Buck the Trend | The Daily Peel | 6/28/22

Market Snapshot

Futures pointed towards the green Monday morning, with both oil and the 10-year yield moving higher too. Crude had a nice day, moving back towards $110. Both ETH and BTC didn’t do anything exciting.

At the closing bell, markets didn’t make much progress in either direction. The Dow dipped 0.19%, the S&P lost 0.29%, and the Nasdaq shed 0.88%.

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What's Ripe

Energy ($XLE) — Energy stocks had a nice day yesterday on the heels of crude’s progress towards $110 per barrel.

Names like Valero, Devon, and Marathon led the gainers of the S&P. $XLE moved higher, finishing the day up 2.93%.

Chinese Tech ($JD, $BIDU) — Although the $KWEB didn’t have a strong day, JD.com and Baidu Inc. were amongst the Nasdaq’s winners yesterday, finishing the day up 2.52% and 2.58%, respectively.

I’m personally not convinced that Chinese tech companies are the way to go, but on the relatively flat day, investors pumped these cats higher.

What's Rotten

Electronic Arts ($EA) — For some reason, even during a major selloff, some names have weathered the storm this year. Electronic Arts, the “It’s in the Game” people from our childhoods, is in that crowd.

Yesterday, shares of $EA lost 3.53%, and on the year, they are down a mere 7.4%. Not a bad showing, given that they lost half of that decline during Monday’s session.

EA appears to be the odd man out, as its peers like Activision Blizzard and Take-Two Interactive are courted by Microsoft and Zynga. Investors might be starting to ask, “does EA still have a future in gaming?”

Disney ($DIS) — Disney’s stock has been backsliding lately, shedding almost 40% year to date. This puts it in the company of SaaS companies that have little to no revenue, not millions of dollars of infrastructure, and probably not a real estate footprint in the billions… not to mention a budding streaming business.

Whether they are arguing with Florida’s Governor over paying their fair share of state and local taxes or making controversial promises about reproductive care in the wake of last week’s SCOTUS decision, it seems like Disney is always in the news.

Shares of $DIS retreated 1.20% yesterday. Now it’s just ten bucks away from its March 2020 lows.

Thought Banana

Save Your Money? — The savings rate in this country has gone from about 33% of disposable income in April of 2020 (you know why!) all the way down to around 4% in recent months, a level lower than any other time since the Great Recession.

Ironically, people were throwing their money into savings accounts when rates were still basically negative, earning next to nothing on their dollars and probably losing money in real terms.

People are now spending more of their money and not stashing it away for a rainy day.

This is actually counter to what the Fed is trying to do to stave off inflation. Accelerated spending rates and falling savings rates can introduce inflationary pressures into the economy.

It makes sense that saving a third of your income isn’t possible forever (unless you’re from Qatar, the country with almost a 60% savings rate), but this drastic reduction in savings is quite the turnaround from two years ago.

This kind of makes sense; things are more expensive now by like double-digit percentages for everything in everyday life of the average American, and wage growth hasn’t exactly kept up with the price of a decent living.

Annual Percentage Yields on savings accounts around 0.18% aren’t normal; a certificate of deposit for 7 years at 0.69% is a dumb idea. Rising rates are going to change these interest rates.

As we tighten, interest rates on everything will rise. From savings accounts to money market and CDs, but also on credit cards and personal loans, lending money will become more lucrative.

This is healthy for the economy. If you can steer clear of sky-high rates like in the 1980s, a little bit of cost of capital is good for business. It also might motivate people with extra disposable income to put their money into banks and capital markets like they did before their return was going to hover around zero.

As people continue to spend their money instead of saving it in the face of inflation, I have to ask – how will you save money to buck the trend?

Wise Investor Says