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#588: First Friday: The Economic Maze We’re Navigating Together

Jobs are growing, interest rates are holding, and your student loan options just hit pause. Welcome to this month’s economic rollercoaster.

The economy is sending mixed messages this month. We added 151,000 new jobs in February, slightly better than January’s 143,000. But unemployment ticked up to 4.1 percent.

Health care is booming (52,000 new jobs). Restaurants and bars? They’re hurting (lost 27,500 jobs). Federal government shed 10,000 positions while state and local governments added 21,000.

The Fed isn’t making any sudden moves. They’ll likely hold interest rates steady at 4.25 – 4.5 percent when they meet March 18-19. Fed Chair Powell made this clear: “We do not need to be in a hurry and are well-positioned to wait for greater clarity.”

Meanwhile, Treasury Secretary Scott Bessent is working a different angle. He’s targeting 10-year Treasury yields instead of pressuring the Fed on short-term rates. His strategy? Use fiscal and regulatory reforms to convince markets that inflation will be controlled long-term.

Energy costs are a key part of his plan. Bessent believes lowering gas and heating oil prices does double duty: saves consumers money and boosts economic confidence. This matters because consumer spending is 70 percent of our economy.

Speaking of confidence – it’s plummeting. February saw the largest monthly decline in consumer sentiment since August 2021. People across all age groups and income levels are increasingly pessimistic. They expect inflation to hit 6 percent in the coming year (significantly higher than current rates).

Got federal student loans? Applications for income-driven repayment plans are temporarily on hold. This affects all plans, even the older ones not being challenged in court.

The pause came after a federal appeals court expanded a suspension of the SAVE plan. About 8 million borrowers had enrolled in this program, with more than 400,000 having their debts erased. If you’re working toward Public Service Loan Forgiveness, this is particularly important since income-driven plans are a key requirement.

In crypto news, bipartisan legislation for stablecoins is moving forward. The Senate has the GENIUS Act while the House has the STABLE Act (yes, that spells “stable genius”).

These bills would establish clear rules about who can create stablecoins and require them to be fully backed by high-quality assets like U.S. dollars or Treasury bills. They would also officially classify stablecoins as payment instruments rather than securities – a significant regulatory distinction.

The housing market? It varies dramatically by location. In DC, some zip codes are seeing prices climb rapidly while others face steep declines. The lesson: real estate is hyper-local. Success comes from becoming an expert in just a couple of specific zip codes rather than trying to understand entire metropolitan markets.

As Fed Chair Powell wisely put it, the key is “separating the signal from the noise as the outlook evolves.” That’s solid advice for navigating our current economic landscape.

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#564: The Real Story Behind These New Tariffs

Our economy just gave us two big surprises that shape how we’ll do business and invest in 2025.

Our job market is going through major changes. Sure, we added 227,000 jobs – way more than anyone expected. Healthcare and hospitality are booming. But here’s what you need to watch: our unemployment rate just climbed to 4.2%. When you look at how many people are joining or leaving the workforce, you’ll spot some interesting signals about where we’re headed.

You’ve probably heard about these new trade proposals making waves. They’re targeting our biggest trading partners – Mexico, Canada, and China. Let’s talk about what tariffs really mean for your wallet. Some industries win, others lose. Your grocery bill? That might change. Your job prospects? That depends on your industry. We’ll help you connect these dots.

This matters because you need to know how these shifts affect your money, your job, and your business decisions. Our markets are changing. Our policies are evolving. But when you understand what’s happening, you can make smarter moves.

Join us as we break down these economic changes into practical insights you can actually use.

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#554: The Most Expensive Election Trade Ever Made (A Cautionary Tale)

The U.S. jobs market hit a surprising speed bump in October, adding just 12,000 new jobs — way below the expected 100,000.

A mix of natural disasters and labor unrest explains the slump. Recent hurricanes in the Southeast wiped out somewhere between 40,000 to 70,000 jobs, while strikes at Boeing and other companies added to the slowdown. Against this backdrop, the Federal Reserve looks ready to cut interest rates next week by 0.25 percent.

Meanwhile, gold is having its biggest moment since 1979, but not for reasons you might expect. Central banks, especially in China and India, are loading up on physical gold like never before. Poland’s central bank has grabbed 167 tons of gold and wants to keep 20 percent of its reserves in gold — a move that hints at banks preparing for possible global shake-ups.

Remember when I-Bonds were the hot ticket in 2022, paying out 9.6 percent? Those glory days are gone. The new rate has dropped to 3.1 percent, making your standard high-yield savings account look pretty good in comparison.

In the stock market, it’s all about the “Magnificent Seven” — Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla. These tech giants account for 62 percent of all S&P 500 gains over the past year. The other 493 companies aren’t doing too shabby either, with profits expected to grow 13 percent next year.

As for the upcoming election, both presidential candidates’ economic plans would push the federal deficit higher. The Wharton School of Business says Trump’s proposals would add $5.8 trillion to the deficit over 10 years, while Harris’s would add $1.2 trillion. There’s also talk about tariffs that could spark inflation and maybe even kick off a global trade war.

Here’s the kicker: during the 2016 election, a 24-year-old Sam Bankman-Fried correctly predicted the outcome before anyone else and made $300 million in a single night trading on that information. But by morning, the markets had swung so wildly that he’d lost $600 million.

The lesson? Even if you guess the election right, predicting how markets will react is a whole different ball game — one that you should avoid. Think long-term, buy-and-hold.

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#528: The Stock Market is in Panic Mode and the Unemployment Rate Jumped – But Everything’s Fine

The Federal Reserve recently decided to hold interest rates steady, leading to significant shifts in the stock market. The Dow dropped over 850 points, and the NASDAQ entered correction territory, falling more than 10% from its peak.

But what do these numbers mean for you? We break down the latest jobs report, which shows a rise in unemployment to 4.3%, triggering a recession indicator known as the Sahm Rule. This isn’t just economic jargon; it affects real lives, impacting job security, investments, and financial planning.

We discuss potential ripple effects on various sectors, such as real estate, where interest rates influence housing affordability.

We also examine the technology sector’s volatility and how recent market corrections might influence tech stocks and the overall investment landscape.

Understanding this can help you make informed decisions about your investment portfolio.

Every First Friday of the month, we bring you our “First Friday Monthly Economic Report,” where we help you make sense of these trends.

We aim to make complex economic concepts accessible. Join us as we explore these pressing economic issues.

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#525: Michael Kitces: Is the Economy Worse than We Think?

We chat with renowned financial advisor Michael Kitces at the Morningstar Investor Conference in Chicago.

Kitces answers a big question: Is the economy worse than we think? He explains that a few big companies like Nvidia, Meta, and Alphabet are holding up the S&P 500. But this doesn’t mean the economy is bad. It’s common […]

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#514: Why the Latest Economic Report is a Rorschach Test

The S&P 500 hit a record high — and the GameStop guy is back, and he now owns 9 million shares of GME, making him the 4th largest shareholder.

Interest rates from remain the same, and are expected to hold steady until September. Inflation remains unchanged from last month.

Last month we saw a massive explosion of new jobs, at 272,000  — nearly 90,000 more than predicted. But we also saw unemployment tick up, which created mixed signals.

Learn the implications of the latest economic news — and how it impacts your wallet — in this month’s economic update.

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#486: Stocks are Hot. Jobs are Hotter. What’s Next?

By every definition of the word, we’re in a bull market.

The S&P 500 hit record highs for five consecutive days last week, and remained strong throughout this week.

The Dow is above 38,000 for the first time in history.

Unemployment has stayed below 4 percent for 24 months, marking the strongest jobs market in half a century.

And consumer sentiment, which reflects more pessimism than the data warrants, is showing signs of improvement.

The Fed met this week and decided to hold rates steady, as expected, but there are hints that they’ll start dropping interest rates within a few months.

Inflation isn’t yet down to the Fed’s target rate of two percent, but it’s getting closer — with one notable exception. Auto insurance has skyrocketed; across the nation, car insurance is 17 percent higher than last year.

Meanwhile, a shake-up in the real estate industry is creating tumult for the National Association of Realtors, which is facing its first serious challenge in 100 years. The outcome could determine how steeply you’ll have to pay when you sell your home.

Where do we go from here? What’s next for the economy? We tackle these questions in this First Friday podcast episode.

Enjoy!

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#470: The GDP Grew 4.9 Percent, Unemployment is at a Near-Record Low … and Everybody’s Stressed About Layoffs

The economy is booming. GDP grew 4.9 percent last quarter, the fastest rate of growth since 2021. Consumer spending jumped 4 percent. Unemployment is holding steady at 3.8 percent, historically low. The U.S. added net new jobs for the 34th consecutive month.

And yet – people are worried.

Online discussion around layoffs at its highest point since July 2020. High-profile headlines about major staffing cuts – most recently from Schwab, which is dismissing 2,000 employees – fuel these fears.

Why is there such a disconnect between sentiment, which is pessimistic, and economic data, which is robust? We explore that question in today’s episode.

We also discuss the controversial Credit Card Competition Act, which if passed might eliminate credit card rewards like airline miles and cashback. We talk about Mint, the budgeting app with 3.6 million users, announcing that it’s shutting down. We also share details about the student loan repayment debacle.

And we describe a landmark court ruling for $1.8 billion – yes, with a B – against the National Association of Realtors and several real estate brokerages, a verdict that may revolutionize the business model of how homes are bought and sold.

Enjoy our First Friday of November 2023 episode!

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