This Week: NVIDIA’s Earnings, Fed Policy, and Recession-Proofing Your Money
Economic changes are happening in 2024! What are you supposed to do about it all?
Rate Cuts Were Last Week. This Week, NVIDIA!
Last Friday, a quote from Fed chair Jerome Powell boosted the market… again.
You can find out what he said in the ‘Economy’ section. For now, here’s what the quote did to the markets:
The Dow Jones rose over 400 points, or 1.14%
NASDAQ saw an increase of 1.47%
And the S&P 500 jumped 1.15%
Friday was an exciting day for all indexes. But this week is exciting because NVIDIA’s earnings report is scheduled for Wednesday, August 28th.
In recent years, NVIDIA has dominated the tech sector. Over the last ten quarters, it beat Wall Street’s revenue estimates nine times, and its stock is up 153% year-to-date.
Those numbers are impressive, but will their story be slightly different this Wednesday?
Three weeks ago, NVIDIA reported that design flaws were found in its upcoming AI chips, delaying production by at least three months.
Downsides to keep in mind:
Tech companies like Microsoft and Amazon won’t be able to upgrade the old models in their data centers until the redesign is complete.
It sucks for investors, too; sales projections will almost certainly be affected, which could cause the stock to perform a bit rocky in the coming weeks.
Although, who knows? With so much confidence in AI, investors might shrug off the bad news — it wouldn't be the first time.
We won’t honestly know until Wednesday when NVIDIA addresses the elephant in the room.
If you're an NVIDIA investor, you may want to watch this one closely. I know I will.
Life After Rate Cuts
Last Friday, Jerome Powell finally said the feel-good words, “The time has come for policy to adjust.” But what does that mean?
To answer that you should know what the current policy is.
Here’s a recap if you’re a new reader:
During the pandemic, interest rates were practically zero, the government printed over $13 trillion, and there was so much money in circulation that inflation rose out of control.
So, to stop inflation, Federal Reserve chairman Jerome Powell raised interest rates to discourage Americans and businesses from spending money. This is our current policy: keep interest rates high, rebalance inflation, and avoid causing a recession.
The “adjustments” he’s talking about:
Now that inflation is almost balanced, he wants to lower interest rates to encourage consumer spending again.
He hopes lower interest rates will jump-start the economy and prevent it from falling into a recession. But will it actually work?
Analysts at J.P. Morgan aren’t sure. In the last two weeks, they’ve raised their probability of a 2024 recession from 25% to 35%. They still predict a 45% chance of a recession beginning by the end of 2025.
Your Financial Playbook
No one knows if a recession will occur, but I believe in preparing you for the worst.
So, if a recession is near, do you know how to protect yourself and your money?
If not, here are suggestions to protect yourself:
Build an emergency fund: Don’t wait. Start now! From experience, I suggest at least six months of expenses. You never know how long an economic downturn could last. However, save what you can, starting now.
Pay off your debts: Pay off any personal debt that isn’t mortgage, car, or school-related. Doing this gives your credit score the best chance to survive extended periods of hardship.
Here are suggestions to protect your money:
Rebalance your portfolio: Instead of investing heavily in growth-focused companies, diversify your money into consumer staples, energy, industrials, etc.
Invest in conservative assets: Bonds, artwork, insurance, or REITs (real-estate investment trusts).
Tools and Resources
The Personal Finance section introduced asset classes we haven’t covered in past articles. So, I’m your resource this week.
If you have questions, respond to this email or use the website's comment section. I’m happy to help.
*Attention new readers:
This section usually has downloadable tools and clickable resources to help you grow your finances. These could be Google Sheets downloads, Amazon book suggestions, or links to join one of our investing workshops.
Just like this one: