US tech stocks worth more than European stocks, what are investors doing to hedge inflation, how are the ultra-wealthy spending their money, what is a 'diversity rider' and we're tracking Lovevery
Weekly newsletter for women who want to be smart about money: financial news, personal finance and investing
Welcome to our #35 weekly newsletter in 2020.
Every week we curate key content and apply a female-lens so you can stay informed and inspired about money and investing.
Stay in the know.
Keep on top of global economic, financial and investing news and trends. And read about what this means for you and your money in 2020 during Covid-19 and beyond.
If you’re short on time, listen to the editorial on audio for a brief overview.
“Our mission is to help women take control of their financial future”
-Jana Hlistova
From The Purse…
Editorial from the Founder
Global equities are now worth over $90trillion+ which is the highest value in history.
And wait for it: the US tech sector has now overtaken European stocks in value (this is including the UK and Switzerland).
The Federal Reserve has announced a major shift in policy: they will let inflation rise above the target 2% (which means that interest rates will remain unchanged).
The UK Chancellor, Rishi Sunak is drawing up plans for the November budget which could mean that capital gains and corporation tax will go up, and the tax relief on pensions may change.
According to the WealthX Report, the ultra-wealthy are changing the way they ‘do luxury’: there is a shift to luxury experiences in the home and the private jet market has had a boost.
Investors are hoarding gold, bitcoin and whisky to hedge against inflation.
Read about Salesforce beating its Q2 estimates for revenue and profits, and its updated guidance for the second half of the year.
We spotlight the Fed’s shift in policy and what is a ‘diversity rider’?
And check out a US startup Lovevery, co-founded by Jessica Rolf who redesigned how children play through learning.
If you have time, watch the TED talk with Naomi Klein about how societies are often addicted to extreme risk.
Stay safe, look after yourselves and your loved ones.
I hope you enjoy this week’s newsletter. Until next week,
Jana
The Big Picture
Global markets and economy news, trends and indicators
The Coronavirus Effect:
Global equities are now worth $90tn+ (the highest value in history)
Why? Big tech stock (eg Apple) has surged in value since the pandemic.
The S&P 500 had its best August since 1986.
The S&P 500 & the Nasdaq reached an all time high.
The Dow Jones erased its losses for 2020.
The US tech sector has now overtaken the value of the entire European stock market.
US: the Federal Reserve announced a major policy shift
The central bank will be more inclined to allow inflation to run above the target rate of 2% (before raising interest rates), also referred to ‘average inflation targeting’.
The Fed also shifted their focus to employment in the low end of the income spectrum.
UK Chancellor: budget to hit pensions, second homes and businesses
Treasury officials are drawing up plans to plug UK’s finances.
Under proposals that are due to form the centrepiece in the November budget:
Corporation tax could go up from 19% to 24% (the global average tax rate).
Capital gains on second homes could go up to 40%-45% instead of the current 28%.
Pensions tax relief: a plan to set a single 30% flat rate relief was previously worked up by the former chancellor.
UK: Bank of England (BoE) says ‘going big and fast’ is an important QE tool in times of trouble
On Friday, Andrew Bailey, the governor for the BoE said the pace of quantitative easing or ‘printing money’ is another way central banks can influence the economy (during times of crisis).
And the Bank will not tighten monetary policy (eg increase interest rates) until there is significant progress in an economic rebound.
Global dividends plunge by $108bn
Large firms cancelled or cut dividends (due to the pandemic) between April and June. In the UK, payouts fell by more than 50%.
US: consumer spending rose by 1.9% in July (vs the predicted 1.5% growth)
Personal income rose by 0.4% vs a predicted fall of 0.5%.
Canada: a record fall in real GDP 11.5% (Q2)
Q2 GDP dropped at an annualised rate of 38.7%.
June real GDP rose by 6.5%, offsetting some of the March and April declines.
Future Focus
Keeping an eye on key predictions, innovations and what’s going to impact the future
US: 80% of economists see a chance of a double-dip recession
According to a survey by the National Association of Business Economics, 4 in 5 respondents said they see at least a 25% chance of a ‘double-dip’ recession.
The median panelist expectation was that 40% of business closures would be permanent.
Most said they expected the central bank's near-zero rates to last through 2021, and 24% said they see the rates staying put until at least 2023.
US: Wharton professor says that a second coronavirus wave won’t stop the stock market’s momentum
Jeremy Siegel, Wharton’s finance professor, has said that stocks are forward looking that a short-term lapse in the economy would not stop long-term moves higher.
He also said that the Fed would be a ‘really powerful force’ (by providing liquidity) and so the market will continue to go up.
Therefore we are likely to see a V-shaped stock market because of the ‘forward looking component’.
And cyclical and tech stocks are expected to go higher in 2021.
WealthX Report: the ultra-wealthy are changing the way they ‘do luxury’
Wealth-X has published The Global Luxury Outlook 2020 and some key highlights include:
the wealthy & the ultra-wealthy are still spending albeit how they spend their money has changed.
there has been a shift to luxury experiences in their own homes.
there has been a boost in the private jet market.
The top luxury cities are: New York, Tokyo, Hong Kong, London and Paris.
Women are more likely to favour art and jewellery. And men prefer classic cars, horses and sports teams.
The report also found that the ultra-high net worth individuals with inherited wealth are more likely to have an affinity to luxury than those who are self-made.
Your Money
Insights, trends and what this means for you and your purse
British workers have ‘no idea’ how their pension works
According to a Hargreaves Lansdown survey: just 22% of women understand pensions are invested in the stock market.
2 in 5 men are aware of where their retirement savings are held.
Less than a third of workers knew company pension is invested.
Investors hoard gold, bitcoin and whisky to sooth inflation fear
Gold has gone up 60% in the last decade (gold hit a record $2,064 an ounce, up from $1,700 at the start of May).
Bitcoin has increased 60% this year (to approximately $11,300), but it is still down 40% since its peak in 2017.
Whisky is a new favourite asset: whisky in casks—at least 4,000 litres of it, stored in a warehouse in Scotland.
Companies: winners & losers
Companies to watch and share price movements
Salesforce rallied 29% on blockbuster earnings (Wednesday) and boosted full-year forecast
The cloud-software leader beat estimates for Q2 revenue and profits:
Subscription and support revenue surged 29% year-over-year, to $5.15 billion.
Updated guidance for the second half of the year: 17% growth for full fiscal year 2021 has been replaced with 21% to 22% growth, or revenue of at least $20.7 billion.
Corporate clients have rushed to upgrade technology during the work-from-home shift.
Salesforce has been added to the Dow Jones Industrial Average, supplanting ExxonMobile.
Workday jumps 12% (Friday) after beating earnings for Q2 and revenue
Workday is a cloud technology company which provides enterprise customers with a finance, HR and planning system.
Revenue: $1.06 billion, versus the $1.04 billion estimate from economists surveyed by Bloomberg.
Full-year subscription revenue: between $3.73 billion and $3.74 billion, versus the $3.7 billion estimate
Workday reported growth among companies looking to navigate the coronavirus pandemic and shifts to telecommuting.
The firm recently partnered with IBM for helping clients plan and monitor returns to offices.
In the Spotlight
Is there a topic you'd like us to Spotlight? Please tweet @jointhepurse
The Fed’s shift in policy: rising inflation & what should investors think?
The Federal Reserve’s change in long-term policy, announced this week to let inflation rise (above its target rate of 2%), highlights the importance of central banks managing future periods of market disruption to aid economic recovery.
This continues to distort asset prices and nurtures recurring bubbles.
By letting inflation rise, the Fed will not be increasing interest rates any time soon. (This protects businesses and consumers and the hope is, this will fuel economic recovery without too much permanent damage).
The Fed has also shifted its definition of full employment for the economy: instead of raising interest rates once the unemployment rate drops below a certain level, officials will wait until a tight jobs market has begun pushing inflation higher (before they take action).
Some argue that the Fed is allowing the US to run hotter for longer before it considers raising interest rates.
Will this policy work? Only time will tell.
Have You Seen This?
Female-focused news, reports, research, campaigns
US: Venture firms embrace ‘diversity rider’
A group of 10 venture firms took a concrete step toward increasing the industry’s diversity this week, pledging to include a new ‘diversity rider’ in their terms sheets.
Alejandro Guerrero, a principal at Act One Ventures created the Diversity Rider program to generate opportunities for diverse check writers to participate in deals.
The language reads:
Diversity Rider: In order to advance diversity efforts in the venture capital industry, the Company and the lead investor, [Fund Name], will make commercial best efforts to offer and make every attempt to include as a co-investor in the financing at least one Black [or other underrepresented group including, but not limited to LatinX, women, LGBTQ+] check writer (DCWs), and to allocate a minimum of [X]% or [X] $’s of the total round for such co-investor.
Know this: startups led by underrepresented founders often find it difficult to access capital in order to grow their business. Globally, angel investors and venture capital investors tend to be white, male and of a certain age. It has been proven that investors look for pattern recognition when they invest, meaning if a founder ‘does not look like them’ or if the founder’s product or service is outside of their frame of reference, they are less likely to invest. Introducing diversity into decision-making is more likely to break up ‘groupthink’ and dispel unconscious bias.
What We’re Tracking
Female-focused products or services, start-ups and businesses led by women, investment and research.
Lovevery (US)-cofounded by Jessica Rolf and Roderick Morris: they have redesigned how children play through learning.
Based on the research, Lovevery creates staged-based play essentials designed by experts that promote brain development.
The start-up has attracted Silicon Valley investors including Google Ventures and the Chan Zuckerberg Initiative.
Money Habits of the Week
Do you have a money habit you would like to share with us? Tweet @jointhepurse
Research gold as an investment and the different ways you can invest.
Check out the World Gold Council to learn about gold as an asset.
Research online platforms that allow you to invest via ETFs ie gold backed exchange traded funds.
What We’re Watching
Naomi Klein is a public intellectual, journalist and activist.
Watch this TED talk about how societies have become addicted to extreme risk in finding new energy, new financial instruments and more ... and too often, we are left to clean up a mess afterward. What's the backup plan?
Coffee Break? Read This
We’d love to hear from you. Get in touch with Jana via the The Purse website or tweet @jointhepurse and @janicka.
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