THE MARKETS

 📈 The Fed doesn’t seem willing to lower rates as rapidly as it raised them.

 💼 Market Reacts as Fed Stays Put

In its keystone meeting this week, the Federal Reserve decided to hold interest rates steady for the fourth FOMC meeting in a row. The federal funds rate (which is the rate that impacts most other interest rates) is currently set at 5.25% to 5.5%.  

The stock market dropped in response to the decision, as investors were looking forward to more positive news. Investors had widely anticipated potential rate cuts early in 2024, but the Fed’s decision and subsequent remarks dampened this notion. 

The central bank’s Chairman Jerome Powell stated, “The median participant wrote down three rate cuts this year. But I think to get to that place where we feel comfortable starting the process, we need some confirmation that inflation is, in fact, coming down sustainably to 2%.” 

That said, the Fed did not dismiss plans to cut interest rates at some point this year, although analysts now expect it may be months away. Moreover, the pace at which it cuts rates will likely be much slower than the pace at which they were raised. 

👀 What to Be on the Lookout for This Week

These are the biggest economic reports to look out for 

Monday: ISM Services PMI
Tuesday: TIPP Economic Optimism Index, Total Household Debt
Wednesday: 30-Year Fixed-Rate Mortgage, Trade Balance
Thursday: Initial Jobless Claims
Friday: No Major Reports 

Additionally, these are the companies reporting earnings next week that you should know about: 

Monday: Caterpillar, McDonald’s, Tyson Foods 
Tuesday: H&R Block, Toyota, Chipotle Mexican Grill, Western Union, Ford, BP, Eli Lilly, Spotify
Wednesday: Walt Disney, Alibaba, Uber Technologies, CVS Health, PayPal, Allstate, Hilton, Spirit Airlines 
Thursday: Ralph Lauren, Hershey Company, Affirm Holdings, Unilever, Cloudflare
Friday: PepsiCo, Honda  

📰 In Other News

Tesla To Texas?

When your CEO is Elon Musk, you typically get the best and worst of both worlds — an issue that Tesla shareholders know too well by this point. 

Tesla’s stock is up over 800% over the past five years partly thanks to Musk’s ability to position the company as an EV leader. Now, Elon Musk has big plans to expand the company into AI and robotics. But only if it’s on his terms. 

First, Musk stirred up some drama by demanding that his voting share of the company be expanded to 25%. It currently sits at 13%. Musk stated that if the company failed to expand his voting share then he might prefer to build AI products elsewhere. On top of that, Musk is now demanding that the company reincorporate in Texas, after a Delaware judge struck down his $51 billion compensation package. 

Microsoft’s Earnings Ride the AI Wave. Microsoft reported blockbuster earnings this week, tallying $62 billion in sales over the quarter, topping estimates of $61.1 billion. Microsoft has been so successful over the past year that it officially crossed the $3 trillion market capitalization milestone in January 2024. For a brief period, it overtook Apple as the world’s most valuable company. Microsoft’s success over the past year has been fueled by its investments in generative AI — particularly, its stake in ChatGPT owner OpenAI. 

AI Entertainment Onslaught. In related news, AI job cuts are starting to take form in the entertainment industry. A new study estimates that AI will disrupt 204,000 jobs nationwide within three years. These cuts could take place across film, TV, music, and gaming for roles in 3D modeling, character design, voice cloning, and sound design.

Wall Street Stops Drug Testing. Some of America’s biggest banks including Goldman Sachs, Bank of America, Citigroup, Wells Fargo, and Morgan Stanley have announced that they will no longer be requiring drug tests for job seekers. Since the banking industry is a large and respected industry, this policy could well trickle over into other sectors.

YOUR ECONOMY

📲 Gen Z’s Uphill Financial Battle

Small Wins

The aspiration of nearly every generation is to leave the world in a better state for their children. However, according to a new report by the Pew Research Center, Gen Z has found themselves in a far less favorable position than their parents to do so. The data Pew collected shows that today’s young adults are reaching key milestones later in life than their parents did in the 1990s.

To start on a positive note, the study reveals that today’s adults are far more likely to have a college education and hold full-time positions compared to their parents. This trend was particularly pronounced among women, who continue to permeate both higher education and the workforce in increased numbers. 

That said, the cost associated with acquiring this education appears to be having a negative impact on the financial well-being of many young adults. The rising cost of higher education has led to increased student debt, making it harder for them to reach other life goals, like buying a house or starting a family. Even though today's young adults are better educated and more likely to hold full-time jobs, they're also dealing with different challenges than their parents. Finding the right balance between the advantages of education and career growth, along with the financial strain it brings, is a major concern for this generation.

Two Major Issues

According to the popular ranking site BestColleges, the average student today graduates with more than $37,000 in student loan debt — no small sum. 

On one hand, going to college typically implies that you’ll be able to land a higher-paying job, which will better position you to pay off this debt. However, as the cost of college continues its upward trajectory, more and more young adults are questioning whether the benefits of a higher education are worth the costs. 

A study by CNBC paints a concerning picture. The findings reveal that a whopping 81% of individuals with student loan debts have had to delay important life milestones. Many of these young adults say that they’ve postponed decisions such as buying a home or a new car, or simply starting a savings account for retirement. This outsized student loan debt can even cause some to delay starting a family.  

Student loan debt isn’t the only uphill battle that Gen Z is facing. Even after they’ve paid off their student loans — an immense task in and of itself — today’s young adults are confronted by one of the most unaffordable housing markets in over a decade. 

In 2023, a homebuyer with the median US income would need to allocate a record-breaking 41% of their earnings on monthly housing costs, according to a study by Redfin. This rate has been on a continuous upward trend, rising from 39% in 2022 and 31% in 2021. Simply put, for those homebuyers who receive bi-weekly paychecks, nearly 100% of the first check each month will go directly toward rent or mortgage payments. The combination of surging home prices and rising interest rates — and, in turn, higher fixed-rate mortgages — has made the prospect of buying a house incredibly challenging for Gen Z.  

Worse yet, the high housing expenses aren't limited to homebuyers. The costs of renting an apartment have also been on the rise. The challenge of affording the basic need for shelter is a large part of why 31% of Gen Z individuals find themselves still living with their parents.

Chasing Financial Independence

If you are a younger member of society and are feeling stressed about your finances, don’t panic. You’re not alone. Only 45% of adults ages 18 to 34 are completely financially independent from their parents, according to the Pew study. 

When you’re struggling financially, it’s easy to blame yourself and feel as if you’re not working hard enough to make ends meet. However, this likely isn’t the case. If you’re like most young adults, then having a lack of financial resources isn’t your fault, but rather the result of soaring education and housing costs.  

With this in mind, making tough but wise fiscal decisions, such as living with your parents to save money, shouldn’t be a mark of shame, but a point of pride. 

 🤔 Remote Workers: Out of Sight, Out of Mind?

Working remotely has been surging in popularity ever since 2020 — and for good reason. The COVID-19 pandemic forced many companies to shift into remote work mode quickly. The work-from-home arrangement has opened up many new possibilities for both employers and employees. Many employees in particular still prefer working from home thanks to benefits like convenience and flexibility.  However, while remote work comes with dozens of plus points, increased job security might not be one of them.

A new study from Live Data Technologies shows that remote workers are 35% more likely to be laid off than employees who show up at the office. To conduct this study, Live Data Technologies looked at data from two million white-collar workers and determined that 10% of fully remote workers were laid off last year, compared to just 7% for those who work at least partially in an office.  Moreover, other studies have shown that remote workers might be less likely to receive promotions than in-office employees. The research attributes this disparity in part to the fact that remote workers tend to receive less mentorship than those working in an office. 

Building Relationships

From the outset, it is worth noting that several industry insiders have pointed out this dataset might be somewhat skewed. Remote workers are highly concentrated in the tech sector, which has experienced waves of mass layoffs over the past year. Live Data Technologies’ findings could largely be the result of last year’s tech sector restructuring. However, anecdotally, it makes some sense why managers may choose to let go of a remote worker over someone working with them in the office. Remote employees often have fewer opportunities and avenues to build interpersonal relationships with their colleagues, and this lack of familiarity and rapport often can extend to management. When it comes time to make difficult staffing decisions, a manager could favor the faces they see every day. On a related note, recruiters say most managers prefer not to fire a worker face-to-face. It’s much easier to lay off an employee over a quick Zoom call, which is another disadvantage for remote workers reliant on virtual tools as their sole means of workplace communication.  Additionally, the study found that managers perceive in-office employees as harder workers. A Gartner survey in 2021 found that almost 70% of executives believed that in-office workers were higher performers than remote employees. Whether the perception is reality is beside the point. The fact that it may be informing a manager’s decision is what matters to remote workers. It’s like the old philosophical question: “If a tree falls in a forest and no one is around to hear it, does it make a sound?” In other words, if a manager can’t see an employee working, are they working at all?

WFH vs. In Office

Working remotely certainly comes with numerous benefits, like putting an end to the hassle of the daily commute, having more time to spend with family, or simply being able to show up to work in sweatpants. But working in an office has its advantages too. These employees can build closer relationships with their colleagues, which provides an easy way to get daily social interaction, in turn possibly even boosting productivity and mental health. Additionally, there are many other in-office perks companies have begun to offer in order to entice employees back, including paid lunches and gym memberships. Ultimately, the decision of whether to work remotely or in the office depends on your company’s policy, as well as your personal preference. Depending on each person’s unique circumstances, opting to work a fully remote schedule might be worth considering, despite the potential job security concerns. However, if given the choice to work remotely, hybrid, or in-office, the data reveals that it may be a good idea to consider spending at least two days per week in the office.  Showing up to work regularly and building rapport evidently does have long-term benefits — even if they may not be evident immediately.

POCKET CHANGE

Investors expect Reddit to fetch a 5 billion valuation in its potential IPO. The social media company is reportedly planning to go public in March.

 Amazon canceled its planned acquisition of iRobot over opposition from regulators. The Roomba parent company subsequently announced plans to lay off over 30% of staff, and its CEO will be stepping down. 

The University of Michigan's consumer sentiment index experienced its largest two-month gain in 30 years. This rise is partly credited to the soaring stock market, coupled with comparatively low gas and egg prices. 

Employers are valuing people skills more than ever. This can be attributed in part to the rise of generative AI, as many employers feel that AI tech will work best alongside human workers, rather than replacing them altogether.  

All major streaming services now require a premium plan to avoid ads. This became official after Amazon Prime introduced ads into its existing Prime Video streaming service and rolled out a higher priced ad-free tier.