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You’re reading Investor Junkie’s weekly newsletter that tells you the week’s financial news in less than five minutes.
September 19, 2022
Last week’s market summary (September 12-16, 2022):
- S&P 500: -5.15%
- Dow: -4.16%
- Nasdaq: -5.97%
- Bitcoin: -10.92%
Here’s what we cover today:
Read on to get the scoop on each of these stories and see a quick list of some of this week’s economic events worth following.
What everyone has been buzzing about
1. Ethereum pulled its long-awaited “merger”
You’ve been hearing about it for years, but Thursday it finally happened. The main network of the Ethereum network (which used proof-of-work) merged with the Beacon chain (which used proof-of-stake). Now, as a chain, Mainnet has fully transitioned to a proof-of-stake consensus mechanism.
If this all sounds Greek to you, I recommend it Check out this ELI5 primer on the differences between the work test and the participation test. But the key takeaway is this: the merger will reduce the power consumption of the Ethereum network by 99.95%.
So where do we go from here? First of all, if you own Ethereum, you may now have the opportunity to start earning staking rewards. Major cryptocurrency exchanges com Coinbase i Binance they have already started offering this feature to their users.
And what about Bitcoin? Will you also consider moving to a proof-of-stake model? Right now, that’s highly unlikely. The Bitcoin community tends to view Proof of Stake as more vulnerable to manipulation by those with the most assets (one of the problems with legacy funding that Bitcoin originally set out to solve).
However, if Bitcoin is unable to control its energy consumption, it is likely to face increasing pressure over time to move away from proof of work. Learn more about which cryptos are environmentally friendly >>>
2. The stock market fell after a troubling inflation report
The latest inflation numbers came out on Tuesday and investors didn’t like what they saw. Although many expected a sharp decline, the year-on-year rate of inflation remained stubbornly high at 8.3%.
Stock markets fell on the news in anticipation of more pain from the Fed (aka steep interest rate hikes). Tuesday was the stock market’s worst day since June 2020. And the S&P 500 and Nasdaq ended the week down more than 5%.
Does the stock market still have more to fall? Ultimately, no one has a stock market crystal ball, but Ray Dalio (founder of the world’s largest hedge fund) he thinks the stock could drop another 20% if the Fed rate goes up to 4.5%.
Friendly reminder: During tough stock market times like the ones we’re experiencing in 2022, it’s important to stay with your long term investment plan Reassessing your asset allocation and building more diversification into your portfolio can be smart moves…but panic selling is almost always the wrong thing to do.
guide: How to diversify your investment portfolio >>>
3. A potentially “disastrous” strike by railroad workers was averted
On Friday last week, Labor Secretary Marty Walsh announced that a deal had been reached between rail unions and their biggest employers. Americans breathed a collective sigh of relief as a railroad strike could have sent food prices through the roof. But how NRP noted this weekthe whole ordeal still underscored the fragile state of our US supply chain.
4. Members of Congress are on the hot seat because of their stock trading
In a deeply researched expositionthe New York Times revealed that between 2019 and 2021, nearly a third of senators or representatives had traded stocks during that time period. Even more worrying was that almost a fifth of those lawmakers had negotiated companies that could present conflicts of interest based on the committees they served on.
In many cases, members of Congress bought or sold stock in companies within sectors that their committees had direct oversight of. The NYT report stoked renewed zeal for Congress to pass a bill that would ban its members from actively trading stocks and using “blind trusts.” House Speaker Nancy Pelosi he says that a vote will be held soon, however others say which will not happen until after the half-terms.
5. Starbucks is getting into NFTs
In a story published last week, Starbucks announced a new Web3-based rewards experience called Starbucks Odyssey. A key component of the experience is that customers will be able to earn or purchase NFTs which will in turn unlock new rewards.
Odyssey will also offer a community experience where customers can interact with each other as well as with employees at their local stores. Here are some quotes from the company’s press release:
“For the first time, we’re connecting members of our Starbucks Rewards loyalty program not just to Starbucks, but to each other. Leveraging Web3 technology will give our members access to experiences and ownership that weren’t possible before.”
You can sign up for the Odyssey waitlist nowbut the platform won’t go live until the end of the year.
What to watch out for this week
Here are some notable economic events taking place this week:
- Monday, September 19: NAHB Housing Market Index (September)
- Monday, September 19: AutoZone (AZO) Earnings.
- Wednesday September 21: Federal Reserve interest rate announcement
- Wednesday September 21: General Mills (GI) earnings.
- Thursday, September 22: Costco Wholesale Corporation (COST) earnings.
At IJ, we’re well aware that many other news teams and websites are creating great personal finance content. So each week we like to talk about some recent stories from our peers that we found interesting, eye-opening, challenging, inspiring… or just plain funny.
Here are our picks for this week:
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