. This development coincides with the company's board evaluating another proposal from Skydance Media for a complete merger with Paramount.

Good to know: Intel awarded up to $8.5 billion in CHIPS Act grants, with billions more in loans available.

💵 Personal Finance

Ways to make money with stocks

Buying and selling stocks is not the only way to make money with stocks. You can earn $$$ by using these tricks too.

Note that these all involve various degrees of risk and is not financial advice. Even if you don’t do any of there, it’s good to know how they work.

• Invest money in stocks that pay dividends to enjoy a regular flow of income. Companies usually pay about 4% dividends but some can go up to 20%. However, this income is not guaranteed and not all companies pay dividends so be careful.

• Bet where the price is going to move to earn money every time you’re right. The best thing about this option is that money is earned instantly. However, there’s a downside because it’s the same as betting, i.e. you’ll lose money if the price doesn’t move in your desired direction. Called spread betting, this technique doesn’t offer guaranteed results and isn’t popular among serious investors but it can still help you make money. Look at platforms like FxPro and Vantage to get started.

• Margin trading is essentially stock trading but it does not involve ownership. It involves borrowing money and using it to enter into trades. You deposit cash into your account, which is less than the amount you can use to trade. Popular among day traders, this technique can make or break you as rewards are exponential but you may lose a large sum of your investment if you don’t play well. Platforms like AvaTrade and XM offer margin trading;

   However, we suggest that you start with a demo account before investing real money and never use margin unless you know what you’re doing and never invest more than you’re willing to lose.

• You can get money by getting a loan against your shares. Some brokers have tie-ups with banks or NBFCs who can issue loans. However, there is a downside because the rate is usually higher. Also, this might not be the smartest move as it may give you access to money but it isn’t the same as ‘making’ money. Also, when you take these loans, you will have to hypothecate the shares to your lender. This means you will have to part ways with your stocks if you fail to make payments.

• Lastly, you can lend your stocks to make money. The stock lending happens through the exchange mechanism and hence it is entirely risk-free. Also, since the shares are not sold, there are no capital gains implications in this case. Candidates for stock lending typically include people who wish to short shares due to a bearish view but they don’t own those shares. Since rolling settlements only permit intraday short selling, they can borrow shares and sell them. Secondly, there are people who could have sold shares without delivery and now need a way out to avoid auction losses.

TLDR: The best way to make money through stocks is to buy and hold stocks. When you invest in stocks, i.e.: when you buy stocks, you will enjoy benefits such as dividends (if it’s a dividend paying stock) and capital gains. Still, even this method is not completely risk free, but has the best long-term track record and is most suitable for nearly everyone.

💰 Be a Better Investor

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

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