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Today's big stories

The US economy added almost 650,000 jobs last month
There’s a lot of evidence to suggest smaller stocks will outperform big ones in the upcoming economic recovery – Read Now
Peloton’s quarterly earnings update was better than expected

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Wham Bam, Thank You Sam

What’s Going On Here?

Looks like Americans have been keeping busy to distract themselves from one thing and another: the US economy added a higher-than-expected 638,000 jobs last month (tweet this).

What Does This Mean?

The number of new hires is one of the best ways to see how an economy’s actually doing, so it bodes well that there are plenty of US businesses – particularly those in leisure, retail, and hospitality – bringing laid-off workers back into the fold. That takes the overall unemployment rate to 6.9%, down from 7.9% last month. But let’s not lose sight of the bigger picture here: there are still about 10 million more people looking for work than there were before the pandemic, while the number of long-term unemployed (i.e. those without a job for 27 weeks or more) climbed to almost 4 million – the most since 2014.

Why Should I Care?

The bigger picture: Word salad.
The US Federal Reserve (the Fed) said late last week that while the country’s economy has “continued to recover”, it’s still a long way off where it was. That’s more of a hedge than the central bank’s position last month, when it said economic activity had “picked up”. Tomayto, tomahto, you might think, but the language the Fed uses is important: investors watch it closely to see if it signals an upcoming tweak to its policies. In this case? There’s so much up in the air that it’s not clear what it signaled. So yep: tomayto tomahto.

For markets: Poll position.
Investors only cared about one thing last week: politics. The US election caused a whole heap of turmoil in the stock market, with investors too focused on what the post-election world would look like to think about a company’s fundamentals. And overall, they seemed to think that post-election world looks pretty good indeed: the US stock market rallied higher this week, inching closer to the all-time highs it reached in September.

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2/3 Premium

Three Reasons Small Stocks Have Big Potential

What’s Going On Here?

The biggest US stocks have dominated the market rally since March, but there’s a lot of evidence to suggest it might be time for investors to switch their attention to “small-cap” stocks instead.

Here’s why: while small caps typically underperform the broader stock market in downturns, they also bounce back faster.

In fact, small caps have outperformed their large-cap rivals nine out of the past ten times the US economy emerged from a downturn.

And that’s not all: there are more reasons small stocks might have much bigger potential than large-cap stocks. Check ’em out.

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Working out should be fun. Good thing obé Fitness are here to shake things up.

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And all of this is the price of a single studio class: $27 per month. Not bad for everything from Pilates to dance cardio, strength to boxing…

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3/3

Captive Audience

What’s Going On Here?

After Peloton announced better-than-expected quarterly results late last week, the exercise equipment maker might be hoping you keep digging deep through these lockdowns forever and ever and ever…

What Does This Mean?

With so many gym-banished fitness buffs working up a sweat in their own homes, demand for Peloton's services last quarter was pretty extraordinary. The company grew its sales by 232%, and posted a profit of almost $70 million – all the more impressive when you realize it lost $50 million in the same period last year. Still, maybe it needs to spend a bit more time on its own treadmill: the company said it can’t keep up with all the orders, and admitted there’d be shipping delays for the foreseeable future. C’mon, Peloton, you got this!

Why Should I Care?

For markets: Keep ‘em busy.
Analysts are keen to know if Peloton can build a sustainable business, so they’ve been paying close attention to how well it holds on to subscribers. But if – as Peloton itself has said – subscriber retention depends on keeping them engaged, there might be trouble ahead: subscribers only did 20.7 workouts a month on average last quarter – a big drop from the 24.7 of the quarter before. Peloton reckons that’s just because people exercise outdoors in the summer, but investors will be waiting to see if the colder months will get subscribers back on their bikes.

The bigger picture: Ready… set... grow!
Peloton’s investors particularly like the recurring revenue the company makes from its subscription service, which provides a more stable income than its equipment does. So they might be pleased to know it grew 133% versus the same time last year, meaning subscriptions now represent a fifth of Peloton’s sales. Subscriber growth accelerated from the previous quarter too – something even subscription-business veteran Netflix couldn’t do. Then again, Peloton does have more room to grow: the equipment maker only has 1.3 million subscribers to Netflix’s 195 million, and fewer big-name competitors too.

Recommended: How to pick the next Peloton.

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💬 Quote of the day

“You cannot shake hands with a clenched fist.”

– Indira Gandhi (the former prime minister of India)

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🤔 Q&A · RE: False Start

“If options generally benefit from rising volatility, why would the ‘put’ options you mentioned profit from falling volatility?”

– Nicola in Liechtenstein

“You’re right that higher volatility generally has a positive effect on an option’s price, Nicola: it makes it more likely that the underlying asset’s price will hit the predetermined point by a certain date, after all. But investors also buy options on volatility itself. So if you’re using a ‘call’ to bet volatility will rise, it stands to reason they’ll be less valuable if volatility falls – that is, moves further away from that higher ‘strike’ price. And it works the opposite way too: the value of a volatility ‘put’ will rise as volatility itself drops off.”

🙋 Ask a question

📚 What we're reading

Humans: 1, Machines: 0 (The Verge)
An election, but in a house with QAnon followers (Mel)
Home envy (The Design Files)

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Finimize - 🇺🇸 America had a busy week

Today's big stories

Wham Bam, Thank You Sam

What’s Going On Here?

What Does This Mean?

Why Should I Care?

Three Reasons Small Stocks Have Big Potential

🤸‍♀️ Upgrade your fitness with obé

Captive Audience

What’s Going On Here?

What Does This Mean?

Why Should I Care?

Older messages

👑 Long live Alibaba

⚠️ Don’t celebrate just yet

🇺🇸 Your Election Day guide

👻 Big Tech goes boo(m)

🔧 Boeing's falling apart

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