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The Threecap
Three things to recap this past week.
1. Robust Heading into Finals Week
After refueling the past few weeks, bullish investors once again took over the market as the S&P, NASDAQ, and Dow Jones all rose of over 2% this past week. Large-cap growth stocks outperformed so-called value stocks for the second week in a row. In contrast to growth stocks, oil, as well as most commodities, fell. Even the ship stuck in the Suez Canal couldn’t make up for investors’ belief that the oil demand is dropping. As electric vehicles become more popular, the amount of oil usage will likely drop severely, leading to what we saw this past week.
In total, the strong jobs report released on Monday shouldered most of the burden of boosting economic growth this week. Looking to the future, investors are hopeful for future growth heading into quarterly earnings season (mid-April). Quarterly earnings season will truly serve as a test of the COVID recovery. Like a game of March Madness, if a company loses their edge come earnings time, they’ll be sent home with major losses.
2. COVID-19 Update
As states open up restaurants and lift restrictions, US COVID-19 maintains an upward trend for the fourth week in a row. Less social distancing and fewer mask mandates are likely fueling this brief spike in cases. Without intervention, the US may likely see another spike in cases heading into the summer season. Cases are up another 2% this week, after an increase of 3.4% last week.
The state of Georgia became the 3rd state to shut down the Johnson & Johnson vaccine sites after adverse reactions occurred. This vaccine has been likened to a miracle for communities stricken with poverty primarily because it only requires an efficient one shot. Most CDC doctors believe these adverse reactions are due to the vaccine’s high potency and that there is no serious issue at hand.
Finally, scientists have presented a growing pool of evidence that as many as 1 in 3 COVID-19 survivors will deal with mental health disorders or neurological disorders within a half-year of the infection.
3. Semiconductor Shortage Spell Trouble for Tech Stocks
Semiconductors are the bread and butter behind technology ranging from medicine to communication. As the backbone of most technology, the demand for semiconductors has skyrocketed due to the pandemic and electric vehicles. Consumer electronics are in even higher demand during the pandemic, leading to a shortage of semiconductors.
Even more concerning is the geopolitical risks for semiconductor production if China invades Taiwan. Both countries are integral in the supply chain of semiconductors, so President Biden is pushing for the creation of a less-reliant supply chain of these. If China does invade Taiwan and the demand for semiconductors continues to grow, the price for these integral parts will lead to higher-priced tech and lower margins for companies that buy semiconductors. Already, Nintendo has had to slow down the production of their flagship devices due to this shortage. In the worst-case scenario, companies might have to bid for semiconductors, raising the price even higher, leading to higher costs.
Featured Articles
What Exactly Is A Bitcoin?
On Halloween 2008, in the midst of the financial crisis, a paper titled Bitcoin: A Peer-to-Peer Electronic Cash System was sent to a cryptography mailing list. The paper was written by an anonymous person (or persons) named Satoshi Nakamoto. Nakamoto described Bitcoin as a digital currency that would allow transactions between two parties without a financial institution facilitating the transaction. Three months later, Nakamoto officially launched the Bitcoin network. It took a year for the first known commercial transaction to occur on the network, when two Papa John’s pizzas, worth $25, were purchased for ₿10,000 bitcoin. Today, a single bitcoin is worth around $50,000…
Starting An Emergency Fund
An emergency fund is exactly what it sounds like — it’s an amount of money you save and use in case of any kind of emergency, like your car breaking down on the highway. The goal of this fund, rather than traditional savings or retirement accounts, is to minimize the effects of an emergency, especially a costly one. An emergency fund should have “at least 3 to 6 months’ worth of expenses.” But how does one even begin to start saving up an emergency fund?
Recent Podcast
In this episode, our hosts Alex Patel and Rohan Gupta talk to Aaron Brown, the former Chief Risk Manager at AQR Capital Management, about quantitative finance. They delve into topics like the basics of quantitative finance, the history of quantitative finance, common misconceptions, how quantitative finance approaches risk management, and much more!
Student Showcase
Shiv Mehta
Sophomore at Ravenwood High School
How did you become interested in finance?: Most kids my age (16) get common gifts for Christmas — video games, clothes, gadgets, and other day-to day-items. But this past Christmas, I received a gift that changed my life. My parents gave me $1,000 to invest in the stock market through Robinhood ©. At first, I was confused. I knew it was a large sum of money, but I was not sure what I would do with it. Only after I began researching and learning about investing did I truly understand the true value of my gift. Spending the rest of Christmas break watching hours of content from financial advisors, I gained an understanding of core concepts. I realized how fortunate I was to get an early start in this new world of finance, and became devoted to my goals for investing Since then, I have continued my studies of the stock market, and am actively building my investment portfolio. I use every dollar of gifted money from parents and grandparents to invest, and plan on investing saved money for the rest of my life.
What does financial literacy mean to you?: After researching the financial literacy gap in America, I realized that personal finance education is more important than ever. Unfortunately, those who need it the most are often the least likely to receive it. When discussing the value of financial literacy, I believe there are perspectives that must be shifted. Here are some of my key takeaways: risk (n.) the number one barrier to investing money and financial literacy overall. To most people, the stock market seems like an endless black hole waiting to suck you in (and your money). You know that there’s potential for profit, but even more potential for loss. But without investing our own money, how could we know the outcome? How can we give up the ability to build our wealth because of fear? Like Suzy Kassem said, “Doubt kills more dreams than failure ever will.” Learning about StreetFins and their noble mission inspired me to contribute as best I could in the fight against financial illiteracy. Therefore, I have put together a slideshow that gives new investors a basic understanding of the stock market and investing overall. It contains explanations of key concepts, a reflection on my personal experience, and a list of educational resources that I use and recommend. My slideshow is now publicly available at this link. I believe that StreetFins can help me reach my personal goals for investing, and also influence my peers to explore this useful subject. For this reason, I plan on registering a StreetFins chapter and creating a StreetFins club at my own school.
Finance Tip
“The trick is not to learn to trust your gut feelings, but rather to discipline yourself to ignore them. Stand by your stocks as long as the fundamental story of the company hasn’t changed.”— Peter Lynch