šš° It's Time to Pay Your Student Loans
Happy Sunday,
For our audience north of the border, we hope you had an amazing Canada Day yesterday! For my Americans out there, let us know what plans you have for the 4th! Iām going down to a friendās house in Redwood City (where I grew up, actually!), and weāre going to BBQ hot dogs and burgers. Itās been cold in SF lately, but the south bay is usually warmer due to the microclimate. The Bay Area has some weird waters around the city that keep it temperate - not sure how the science works though lol. Itās a good thing I make finance videos and not science videos.
Enjoy the Sunday Primer!
- Humphrey, Tim & Rickie
Market Report
Times Up! Student Loans to Resumeā¦
The U.S. Supreme Court has nullified President Joe Biden's student loan forgiveness plan, which could have eliminated up to $20,000 per borrower. This development comes amidst rising debates about the value of college education, given the increasing tuition costs and stagnant wages. The suspension of student loan payments, first initiated in March 2020, is set to end in August, with the average pre-pandemic student loan payment amounting to about $400 a month.
For those who may not be able to afford the monthly bill, there are several income-driven repayments (IDR) options available. Under these plans, the payment is determined as a percentage of the borrower's discretionary income, potentially leading to zero payments depending on the borrower's income. Alternatively, the Public Service Loan Forgiveness Program can forgive the remaining balance after 120 qualifying payments, with the catch that you must work for a qualifying employer.
Banks Increase Dividends After Passing Stress Tests
Major US banks, including JPMorgan, Wells Fargo, Morgan Stanley, and Goldman Sachs, have announced increased dividends after passing this year's Federal Reserve stress tests. Citi, despite a higher capital requirement due to its test results, also raised its quarterly dividend.
The Fed's findings indicated that all 23 large US banks could endure a severe global recession and upheaval in the real estate markets, typically leading to significant returns to investors through dividends and stock buybacks.
The new dividends announced by the banks saw increases across the board. Citi raised its quarterly dividend from 51 cents to 53 cents, Goldman Sachs from $2.50 to $2.75, JPMorgan from $1 to $1.05, Morgan Stanley from 77.5 cents to 85 cents, and Wells Fargo from 30 cents to 35 cents. However, the banks are preparing for increased regulatory scrutiny in the months ahead, with the anticipated introduction of new rules and a revamp of the Fedās supervisory process following the collapse of four regional banks this year.
Goldman Ends It With Apple?
Goldman Sachs is reportedly considering ending its partnership with Apple, potentially disrupting a collaboration that helped the tech giant expand into financial services. According to the Wall Street Journal, Goldman Sachs is in discussion with American Express for them to take over the Apple credit card and other joint services. Apple has been increasing its focus on financial offerings as part of a broader strategy to boost revenue from services, which accounted for around 20% of its sales last year.
Fears of Market Bubble Increase
Investor concerns about an AI-driven bubble and a Federal Reserve set on controlling inflation through higher interest rates have led to the withdrawal of nearly $44 billion from US stock mutual funds and exchange-traded funds (ETFs) that track growth shares since the start of the year. Although the Nasdaq 100 Index has experienced a 37% surge in 2023, primarily driven by five major tech companies (Apple, Microsoft, Alphabet, Amazon, and Nvidia), investors are increasingly worried about unsustainable stock valuations. These five tech giants constitute about 40% of the weighting in the Vanguard Growth ETF and the iShares Russell 1000 Growth ETF, two of the biggest large-cap growth funds.
Despite this exodus, there are signs that the tech rally still has some fuel left, with mutual funds and ETFs holding just 18% of US stocks by market value and nearly 70% held by hedge funds, pension funds, life insurance companies, and retail investors.
The market now faces a key inflection point as earnings season approaches, with Big Tech firms' performance expected to set the marketās tone.
Forecast Ahead
Big Number: 466,140
Tesla set a new company record by delivering 466,140 cars worldwide in the second quarter, surpassing Wall Street estimates and marking a significant increase of 83% from a year ago. The delivery figures reflect CEO Elon Musk's strategy of volume growth through price cuts. Additionally, the company managed to reduce the discrepancy between production and deliveries to 13,560 units in the second quarter, addressing concerns about inventory buildup.
To stimulate vehicle sales, Tesla not only cut prices across its lineup but also introduced incentives, such as three months of free fast-charging in the US for cars delivered before June 30. While Tesla remains the largest EV maker in the US, it faces growing competition globally, especially in China, its second-largest market. Tesla recently reduced the prices of its premium car models in China by over 4.5% and offered cash subsidies to some Model 3 buyers. The company plans to announce its second-quarter earnings on July 19.
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