Dive deeper into the world of investing and applied AI.

Welcome to our Friday Finance Fix Newsletter, where we bring you the latest updates on key financial developments shaping the economy and markets.‍

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Powell Causes the Market’s Streak to End

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An eight-day winning streak for the S&P 500 came to a halt on Thursday, and you can thank Fed Chair Jerome Powell for the market's sudden shift. Powell's remarks on inflation adjustments and the possibility of tightening policy further created uncertainty, leading to a market retreat. The positive sentiment fueled by the streak saw a 6% gain evaporate. However, the market is bouncing back with easing Treasury Yields, providing a glimmer of optimism amid turbulent times.

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Sources | Read More

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Microsoft Is Leading Big Tech

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In a surprising turn, Microsoft takes the lead in the tech sector, adding $1.5 trillion to the Nasdaq 100. The incorporation of AI into Microsoft's technology, especially its investment in OpenAI's ChatGPT, is paying off. This move has positioned Microsoft at the forefront of the tech chain, triggering an AI war among competitors striving to keep up. With estimated earnings up by 2.4%, Microsoft's success signifies a potential shift in the dynamics of the tech market.

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Sources | Read More

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Disney Dominates at Boring Movies

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Disney's recent triumphs with Hulu acquisition and beating earnings expectations contrast with its struggles in the box office. Despite a prolific output of over 10 movies in two years, consumer fatigue and a lack of quality content are taking a toll. The 33rd Marvel installment, "The Marvels," reflects this trend, costing $250 million but predicted to earn only $75 million in its first weekend. Disney faces the challenge of balancing dominance in the streaming wars with the demand for compelling content.

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Source

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Tesla and Toyota Shake in Their Boots

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After the UAW's victories with the Big Three automakers, Tesla and Toyota are under pressure to address unionization efforts. Biden's support for the union adds complexity to their situation. Despite attempts to match adjustments made by the Big Three, both companies face challenges as they become targets for unionization. The aftermath of strikes and political involvement continues, causing volatility in their performances.

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Source

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Warren Buffet Continuing to Gear Up

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Warren Buffet's Berkshire Hathaway shows significant movements, increasing operating income by 40% and breaking a cash record in Q3. Analysts speculate on Buffet's motives, with suggestions of a recession bet. However, amidst these moves, Buffet faces accusations of violating ethical policies by trading millions in the same stocks. As leaks and speculations swirl, Berkshire Hathaway's actions are closely watched, adding to the predictions of a Q4 recession.

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Sources | Read More

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What About alphaAI?

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In any investment endeavor, the key to success lies in making informed decisions. Whether you're building a recession-resistant portfolio, diversifying your assets, or simply exploring new opportunities, your journey should be guided by knowledge and insight. At alphaAI, we are dedicated to helping you invest intelligently with AI-powered strategies. Our roboadvisor adapts to market shifts, offering dynamic wealth management tailored to your risk level and portfolio preferences. We're your trusted partner in the complex world of finance, working with you to make smarter investments and pursue your financial goals with confidence. Your journey to financial success begins here, with alphaAI by your side.

The multitude of options within equities is the overwhelming factor that deters investors from making wise investments. Should you invest in a particular sector, in crypto or maybe stocks? What about the time of day or strategy? Everything can get a bit muddy if the benefits and drawdowns aren’t fully understood, especially for the fundamentals. However, taking the time to understand the difference between ETFs and Mutual Funds is the step that can impact how much money you make. 

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How are an ETF and a Mutual Fund similar? 

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The initial similarity between ETFs and Mutual Funds is how everybody, regardless of experience, knows to invest in one or the other! Both are significant vehicles for success. Both allow investors to pool money together and invest in a basket of assets, including stocks, bonds, commodities, and other investments. Both can track indexes. Both can be used to diversify a portfolio and reduce risk.

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The attractive qualities that draw investors in can cause confusion when the differences start popping up! Just because you can get that diversification with both, doesn’t mean the pricing and management are the same. 

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How are an ETF and a Mutual Fund different? 

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Once the prestige and similarities are put aside, the differences between ETFs and mutual funds become very niche. The main difference is how they are traded and managed. ETFs trade on an exchange like stocks, while mutual funds are traded directly with the fund company (ex. Vanguards). This means that ETFs can be bought and sold throughout the day, while mutual fund trades are executed once per day at the end of the trading day. Along with it, it makes it easier for investors to manage ETFs vs. Mutual Funds because it’s typically through the company. 

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Another significant difference between ETFs and mutual funds, typically the deal breaker, is their expense ratios. An expense ratio is a fee that the fund company charges to cover the costs of managing the fund, and ETFs generally have lower expense ratios than Mutual Funds. The reason is because ETFs are more passively managed compared to Mutual Funds. 

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Pros and Cons of ETFs and Mutual Funds for Your Portfolio

Although there are several interchangeable similarities, the differences still impact the pros and cons of ETFs and Mutual Funds. They have the ability to fit varying investment strategies, so depending on the goal, you may want one over the other. 

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ETFs

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Pros:

• Trade like stocks, so you can buy and sell throughout the day (intraday trading).
• Typically experience reduced tax liabilities because of lower capital gains distributions. 
• Generally, they have lower expense ratios than mutual funds.
• Offer a wide range of investment options, including index funds, sector funds, and commodity funds.

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Cons:

• Primarily passively managed, which may not suit investors seeking active management.
• Can be more volatile than mutual funds due to intraday trading.
• May have higher commissions than mutual funds.

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Mutual Funds

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Pros:

• Experienced fund managers make active investment decisions.
• Can be purchased in fractional shares, making them more affordable for investors with smaller budgets.
• No brokerage commissions attributed to mutual funds.
• Offer various investment options, including actively managed funds, index funds, and target-date funds.

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Cons:

• Can only be traded once per day, at the end of the trading day.
• Generally, they have higher expense ratios than ETFs.
• Typically, mutual funds generate more capital gains distributions, leading to higher tax liabilities.
• Actively managed funds may underperform the market over time.

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Takeaways 

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How do you decide if you should invest in an ETF or a Mutual Fund? It all comes down to preferences and management. If you’re unsure what yours are, you can build that up with alphaAI. Although Mutual Funds aren’t part of the shtick, with our machine learning technology you can rely on data-driven decision-making regarding ETFs. Our AI analyzes ETFs with a unique predictive capability, and multiple models work together to make trading decisions. The predictive models used by alphaAI can identify patterns in ETF data that are not visible to humans. Our AI investment technology automatically adapts to changing market conditions so that you're always optimally positioned to achieve your financial goals. If you’re looking for a rules-based portfolio management system, you found the rightplace! Check out more about how our technology functions here.  

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Sources

• https://www.schwab.com/etfs/mutual-funds-vs-etfs#:~:text=While%20they%20can%20be%20actively,performance%20of%20a%20particular%20index.&text=Mutual%20funds%20come%20in%20both,are%20managed%20by%20fund%20managers.
• https://www.investopedia.com/articles/investing/110314/key-differences-between-etfs-and-mutual-funds.asp
• https://www.alphaai.capital/journal-entries/our-technology

Economic downturns are an inevitable part of the business cycle, and they can have a significant impact on investment portfolios. During times of recession or market turbulence, investors often seek refuge in assets that have historically demonstrated resilience. Exchange-Traded Funds (ETFs) are an excellent tool for building a recession-resistant portfolio. In this blog, we will explore ETFs that have a history of performing well during economic downturns and discuss strategies for constructing a recession-resistant investment portfolio, supported by data and expert insights.

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Understanding the Recession Landscape:

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Before delving into the specific ETFs, it's crucial to understand the economic landscape during a recession. Economic indicators, such as GDP growth, employment data, and corporate earnings, can provide valuable insights. Recessions are typically characterized by economic contraction, rising unemployment, and reduced corporate profitability.

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Safe-Haven Assets:

Historically, investors turn to safe-haven assets during recessions. Gold ETFs (e.g., SPDR Gold Trust - GLD) and U.S. Treasury Bond ETFs (e.g., iShares 20+ Year Treasury Bond - TLT) tend to perform well as investors seek to preserve capital.

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• Defensive Sectors: Defensive sectors like consumer staples and healthcare tend to be more resilient during economic downturns. ETFs like Consumer Staples Select Sector SPDR Fund (XLP) and Health Care Select Sector SPDR Fund (XLV) can be considered.
• Dividend Aristocrats: Companies with a history of increasing dividends, known as "Dividend Aristocrats," are often viewed as stable during recessions. The ProShares S&P 500 Dividend Aristocrats ETF (NOBL) tracks such companies.
• Low Volatility ETFs: ETFs designed to track low-volatility stocks, like the iShares Edge MSCI Min Vol USA ETF (USMV), can offer stability during turbulent market conditions.
• Data and Historical Performance: To support our claims, let's look at historical performance data. During the 2008 financial crisis, for example, the SPDR Gold Trust (GLD) significantly outperformed the S&P 500 Index, and U.S. Treasury Bond ETFs like iShares 20+ Year Treasury Bond (TLT) saw substantial gains.

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During the same period, the Consumer Staples Select Sector SPDR Fund (XLP) and the Health Care Select Sector SPDR Fund (XLV) exhibited lower losses compared to the broader market. Dividend Aristocrats, as represented by the ProShares S&P 500 Dividend Aristocrats ETF (NOBL), were relatively stable as well.

Low-volatility ETFs like the iShares Edge MSCI Min Vol USA ETF (USMV) maintained a steadier course during the 2008 financial crisis, reducing portfolio risk.

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Strategies for a Recession-Resistant Portfolio:

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Diversification:

A key strategy for building a recession-resistant portfolio is diversification. By investing in a mix of assets such as gold, bonds, defensive sectors, and low-volatility stocks, investors can spread risk and enhance the potential for stable returns.

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Regular Rebalancing:

Regularly rebalancing your portfolio helps maintain the desired asset allocation. This ensures that your investments remain aligned with your long-term goals, even during market downturns.

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Risk Management:

Implement risk management strategies, such as setting stop-loss orders, to limit potential losses during turbulent market conditions.

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Ongoing Research:

Stay informed about economic conditions and market trends. Monitor the performance of your ETFs and be prepared to adjust your portfolio as needed.

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Takeaways:

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Recessions are an inevitable part of the economic cycle, but with careful planning and the right investment strategies, investors can weather the storm. ETFs offer a convenient way to build a recession-resistant portfolio by providing exposure to assets that historically perform well during economic downturns. It's essential to combine these ETFs strategically, diversify your portfolio, and remain vigilant in managing your investments.

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Remember that historical performance is not indicative of future results, and it's crucial to consult with a financial advisor or conduct your own research before making any investment decisions. A well-balanced portfolio of recession-resistant ETFs can help investors navigate the challenging waters of economic uncertainty while working toward their long-term financial goals.

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What About alphaAI?

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In any investment endeavor, the key to success lies in making informed decisions. Whether you're building a recession-resistant portfolio, diversifying your assets, or simply exploring new opportunities, your journey should be guided by data and time-tested methodologies. At alphaAI, we are dedicated to helping you invest intelligently with AI-powered strategies. Our roboadvisor automatically adapts to market shifts, offering dynamic wealth management tailored to your risk level and portfolio preferences. We're your trusted partner in the complex world of finance, working with you to make smarter investments and pursue your financial goals with confidence. Your journey to financial success begins here, with alphaAI by your side.

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Disclaimer: Investing in the stock market involves risks, and past performance is not indicative of future results. The information provided in this blog is for educational purposes and should not be considered financial advice. Please consult with a qualified financial advisor before making any investment decisions.

Welcome to our Friday Finance Fix Newsletter, where we bring you the latest updates on key financial developments shaping the economy and markets.‍

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Is the Market Sailing Smoothly?

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The recent Federal Reserve report, maintaining unchanged interest rates, brought a sense of relief to the market. Investors welcomed this decision, and it was seen as a positive signal. However, the employment report released soon after raised some eyebrows. The unemployment rate slightly increased to 3.9%, exceeding expectations by 0.1%, while job growth decelerated to 150,000, falling short of the anticipated 170,000. Additionally, wage growth showed a moderate increase of 0.2% in hourly earnings.

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These statistics are critical indicators of the labor market's health and the effectiveness of the Federal Reserve's monetary policy. A cooling job market suggests that the Fed's strategy of raising interest rates may be achieving the desired outcome, potentially averting recession fears.

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US Treasury Yields Fall on Their Face

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Following the Federal Reserve's announcement, US Treasury yields took a dramatic tumble. The 10-year Treasury Yields briefly dipped below 4.5%, marking a nearly 50 basis points decrease from the levels seen just days before. Although yields saw a slight recovery, they still remain below their recent highs. This drop in Treasury yields reflects investor caution regarding the economic outlook and a hopeful anticipation that the Fed may be nearing the end of its interest rate hikes.

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UAW Strikes Conclude, Toyota and Tesla React

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The United Auto Workers (UAW) recently celebrated significant pay and benefit improvements at Detroit's Big Three automakers. This has put pressure on non-union automakers like Toyota and Tesla, who quickly responded to avoid a similar fate. Toyota increased employee pay from $32 to $34.80 an hour, while Elon Musk emphasized that stock options could still allow workers to out-earn UAW employees. The battle for workers' rights in the automotive industry might not be over, especially with the imminent rise of electric vehicles.

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Disney Takes Over Hulu

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Disney's acquisition of Hulu in 2024 is set to shake up the streaming industry. With Disney consolidating its position in the market, consumers might expect rate hikes in the near future. Disney's CEO is eager to create a bundled offering across their various platforms, which could potentially enhance profitability, especially with the upcoming ESPN Bet launch. However, this consolidation may lead to increased costs for consumers already burdened by multiple streaming subscriptions.

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Developments in AI

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The field of artificial intelligence is evolving rapidly, with significant developments both in government policy and corporate innovation. President Biden issued an executive order outlining various AI pillars, including safety and security standards, privacy protection, and the advancement of equity and civil rights. This order also calls for congressional legislation to enforce AI regulations. Simultaneously, Microsoft is integrating ChatGPT's technology into Microsoft 365 Enterprise with a feature called Copilot. It promises to enhance productivity by automating various tasks, such as turning Word documents into PowerPoint presentations and drafting email responses.

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The rapid advancement of AI technology is surpassing the existing legislative framework, raising concerns about potential future regulations that could impact the business world.

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What about alphaAI?

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In any investment endeavor, the key to success lies in making informed decisions. Whether you're building a recession-resistant portfolio, diversifying your assets, or simply exploring new opportunities, your journey should be guided by knowledge and insight. At alphaAI, we are dedicated to helping you invest intelligently with AI-powered strategies. Our roboadvisor adapts to market shifts, offering dynamic wealth management tailored to your risk level and portfolio preferences. We're your trusted partner in the complex world of finance, working with you to make smarter investments and pursue your financial goals with confidence. Your journey to financial success begins here, with alphaAI by your side.

If you've noticed the stock market performing well recently, it's likely due to the United States Federal Reserve's decision to maintain its interest rates. While this may seem like good news in the short term, the implications of the Federal Reserve's interest rate decisions on the stock market are far-reaching and complex. This article delves into how these decisions influence market behavior, investor sentiment, and economic stability.

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The Current Interest Rate Landscape

After reaching a range of 5.25% to 5.5%, the Federal Reserve's benchmark federal funds rate remains unchanged. This is the first time in nearly two years that the Fed has held rates steady for consecutive meetings. Good news, right? Although these aggressive rate increases were part of a broader strategy to address the most significant inflation surge in four decades that has sent the economy into a flurry.

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Despite the decision to maintain rates, the Federal Reserve has left the door open for the possibility of future rate hikes, with the likelihood of having a hike in December going up by 25%. So why maintain the current rate now? The decision comes after a series of 11 interest rate increases since March 2022 because the strategy is beginning to shift in response to the market.  The central bank's efforts to combat surging inflation and maintain a strong economy post-pandemic are working with strong job reports, strong GDP, and numerous positive earnings reports.

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In their statement, the Fed acknowledged that economic activity had expanded at a "strong pace" during the third quarter, a notable upgrade from their previous description of "solid" growth in September. Despite the series of rate hikes, the US economy remains remarkably resilient, with the Fed remaining committed to bringing inflation down to its 2% goal.

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How Interest Rate Decisions Affect the Stock Market

Interest rate decisions by the Federal Reserve are closely watched by investors, as they have a direct impact on the stock market. When the Fed raises interest rates, borrowing costs for companies increase, which can lead to reduced corporate profits and lower stock prices. Conversely, when the Fed lowers rates, borrowing becomes cheaper, potentially boosting corporate profits and stock prices.

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1. Investor Sentiment: The stock market's response to interest rate decisions is often immediate. A decision to maintain or lower rates is generally seen as positive, leading to increased investor confidence and higher stock prices. On the other hand, rate hikes can lead to market volatility and decreased investor confidence.
2. Economic Indicators: Interest rate decisions are influenced by various economic indicators, including GDP growth, employment rates, and inflation. Positive economic indicators can lead to rate hikes, which may negatively impact the stock market. Conversely, negative indicators can lead to rate cuts, potentially boosting the market.
3. Sectoral Impact: Different sectors of the stock market respond differently to interest rate changes. For instance, the financial sector often benefits from higher interest rates due to increased lending margins, while the real estate sector may suffer due to higher borrowing costs.

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Investors’ Reaction

The stock market's response to this news was largely positive; not only were everyday Americans feeling sunny, but investor sentiment flipped. In fact, investors feel so positively that the Federal Reserve might be nearing the end of its rate-hiking campaign that the boost in today’s major stock indices has already been witnessed. The Nasdaq, S&P 500, and Dow Jones Industrial Average posted substantial gains, suggesting that the market interpreted the Fed's decision as a commitment to maintaining interest rates for the short term.

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Traders are now pricing in an 85% chance that there will be no further rate hikes this year, compared to the 59% odds that existed just before the policymakers' meeting. This shift in market sentiment indicates a growing belief that the Fed is reaching the conclusion of its interest rate tightening cycle, especially in light of the robust US economy shown in Q3.

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Remaining Concerns

One of the primary drivers behind the Federal Reserve's decision to raise interest rates has been the persistent inflation issue. While the Fed's preferred measure of annual inflation, which excludes food and energy costs, has decreased since its peak, it remained stubbornly high at 3.7% in September, largely due to rising rent and service costs. Economists expect this measure to decrease in the coming months, particularly as rent hikes and wage growth slow, but that isn’t shown in the unrest amongst the working class.

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While the decision to keep interest rates steady may provide relief to consumers who have faced multiple rate increases on credit cards, rent, and adjustable-rate mortgages, the Fed has signaled that it remains open to the possibility of future rate hikes. Is the robust US economy a positive sign, indicating resilience despite higher borrowing costs, or a negative one, as it could prolong high inflation rates? As the balance is sought after, there’s still no clear answer as analysts are split over what the future could bring.

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Takeaways

Regardless of the unknown future, the Federal Reserve's decision to maintain its benchmark interest rates in the face of a strong US economy and persistent inflation concerns reflects a cautious approach. The Fed is treading carefully to avoid pulling the carpet from under the financial markets or pushing the US into the recession that everyone keeps discussing. With the next meeting scheduled for December 13-14, further developments are on the way.

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For investors, staying informed and prepared for potential changes is more essential than ever. Even one meeting can shift the economic landscape, so staying updated on the Federal Reserve's decisions and their impact on the stock market is crucial.

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What about alphaAI?

In any investment endeavor, the key to success lies in making informed decisions. Whether you're building a recession-resistant portfolio, diversifying your assets, or simply exploring new opportunities, your journey should be guided by knowledge and insight. At alphaAI, we are dedicated to helping you invest intelligently with AI-powered strategies. Our roboadvisor adapts to market shifts, offering dynamic wealth management tailored to your risk level and portfolio preferences. We're your trusted partner in the complex world of finance, working with you to make smarter investments and pursue your financial goals with confidence. Your journey to financial success begins here, with alphaAI by your side.

There’s a big difference between reporting the market’s movements to feeling those movements in day-to-day life. Consumers who experience the economy in real-time are more likely to put off former habits for cheaper alternatives, which leads to better-than-expected performance for affordable brands. But what happens when those affordable options hike their prices? French fries become the stock market’s best friend. 

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McDonald’s Surprising Performance 

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Those difficult times everyone keeps talking about aren’t so difficult for McDonald’s, which increased sales by 11% and revenue by 14% ($6.69 billion) in Q3, while EPS jumped to $3.19, which is 19% more than last year. It especially saw developments in the United States, as consumers adjust their spending habits but don’t stop them. 

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This opportunity is often overlooked when the frenzy of the market takes place. If investors go into a panic about the traditional stocks they invested in (ex., Apple), and then those stocks start dipping because of consumer behavior, it means it’s time to look elsewhere. Spending habits haven’t stopped in the US; in fact, GDP is up, meaning they’ve simply shifted to other areas.

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How Did McDonald’s Pull It Off? 

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For middle and higher-income families, household spending budgets have been cut to adjust for inflation, volatility, and difficult times, leading to them frequenting the restaurant. On the other hand, lower-income families who are struggling to purchase groceries because of higher rates are heading to the restaurant more than usual. 

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Consumers' wallets are struggling, so McDonald’s perform well? Partly. McDonald’s also began increasing prices, with some stores selling the Big Mac combo for as much as $18. Other technology advancements include app upgrades and in-store kiosks. 

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However, economic uncertainty definitely isn’t hurting McDonald’s, with CEO Chris Kempczinski stating that the economy’s “difficult times” are an opportunity for the chain.

It’s Not Just McDonald’s! 

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It isn’t just McDonald’s reaping the benefits of consumers' tears and dollars; other restaurants and chains benefit from the economic pressure on American consumers. Including the following;

• Amazon: The e-commerce giant saw an increase in revenue of 13% as consumers looked for easy affordable alternatives, which the diverse company clearly provided. 
• Chipotle: The burrito king experienced an overall revenue boost of 11% while consumers enjoyed the splurge, which far out beat analysts' expectations. 
• Domino’s Pizza: The fast-food pizza place boosted revenue by 8.8%, which put them back on the map (not a map I’m on) as consumers eat up the promotional deals sent out. 

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The biggest note for the positive Q3 reports is that consumers are still spending but in cheaper yet likable locations. Investors should look for companies that are well-positioned to meet the needs of consumers during an economic downturn. These companies may include those that offer affordable products and services or those that can innovate and adapt to changing consumer behavior.

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Takeaways

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When investors become overly concerned with the lack of consumers for a popular brand during an economic downturn, it typically means that consumers have simply moved their spending to other brands that offer more affordable prices, convenient options, or a better value proposition.

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Target and Walmart may be struggling because consumers are looking for cheaper alternatives, such as cheap online shopping provided by Amazon. Red Lobster and The Cheesecake Factory may have decreased sales because consumers are cutting back on discretionary spending and choosing more affordable options like McDonald's and Chipotle. Fine dining might not be the best bet for boosting the economy, but maybe french fries and burritos will do more than expected.

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What about alphaAI?

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In any investment endeavor, the key to success lies in making informed decisions. Whether you're building a recession-resistant portfolio, diversifying your assets, or simply exploring new opportunities, your journey should be guided by knowledge and insight. At alphaAI, we are dedicated to helping you invest intelligently with AI-powered strategies. Our roboadvisor adapts to market shifts, offering dynamic wealth management tailored to your risk level and portfolio preferences. We're your trusted partner in the complex world of finance, working with you to make smarter investments and pursue your financial goals with confidence. Your journey to financial success begins here, with alphaAI by your side.

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Welcome to our Friday Finance Fix Newsletter, where we bring you the latest updates on key financial developments shaping the economy and markets.‍

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Tech Sector Takes a Hit

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The tech industry experienced a significant downswing last week, with the market closing at its lowest point since May. The earnings season brought its fair share of drama, particularly for the tech giants. While Alphabet managed to beat analysts' expectations, it couldn't offset the underperformance of Google's cloud business. This led to a 9.5% drop in Alphabet's stock, sending the entire technology sector into a selling frenzy. Even positive reports from Meta, Microsoft, and Amazon couldn't lift the market. In the background, the bond market remained rocky, with the 10-year Treasury note surpassing 5%, which could have far-reaching implications for the economy.

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The sources: CNBC, The New York Times

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Twitter's (Sorry, X) Troubles Continue

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Twitter, now under the ownership of Elon Musk, has been facing a series of challenges. Global app downloads have plummeted by 38%, monthly active users have dropped by 14.8%, and users are spending 2% less time on the platform. In the United States, ad revenue has declined by a staggering 60%. These setbacks are attributed to various factors, including advertiser pullouts, technical glitches, user issues, and increasing incidents of hate speech. As Twitter struggles, users are actively exploring alternatives, although none have emerged as a strong contender yet.

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The sources: Axios, Morning Brew

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U.S. Consumers Keep Spending

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Despite looming threats of a potential recession, high housing and rental costs, and nationwide strikes, U.S. consumers continue to spend. The U.S. GDP grew by 4.9% in the last quarter, largely fueled by robust consumer spending. Factors contributing to this strength include strong wage growth, easing inflation, and an improving job market. Consumers appear undeterred by global crises as they seek experiences like dining out, travel, and entertainment. However, the return of student loan payments in the next quarter could introduce some uncertainty.

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The source: Morning Brew

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Ford Strikes a Deal with UAW

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After over six weeks of pressure and targeted strikes, the United Auto Workers (UAW) finally reached a tentative deal with Ford. The deal outlines a 25% hourly wage increase over the life of the four-plus-year contract, resulting in a top hourly wage of over $40. This marks a significant victory for auto workers, as wages have rarely risen more than 3% in a year. With one contract on the table, the UAW strikes continue, now targeting the most profitable factories of other major automakers, including Stellantis and GM.

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The source: Morning Brew

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EV Production Slows Amidst Car Payment Struggles

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Americans are increasingly supportive of green energy, but many are struggling to keep up with auto loan payments. Low-income Americans are falling behind on their auto loans, and repossession rates are expected to rise substantially this year. Analysts suggest that UAW strikes, coupled with consumers' financial difficulties, have led to a slowdown in electric vehicle (EV) production by companies like Ford and GM. However, as strikes conclude and the Biden administration continues to promote green energy solutions, the EV market could see a positive shift.

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The sources: Morning Brew, Read The Joe

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What about alphaAI?

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In any investment endeavor, the key to success lies in making informed decisions. Whether you're building a recession-resistant portfolio, diversifying your assets, or simply exploring new opportunities, your journey should be guided by knowledge and insight. At alphaAI, we are dedicated to helping you invest intelligently with AI-powered strategies. Our roboadvisor adapts to market shifts, offering dynamic wealth management tailored to your risk level and portfolio preferences. We're your trusted partner in the complex world of finance, working with you to make smarter investments and pursue your financial goals with confidence. Your journey to financial success begins here, with alphaAI by your side.

The events that kick the US into high gear are usually centered around competition, which is exactly why solar manufacturing will be the next boom in the stock market. With China’s dominance of the market, Biden’s incentives in the Inflation Reduction Act, and the potential economic gains, it sets the US market up for a new source of energy.

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Why is solar-based power being pushed? 

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Energy has been the battle of the globe since the beginning of time, it just takes different forms along the way. Currently, the energy market is evaluated as an $8 trillion dollar industry, with solar taking up 1% of it. However, those numbers are shifting, with countries like Japan and Germany relying fully on solar energy for decades.

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Despite the US contributing the majority of the original research behind solar energy, China is the largest producer of solar panels in the world. According to Energy Sage, “China manufactures 75% of modules, 85% of cells, 97% of wafers, and 79% of polysilicon,”  essentially controlling over 80% of solar panel production, completely dominating the market. 

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In comparison, the US is currently manufacturing just over 2% of the world’s solar panels, which isn’t sitting well with the US. With the recent push in global EV, volatility over energy sources (e.g., oil), fear over China’s solar panel production, and the potential for savings, the US’s 2% is on its way to quickly change.

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The US is now pushing for solar panel manufacturing within the US. If you’ve noticed how green energy has recently been pushed by the Biden administration, the reason is to ultimately combat China’s dominance of this growing market.

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What is the US encouraging? 

Biden passed the Inflation Reduction Act (IRA) in 2022, which created generous incentives for companies to manufacture solar PV components in the United States.

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The Inflation Reduction Act of 2022 introduced substantial incentives like the Advanced Manufacturing Production Tax Credit (45X MPTC), to encourage domestic production of clean energy components. This tax credit directly benefits companies involved in manufacturing photovoltaic cells, PV wafers, PV inverters, battery storage modules, and critical minerals essential for clean power generation.

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In addition to the tax credit, the Department of Energy has been authorized to provide loans of up to $400 billion to support the growth and operation of emerging solar companies.

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What Does That Mean for the US?

In the coming years, a boom in solar manufacturing. Frank Van Mierlo, CEO of a solar PV manufacturer, stated, “The energy market is $8 trillion and solar is 1% of it today. There will be solar companies with $100 billion market capitalizations in the near future.” This statement boasts of a hopeful future for the US’s ability to fill in the previous gaps of green energy.

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How can you capitalize on it?

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How can investors capitalize on the future boom of solar panel manufacturing? First, do your research on companies already established and that are up and coming because of Biden’s incentives. Next, consider ETFs that track the solar energy industry, evaluate publicly traded solar companies (ex. First Solar, Enphase Energy, and SunPower), and look into privately owned solar companies moving towards IPOs because of growth. 

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Regardless of potential, it is also important to remember that solar energy is a cyclical industry, as is the energy sector. Meaning that there will be periods of time when the industry is growing rapidly and other times when it is growing more slowly. Be prepared for this volatility and have a long-term investment horizon, but also consider what the bright future of the US with such a push towards solar panel manufacturing. 

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What about alphaAI?

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In any investment endeavor, the key to success lies in making informed decisions. Whether you're building a recession-resistant portfolio, diversifying your assets, or simply exploring new opportunities, your journey should be guided by knowledge and insight. At alphaAI, we are dedicated to helping you invest intelligently with AI-powered strategies. Our robo advisor adapts to market shifts, offering dynamic wealth management tailored to your risk level and portfolio preferences. We're your trusted partner in the complex world of finance, working with you to make smarter investments and pursue your financial goals with confidence. Your journey to financial success begins here, with alphaAI by your side.

Welcome to our Friday Finance Fix Newsletter, where we bring you the latest updates on key financial developments shaping the economy and markets.‍

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Is the Economy Doing Well?‍

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The economy has seen positive developments compared to predictions from a year ago. Job growth is strong, jobless claims are lower than expected, and spending is surpassing forecasts. However, concerns about inflation persist, with the possibility of another interest rate hike. High debt levels continue to pose challenges, but the positive economic outlook contrasts with earlier recession predictions.

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Earnings Season Leaves Some Investor’s Shocked!‍

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Earnings season is characterized by both successes and disappointments. Major banks like JPMorgan, Wells Fargo, and Citigroup performed well due to rising interest rates, while Goldman Sachs saw a 33% profit dip. Tesla's performance and pricing decisions affected its profits, and Netflix exceeded expectations with significant subscriber growth. The end of earnings season will offer a clearer picture of individual sector performance and the overall economy's trajectory.

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The Love (or Hate) Triangle with Advanced Chips, the USA, and China.‍

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The U.S. has imposed restrictions on chip manufacturers, including AMD, Intel, and Nvidia, to limit China's access to advanced AI chips. These restrictions have led to consequences, including a drop in Nvidia's stock value. Chinese companies have been stockpiling AI chips, contributing to a global shortage. The U.S. is concerned about potential risks associated with China's access to advanced technology, and further restrictions could impact exports and funding for companies like Nvidia.

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Global Economic Predictions in the Midst of War‍

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Tensions surrounding recent events, like the hospital bombing in the Middle East, have raised concerns about economic impact. The U.S. has allocated $100 billion in aid to various countries, including Israel, which could lead to rising oil prices. The potential involvement of Iran in a war with Israel may further impact oil prices and global inflation. The U.S.'s involvement in these conflicts is expected to have broader economic consequences, including implications for the travel and airline industries.

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The Housing Market Updates‍

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High mortgage rates, at their highest since 2000, are negatively affecting the housing market. This has led to reduced demand for both home purchases and new construction, including apartment buildings. Mortgage applications have declined by 7%, indicating a cooling housing market. The slowdown is likely to impact consumer spending and potentially lead to job cuts in the construction and home-building sectors.

‍

What about alphaAI?

‍

In any investment endeavor, the key to success lies in making informed decisions. Whether you're building a recession-resistant portfolio, diversifying your assets, or simply exploring new opportunities, your journey should be guided by knowledge and insight. At alphaAI, we are dedicated to helping you invest intelligently with AI-powered strategies. Our roboadvisor adapts to market shifts, offering dynamic wealth management tailored to your risk level and portfolio preferences. We're your trusted partner in the complex world of finance, working with you to make smarter investments and pursue your financial goals with confidence. Your journey to financial success begins here, with alphaAI by your side.