Finimize - ✂️ It might be cutting time

US inflation gave the Fed something to think about | Luxury fashion fell out of fashion |
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Hi Reader, here's what you need to know for May 16th in 3:14 minutes.

🥐 Finimized over a pistachio croissant at Aromi in Cambridge, UK (🌥19°C/67°F)

Today's big stories

  1. US inflation was in line with expectations, so it might be time to bring out the rate-cutting scissors
  2. Three seasoned investors, one big reveal: their top trading idea – Read Now
  3. Burberry’s slow sales did little to convince investors of the brand’s creative revamp

The Action Take

The Action Take

What’s going on here?

Data out on Wednesday showed that US inflation slowed down in April, which might be the Federal Reserve’s (the Fed’s) cue to cut.

What does this mean?

The consumer price index tracks how the price of a standardized basket of goods and services changes over time. And last month, prices came in an average of 3.4% more expensive than the same time last year – slightly down from the month before, just as economists expected. The dip suggests that what went up might finally be coming down, especially when core inflation – which strips out volatile food and energy prices – came in lower than it did in March, too, landing at an annualized 3.6%.

Why should I care?

For markets: So much for April showers.

This data could have a serious impact. See, the Fed’s next opportunity to adjust interest rates is in early June, and May’s readings won’t have come in by then. That means the central bank will need to reference April’s data – and with Wednesday’s release suggesting that inflation is on the descent, that bodes well for the prospect of rate cuts. Add in weaker-than-expected retail sales and hints that the US job market is straining, and you can see why traders’ bets show a 50% chance of a cut before September.

For you personally: Nickel-and-diming over nickels and dimes.

Remember, inflation coming down isn’t the same as prices themselves coming down. Instead, it just means that the rate of increase is slowing. That said, while deflation – or falling prices – might sound like a relief for the wallet, it would cause major problems for the economy. So rate cuts might be the best outcome right now: they’d make it cheaper to borrow and spend money, spurring on the economy as a result. On top of that, lower rates would benefit companies and their stock prices, which explains why the S&P 500 initially picked up after the data.

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Analyst Take

Three Pros Spill The Tea On Their Very Best Investing Ideas For 2024

Three Pros Spill The Tea On Their Very Best Investing Ideas For 2024

By Theodora Lee Joseph, CFA, Analyst

Let’s face it: markets are in a weird place right now.

Stocks have been jaunting upward, bond yields are still high, and no one knows when those interest rate cuts will start.

That’s why Bloomberg recently asked three top-of-their-game experts – ones who live and breathe this stuff daily and have seen every market quirk – for their best investment ideas.

So that’s today’s Insight: three pros spill the best trade ideas they’ve got now.

Read or listen to the Insight here

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Coat Of Harms

Coat Of Harms

What’s going on here?

Burberry warned investors of a tough first half of the year on Wednesday, as trenchcoats failed to save the luxury fashion house from, well, the trenches.

What does this mean?

Burberry’s been struggling to turn the Asia-Pacific and Americas regions plaid recently, as cash-strapped shoppers have cut beige bucket hats from their budgets. In fact, Burberry’s sales in China last quarter fell 19% from a year ago, pushing the company’s overall same-store sales growth down 12%. And now, Burberry expects wholesale revenue – the money it makes selling to retailers – to be 25% lower in the first half of this financial year than the last. At least it has company: Gucci-owner Kering recently warned investors to expect a 40% to 45% drop in its profit for the first half of the year.

Why should I care?

For markets: Back to the pattern-cutting board.

Burberry’s current creative revamp leans further into its heritage and iconic check pattern, in hopes that’ll win back nostalgia-hunting fashionistas. But that British style won’t come cheap: the signature “rocking horse” bag is priced at £1,890 ($2,372). According to some analysts, that’s simply too expensive to convince Burberry’s target customers to saddle up. Investors don’t have much hope, either: they sent the stock down 4% on Wednesday, after already slicing it in half over the last year.

The bigger picture: Not too hot, not too cold, not just right.

US retail sales were flat from March to April, a worse result than economists expected. But it’s no wonder folk are cutting back: inflation is still biting and Americans’ pandemic savings are drying up. Mind you, higher end luxury brands like LVMH and Hermès are managing alright, suggesting that the uber-rich can still afford to splash tens of thousands on Birkins. Burberry’s problem might be its positioning, then: not high-end enough to supersede price pressures, but not cheap enough to attract budgeters.

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🎯 On Our Radar

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🤔 Q&A · RE: Fingers Crossed

“What are some strategies for managing personal finances during uncertain economic times?"

From John in the USA

“First up, you’ll want to build up your ‘emergency fund’ if you haven’t already. That’s money you set aside to cover unexpected financial shocks – it should be about three months of your after-tax income. Then, you might want to turn your attention to the long term: retirement. As a rule of thumb, John, assume you’ll need 80% of your current income in retirement and multiply that by 25 for an estimate of how much you may want to have set aside. Once you’ve got that figure in mind, consider increasing your contributions to tax-advantaged accounts and prioritizing saving and investing to build a solid retirement fund.”

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