The Fed Fights Inflation, the Markets Fight the Fed (4 min read)
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The traditional wisdom of "Don't fight the Fed" is currently being challenged as investors are now betting against the Fed's intention to keep policy tight. The market is expecting significant interest rate cuts this year despite stable inflation and a resilient US economy. However, this article argues that there are still three key elements of uncertainty; the growth outlook, inflation and real interest rate, and how the Fed will respond to it. As these elements become clearer, it will determine whether or not investors have picked the wrong fight.

US Consumer debt passes $17 trillion for the first time (2 min read)
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The total US consumer debt reached a new high in the first quarter this year, surpassing $17 trillion despite a sharp pullback in home borrowing. The number is up 0.9% from the previous quarter and about $2.9 trillion higher than the pre-Covid period in 2019. The delinquency rates for debts like credit cards and auto loans have also increased to the highest since late 2020. Meanwhile, mortgage loans and refinancing declined to their lowest since 2014, with higher interest rate contributing to the slowdown.

EU approves Microsoft’s $69 billion acquisition of Activision Blizzard (5 min read)
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EU regulators approved Microsoft’s proposed $69 billion acquisition of Activision Blizzard as the company offered remedies in the area of cloud gaming that eliminated antitrust concerns. The approval is a huge win for Microsoft since the UK’s top competition authority blocked the deal last month. Regulators globally have been probing whether Microsoft’s acquisition could distort competition in the console and cloud gaming market. Despite the EU approval, Microsoft still faces a tough task of convincing other regulators, including the US Federal Trade Commission.

Shake Shack’s Shares Rise After Activist Investor Takes Stake (2 min read)

Shares of Shake Shack rose 8% on Monday after activist investor Engaged Capital have taken a stake in the company and is pushing for changes to help further boost profitability. Shake Shack faced many challenges during the pandemic but has since been on track to bolster growth. The company has implemented strategies like adding order kiosks and introducing new menu items to help improve margins, which led to earnings exceeding analysts’ expectations in Q1. Its stock has risen 70% this year, significantly surpassing the S&P 500 Restaurants Index.

A Potential Cure for the Go-Nowhere Stock Market (3 min read)

The returns on the S&P 500 over the last three, seven, 12, and 25 months have been mostly stagnant. Until more signs that this pattern will end, investors could consider covered call ETFs for some relief. They utilize a covered call writing strategy in a portion of their portfolio to receive premium payments in exchange for limited upside returns. This means that investors in these ETFs can stay invested and earn some income at the same time while waiting for a clearer long-term market trend to develop. This article highlighted a few covered call ETFs to consider.

Investors dump mutual funds for equities too, not only ETFs (3 min read)

Investors are shifting away from mutual funds and towards individual stocks, according to a new research. The proportion of investments held in mutual funds by millennials decreased from 57% in 2018 to 40% in 2022, while direct equity holdings increased from 19% to 33%. A similar trend was seen among baby boomers as well. ETFs also experienced growth during that period, but direct equity holdings saw the largest increase. This trend is expected to continue, driven by the popularity of passive investments and personalized portfolios.

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Thanks,
Thomas

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