Highlights: Stocks tumbled on Wednesday as the Fed continued to hike rates while also acknowledging turmoil in the banking sector could potentially slow the already fragile economy. On a bullish note, the latest Fed projections called for just one more hike this year.

Fed hikes rates by a quarter percentage point, indicates increases are near an end (5 min read)
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The Fed has raised interest rates by 0.25%, stating that future increases are not guaranteed and will depend on incoming data. The terminal rate was left unchanged at 5.1%. The decision came amidst a banking crisis, and the statement suggested that it was uncertain how recent events would impact economic activity, hiring, and inflation. The Fed acknowledged that the events in the banking system were likely to result in tighter credit conditions. Markets reacted negatively, with stocks falling during and after Fed Chair Jerome Powell's news conference.

Analytics Shows Buy Now Pay Later Usage Is Higher Amid Economic Concerns (4 min read)
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Consumers are increasingly turning to buy now pay later (BNPL) options to manage living expenses amid rising inflation and economic uncertainty. Online groceries and home furnishings have shown the strongest growth in BNPL orders, with groceries up 40% and home furnishings up 38% in the first two months of 2023. Consumer cost-of-living expenses are also on the rise, leading to the increased usage of BNPL to budget their money. While the use of BNPL for less costly goods has fallen, it still raises concerns about the impact on household debt this year.

GameStop stock soars after retailer posts first quarterly profit in two years (4 min read)
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GameStop reported a profit of $48.2 million in Q4, the first quarterly profit in two years and a huge improvement from the $147.5 million loss a year ago. The company has been working to steer itself back to profitability and got there in part by cutting costs. Its turnaround plan was reinvigorated in 2021 after a leadership shake-up, which led its stock riding some short-term, meme stock momentum, but it has since leveled out. GameStop stock was up more than 35% after the news on Wednesday, but still much lower than its 52-week high about a year ago.

US bondholders prepare to sue Swiss over $17bn Credit Suisse wipeout (4 min read)
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US investors are gearing up to take legal action against the Swiss government following its decision to write off $17 billion of Credit Suisse bonds as part of the bank's merger with UBS. The Swiss government used an emergency ordinance to write down the bonds to zero, which has been criticized as a breach of trust in the country's debt securities. If left unchecked, the action may damage debt security trust across Switzerland and Europe. Pimco, Invesco, BlueBay, and Legg Mason are among the investors holding Credit Suisse bonds.

What Are Smart Beta ETFs? (6 min read)
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Smart beta ETFs use a rules-based approach to construct a portfolio, aiming to outperform market-cap-weighted index funds by using factors such as value, momentum, quality, volatility, and size. It combines elements of passive and active management styles and can be classified into various types based on their selection process. While these ETFs offer the potential for higher returns, they also pose risks such as complexity and limited track record. Investors should review the methodology to understand how it is constructed and what factors are used.

Apple and Microsoft Weight in S&P 500 Reaches Record High (2 min read)
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Apple and Microsoft now make up 13.3% of the S&P 500, the highest level on record, as the FAANG stocks have been negatively impacted by macro conditions. Investors concerned about concentration risk may consider using an equally weighted approach, such as the Invesco S&P 500 Equal Weight ETF (RSP). An equal-weighted strategy mitigates size bias and avoids over-concentration by selling relative winners and purchasing relative losers at each rebalance.

That's it for today! You can reply to this email if you have any comments or feedback.

Thanks,
Thomas

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