Hi Newsletterest, here's what you need to know for May 7th in 3:13 minutes.

🎟 With the economic impact of COVID becoming clearer by the day, our analysts are hosting a virtual AMA on May 13th to field any new questions you have. Go on, really put them on the spot.

Today's big stories

The US and European economies are at risk of years of low growth and inflation once the coronavirus threat disappears
Our analysts look into whether retailers and ecommerce platforms still make a good bet in the post-pandemic future – Read Now
Investors who are stockpiling cash are getting it wrong, according to UBS Wealth

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Culture Shock

What’s Going On Here?

After spending trillions of dollars on limiting coronavirus’s economic impact, the US and Europe might find they have a lot more in common with Japan than they realized.

What Does This Mean?

The Bank of Japan (BoJ) has spent the last couple of decades buying up government bonds in an effort to boost both the country’s inflation and its economic growth prospects – all without much success. And those continued purchases mean the Japanese debt owned by the BoJ is now larger than the current size of the country’s entire economy.

Investors, then, might be getting déjà vu. There are record low interest rates in Europe and the US at the moment, and both countries have announced unprecedented amounts of mid-pandemic spending to support their economies. Europe’s central bank now owns eurozone debt totaling 40% of its economy’s size, and America’s owns about 30%. And with more spending likely – and an economic bounceback less so – the two of them might soon be in the same tight spot as their Eastern cousin.

Why Should I Care?

For markets: You snooze, you lose.
Having continued to buy bonds without successfully stimulating its economy, the BoJ now owns about half the country’s total – making buying and selling them a less exciting prospect for investors. The risk is that the same thing happens to the US's bonds: with its central bank ready to buy unlimited amounts, bonds' volatility (i.e. their swings in prices) has already dropped to a one-year low. And as corporate bailouts arrive with tough terms and government-owned stakes, that decline in investor interest could plague stock markets too.

The bigger picture: Banks at the ready.
If central banks stop buying massive amounts of government bonds, the drop in demand is likely to send their prices down and yields up (the two move inversely), in turn increasing borrowing costs for everyone else. And if that discourages spending, economic growth could falter – and central banks may need to step in again.

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2/3 Premium

Canadian Hustle

What’s Going On Here?

Canada’s Shopify reported first-quarter earnings on Wednesday, and the ecommerce upstart’s climbing sales may be a clue to the post-pandemic retail reality.

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Mayday!

What’s Going On Here?

Swiss investment bank UBS has warned that the old adage, “Sell in May and go away” until the fall is not the right strategy this year. Do you copy?

What Does This Mean?

Here’s the thing, investors who heeded the saying last year might’ve been right to do so: they’d have avoided the second-worst May for US stock markets since the 1960s, in which a record $20 billion was withdrawn from the American exchange-traded funds that track stocks. But the long-standing mantra isn’t watertight at the best of times. If, for instance, you’d sold in May and gone away until the last few months of 2018, you’d have seen the year’s stock market gains evaporate and then some. And let’s face it, these aren’t the best of times, so UBS prefers a new truism for the months ahead.

Why Should I Care?

For you personally: Wise guys.
“Buy in May and, er, keep a watchful eye on your investments,” reckons UBS Wealth. Its advisers think that with interest rates as low as they currently are, investors who do want to sell are better off buying bonds and stocks instead of sitting on low-returning cash. They’ve also suggested you buy in installments (a.k.a. dollar-cost averaging) and focus on trends likely to be boosted by coronavirus disruptions – ecommerce, fintech, automation, and robotics, to name a few – as well as stocks in more stable industries like consumer staples (tweet this).

For markets: While the cat’s away.
There may be fewer investors around to buy and sell stocks, bonds, and other assets for the next few months in any case, which means those who do stick around will have a more significant effect on prices. Typically, that results in bigger swings in both directions as they respond to unexpected headlines and earnings updates – and try to pocket profits while the others aren’t paying close attention.

Get invested: The three key signs of any good wealth manager.

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💬 Quote of the day

“If solutions within the system are so impossible to find, then maybe we should change the system itself.”

– Greta Thunberg (a Swedish environmental activist)

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🤔 Q&A · RE: Stash Flow

“What debt-to-equity ratio should BP have?”

– Curt in Washington, USA

“BP, specifically, wanted to get its debt-to-equity ratio down to 0.3x, but there’s no hard rule about what the ideal debt-to-equity ratio is. For one, it depends on the cost of any debt a company has (i.e. the interest rate) and how much that’s likely to increase with additional borrowing. For another, it depends on the company’s theoretical cost of equity. Both those factors vary wildly based on a company’s industry and its individual circumstances.”

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🌍 Global: Fintech’s Post-Pandemic Future – 6pm UK time, May 7th
🇦🇺 Australia: Financial Awareness During Tough Times – 7.30pm AEST, May 12th
🌍 Global: Finimize Live AMA – 1.30pm UK time, May 13th
🇦🇺 Australia: Financial Health Check During A Pandemic – 5.30pm AWST, May 13th

📚 What we're reading

Apolitical brands are a thing of the past (Fast Company)
Your brain is a master of “offline replay” (Inverse)
The nuclear code gets an update (Interesting Engineering)

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Finimize - ⚠️ UBS says don’t sell

Today's big stories

Culture Shock

What’s Going On Here?

What Does This Mean?

Why Should I Care?

Canadian Hustle

🚨 NEW: Get Finimize content in your app

Mayday!

What’s Going On Here?

What Does This Mean?

Why Should I Care?

🎙 What do you need for a Finimize virtual event?

Older messages

📈 Whoa, Microsoft and Facebook

📉 Google's 4 billion dollar void

🤖 Big tech saves stocks

😨 JC Penney’s bankruptcy nightmare

💪 Blackstone: what coronavirus?

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