The US stock market fell sharply on Monday as investors are concerned over the possibility that the Feds will hint at another big rate hike to stomp out inflation in September. Traders are split 50/50 on whether the interest rates will increase by 50 bps or 75 bps. All eyes are on Fed Chair Jerome Powell’s speech later this week at the Jackson Hole meeting, looking for clues on how aggressive the Feds will be on future rate hikes. The S&P 500 is down 13% for the year and the NASDAQ is down more than 20%.
AMC stock price dropped 58% so far year to date and it slid another 42% today after the new preferred stock APE started trading. APE is essentially a two for one stock split and it is seen as a tool for the company to raise additional cash. Cineworld, one of AMC’s largest competitors, said it is considering filing for bankruptcy which added more concerns to the financial health of AMC. The movie theater industry has been struggling with the lack of blockbusters coming and people getting more comfortable with streaming services at home.
The euro breached below parity with the US dollar again and hit the lowest level since 2002. The main culprit was the surging gas price that was triggered late last week when Gazprom announced it is planning maintenance on the Nord Stream 1 Pipeline. Some believe that the maintenance is just an excuse for a prolonged shutdown of the line. This sets a gloomy tone into the future with fear of shortages and concerns of a severe economic downturn.
Blackrock launched a new suite of ETFs that provide buy-write strategies on 3 of their fixed income ETFs - iShares 20+ Year Treasury Bond ETF (TLT), iShares High Yield Corporate Bond ETF (HYG), and iShares Investment Grade Corporate ETF (LQD). The goal is to provide investors an increase in yield during a rate volatile environment. Each ETF has two potential income sources, one from the premiums selling the monthly call options and the other is the yield from the underlying ETF.
Hedge funds are positioning themselves to bet the Federal Reserves will have another big rate hike in September. Collectively they have placed big shorts in the futures market and the position has more than tripled in size over the past month. The FOMC minute last week was ambiguous whether they were hawkish or dovish, which made the Jackson Hole meeting a key event where Fed Chair Jerome Powell will be speaking.
A golden standard in budgeting is to use the 50-30-20 strategy to allocate your income where 50% goes to things that you need, 30% to things that you want, and 20% towards savings and investments. Although saving 20% from your paycheck is a common recommendation, how much to save really depends on your financial goal and what you need the savings for. The important thing is to get into the habit of saving regardless of how much you put aside.
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