📦📉 FedEx Shocks the Market!
Hello friend,
I hope you are well. The Fed raised rates again, so now the Federal Funds rate stands at 3% on the low end. This means if you’re looking to buy a house, or finance a new car: rates will be going up - so payments are going to be more expensive.
In YouTube news, we’re trying 4-6 different types of content on the channel in the next few weeks and we’re testing to see which ones you resonate with.
The journey is hard sometimes because we put a lot of effort into our videos. And the metric for success, views, sometimes doesn’t align with our efforts. It can be frustrating as a content creator, but that’s neither here nor there, we’re enjoying the process and we hope you enjoy the videos.
Enjoy this week’s Hump Days!
- Humphrey, Rickie & Tim
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Featured Story
FedEx missed on earnings last week. Badly. And this resulted in FedEx falling 22% in one day, the biggest drop since 1980. The company cited higher fixed costs as volume decelerated, worsening macroeconomic trends, and expenses lagging worsening demand. Both FedEx and UPS saw lower volume of packages this year as the online shopping frenzy of the early pandemic days cools. As such, consumers have made the switch away from material goods and towards spending on travel and entertainment.
This is a big deal for the rest of the market because of FedEx’s position within the global economy. They hold insight into how often people are making purchases and how big the parcels being shipped are. For this reason, FedEx is seen as a bellwether stock meaning they are believed to be a leading indicator of the direction of the economy and their strong earnings usually precede strong macroeconomic reporting. FedEx’s miss on earnings was followed by a 1.3% drop in the S&P 500 the next day.
RSM Chief Economist Joe Bruselas joined Yahoo Finance Live and was quoted saying this about FedEx:
“When you take a step back and you look at FedEx, it’s about as good a bellwether as one could obtain between multinational active enterprises, the American real economy, and their linkage to the international economy.”
Bruselas continued by saying:
“That’s why you’re seeing the sell-off in transportation, rails, and other industrial sectors that have exposure into how we do things, how we buy things, how we move things.”
The market has no shortage of bad news as of late and FedEx’s broadside to investor sentiment comes at a sensitive time for Wall Street. During the regular trading session on Thursday (prior to FedEx’s report), the market dropped 1.1% as a raft of economic data failed to alter the expected course of aggressive tightening by the Federal Reserve amid growing warnings of a global recession.
For an insight into what to look forward to in the markets next week, keep an eye out for the next edition of the Sunday Primer and if you haven’t read the latest edition yet, check it out to get a heads-up!
Weekly News Roundup
S&P 500 Futures Drop After FedEx Stokes Fears About Economy (Reuters)
FedEx missed on earnings badly last week (recap) and even withdrew their financial forecast. The company said its fiscal first-quarter results were hit by global volume softness and that they expected further deterioration of business conditions. FedEx is a bellwether stock, meaning it is believed to be a leading indicator of the direction of the economy. FedEx’s poor performance is not a welcome sign for market optimists.
HY: In addition to this and the rising interest rates, the market has not been in a great place lately. Unless we get some great news in Q4, the market might end the year down.
U.S. Consumer Watchdog Plans to Regulate ‘Buy-now, Pay-later’ Companies (Reuters)
The U.S. Consumer Financial Protection Bureau (CFPB) plans to start regulating “buy-now, pay-later” companies like Klarna and Affirm holdings, popularized by the pandemic, due to worries their fast-growing financing products are harming consumers. The CFPB will issue guidance to align sector standards with those of credit card companies. The watchdog highlighted a lack of standardized disclosures and the potential for consumers to become overextended.
RH: If it truly is interest-free and fee-free, then time-value of money! A dollar today is worth more than a dollar tomorrow. But I imagine that is not how most people are going to see it which is why regulators are worried.
TC: Hoping for more BNPL oversight… To be honest, it just seems like a rebranded form of subprime lending. Is the BNPL model recession-proof? I guess we’ll find out soon.
Mark Zuckerberg’s $71B Wealth Wipeout put Focus on Meta’s Woes (Bloomberg)
Mark Zuckerberg’s big bet into the metaverse has not paid off and while many U.S. tech titans have seen a portion of their wealth erased, Zuckerberg still stands out. His fortune has been cut in half and then some, falling by $71B bringing his total net worth to $55.9B, 20th among billionaires and his lowest spot since 2014. Facebook earlier this year revealed no growth in monthly users, triggering its historic collapse, slashing $31B in one day.
HY: I don’t really know if this matters. The ‘metaverse’ Zuck wants to build will likely take 5-10 years, and the market may be prematurely overreacting. One thing I do know is to not bet against Mark, because he’s proven time and again that his company typically succeeds in the face of “short term problems”.
Charts of the Week
Do you really need to work 100-hour weeks for success?
According to the survey data from the U.S. Census Bureau, America’s top 10% income percentile works 4.4 hours more each week than those in the bottom 10%. While income and wealth gaps are widening globally, it’s interesting to see that higher earners aren’t necessarily working more hours to achieve their larger salaries.