Finimize - 🏅 The US is winning

What’s going on here?

The US economy grew at a surprisingly nimble pace in the second quarter, as falling inflation and a still-strong job market had consumers spending freely.

What does this mean?

The heftiest of the hefty economies expanded by an annualized 2.8% – double the pace seen in the first three months of the year. And that sassy pickup was thanks in large part to the country’s dependable growth engine: the American consumer. Their spending rose by an unexpectedly peppy 2.3%, even as higher interest rates took a nibble out of their finances. The news here is good: it looks like the country is on track to achieve an uber-tricky “soft landing” – in which higher interest rates manage to cool the economy just enough to bring down inflation, without tipping the whole thing into a recession.

Why should I care?

For markets: Cruel summer.

The economic growth data had a calming effect on an otherwise jittery market. Stocks had seen a sharp selloff on Wednesday, as fearful investors ditched their Magnificent Seven winners – anxious that Big Tech’s earnings might never match the massive figures that firms are spending on AI. That’s typical after a long rally like the one we’ve seen: a small flurry of investor exits can spark a cascade of similar moves, regardless of the bigger picture.

For you personally: Remember to breathe.

Everyone hates that moment when you log into your trading account and see your balance has dropped. Sometimes, honestly, it’s better not to look. But, if you do, remember to keep your long-term goals in mind – and don’t panic. Every selloff is an opportunity to become a better investor, to add to your existing stocks at better prices, and to test how diversified your overall portfolio is.

What’s going on here?

AI jitters sent markets from the US to Asia and Europe into a tailspin this week, with the S&P 500 suffering its worst fall since December 2022.

What does this mean?

A $1 trillion meltdown smacked the tech-heavy Nasdaq 100 on Wednesday, touched off by some less-than-spectacular quarterly results from Alphabet and Tesla. Investors have been on a hair trigger, fearing the AI-related spending spree might hit a wall – unless big fish like Alphabet and Microsoft can swiftly turn those investments into profit. The list of losers from the tech selloff reads like an AI who’s-who, with Nvidia, Broadcom, and Arm right at the top. Even chip whiz SK Hynix was swept into the downdraft, falling 9% – just after it announced an expectation-smashing quarter. And that could be a warning for US tech behemoths Microsoft, Meta, Apple, and Amazon, which all report earnings next week.

Why should I care?

Zooming out: Less is more.

Investors were already cashing in gains and hunting for something different after a long tech boom. That pivot has lifted the small-fry Russell 2000 index by 8% this month to hit its highest level in over two years. There’s a reason folks are eyeing the little guys: since they carry lots of short-term and variable-rate debt, they tend to thrive as interest rates fall. Plus, with domestically focused business models, smaller firms offer a snug refuge away from international turmoil.

The bigger picture: Rocking the boat.

With half the world’s voters hitting the polls this year, that could mean only one thing: uncertainty. And there’s already plenty of that around, as major central banks ponder when to cut interest rates. So it’ll hardly be surprising if the market sees a few wild swings. That’s no reason to change what you’re doing, though: if you’ve got the patience to remain invested through the chaos, you just might snag a sweet deal or two.