This Week In The Market: June 18, 2021
Welcome to the inaugural edition of "This Week In The Market." Each week, we'll cover the stories directly impacting investors, and more specifically, what it means for you. You shouldn't need a degree in finance to understand why your money is moving, so join us here each week for the simple breakdown. Let's go!
The Federal Reserve: Bullsh** or Bearsh**?
The BFD: The Fed released their stance on the economy this week via Chairman Jerome Powell, when he noted that the central bank was "considering tapering its purchases of Treasury's and mortgage securities." He also stated an intended goal of interest rate hikes some time in 2023, assuming the economy is stable enough to handle it.
In Plain Speak: Alright, this is actually a big deal. When COVID-19 brought the economy to a crippling standstill, the Federal Reserve announced they would be pumping in around $120 billion per month from their cash reserves into what they call "quantitative easing." This involves them purchasing treasury bonds and mortgage securities in order to keep the market afloat and avoid plunging the U.S economy into the 7th circle of Dante's Inferno. The combination of the Fed now looking to end that program, as well as hike interest rates, signals the all encompassing "uncertainty" into the market, and the market HATES uncertainty. Higher interest rates are also historically bad for the market, as more conservative investors will now receive a higher return from a much less risky asset, causing them to pull money out of stocks and load up on bonds.
How Can This Make Me Rich?: A few ways, thanks for asking. 1. You too can be one of those more conservative investors and put more of your money into higher-yielding bonds. 2. You could play the downside of the market and profit from fish bigger than us pulling their cash. 3. Keep some cash on the sidelines. When there's blood in the water, it's time to strike.
The Path to Riches Could Be In Your...Genes?
The BFD: You know when you listen to a podcast and every ad break you hear is for MeUndies or 23AndMe? Well one of those went public this week, now trading on the U.S NASDAQ under the lovely ticker symbol "ME." The stock popped after it's SPAC transition was finalized, but has since settled to around 30% above it's debut price at time of writing.
How Can This Make Me Rich?: IPO's (and in this case, trading debuts), can be super risky, but very rewarding. SPAC's have been all the rage this year as companies get to bypass the investment bank roadshow route, and the SPAC owners get to rake in those sweet sweet fees. 23AndMe presents a very interesting investment depending on where they go in the future, since right now they're just likely to tell you where your grandparents might be from. Could they branch into gene therapy, or partner with big biotech firms to sell your data? Sure, and that could present massive upside. Right now though? You may want to put this on the watchlist, somewhere near the bottom.
The Stock of the Week
A huge shoutout to those lucky bastards that have semiconductor chip giant Nvidia Corp in their portfolios this week.
This bad boy set five individual 52 week highs this week, popping and locking thanks to some bullish sentiment in the media and from big bank analysts. First, CNBC took a look at competitor Intel's market share and noticed that they hadn't been able to catch the upstarts in AMD and Nvidia. Well the investment analysts at Bank of America agreed, subsequently upping their price target for the share from $800 to $900, which is a number frequently sighted as the per share goal in the next 12 months.
How Can This Make Me Rich?: If you fancy yourself a sophisticated investor and don't have some sort of exposure to semiconductors, please remove yourself from my site. I'll wait. He gone? Good. For the rest of you, semiconductors are only gaining steam as we begin to take everything online, called IOT (Internet Of Things). From coffee pots to Tesla's, everything now needs a chip to handle the immense number of processes handled in each device during every moment of the day. The biggest growth lever these companies have? Self driving cars. If you're bullish on the next big wave of the future, consider putting some Nvidia in your portfolio mix. You can make my finders fee out to "Cash."