Week of April 11th, 2022 - Inverted Yield Curves
This Week’s Sponsor
StreetFins Stock Pitch Competition
The StreetFins Stock Pitch Competition’s first-round submission window had been extended and will close on April 17th! Participants must submit a 5 minute or less stock pitch, with those moving onto the second round presenting live to our audience on Zoom! Interested in winning the $2,000 prize pool from our sponsors? Sign up with the link below!
The Inverted Yield Curve
Recently, the spread between the yields for 3-month and 10-year U.S. Treasuries has dropped below 0. Economists and investors across Wall Street have been spooked by this inversion, citing it as an indicator of the next recession in the US economy. But why is Wall Street claiming this indicator is a signal for the next economic collapse?
It helps to understand what the yield curve actually represents, and to do that, you need to know about bonds.
Introduction to Dollar Cost Averaging
I’m sure we have all heard that putting away money regularly is key to building a successful portfolio and that trying to time the market is simply a loser’s game. The dollar-cost averaging strategy helps an investor mitigate that risk by putting a fixed amount of money in a stock or fund over time, regardless of fluctuations. It is likely that you are employing this strategy right now if you own a 401K or Roth IRA account to which you contribute at regular intervals.
Federal Interest Rate Hikes
The Fed has announced that they will raise the target for the federal funds rate at the March meeting of the FOMC (Federal Open Market Committee). Fed Chairman Jerome Powell has been vague as to the frequency and magnitude of interest rate hikes throughout the year, but he has been very clear about ending the massive support the Fed has provided to the economy, saying, “This is going to be a year in which we move steadily away from the very highly accommodative monetary policy we put in place to deal with the economic effects of the pandemic.” This announcement comes as high inflation plagues the country. The latest CPI data reports that the inflation rate rose 0.6% in January, bringing it to 7.5% (the targeted inflation rate is 2%). The CPI stands for the Consumer Price Index, which measures price changes in consumer goods and is the primary measure of the inflation rate. Powell, along with the rest of the nation, hopes that the interest rate hikes can cool inflation quickly.
In this episode of Finance Simplified, we put together a summary of the best insights from each of our 30 episodes for you to learn for the new year!
“Every moment in business happens only once. The next Bill Gates will not build an operating system. The next Larry Page or Sergey Brin won’t make a search engine. And the next Mark Zuckerberg won’t create a social network. If you are copying these guys, you aren’t learning from them.” — Peter Thiel