Finimize - ✂️ Amazon splits its stock

The great American road trip will cost you | Amazon's breaking up its stock |

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Today's big stories

  1. US consumer prices rose by their most in more than 40 years in February
  2. Our analyst looks into whether you should buy the stock market dip – Read Now
  3. Amazon's splitting its stock and buying back its own shares

Road Rage

Road Rage

What’s Going On Here?

Data out on Thursday showed that US consumer prices rose by the most in more than 40 years last month, and the country’s drivers aren’t exactly happy about it.

What Does This Mean?

That summer road trip Americans were planning is starting to look a lot more expensive, with gas prices 38% higher in February than they were at the same time last year. And if that wasn’t enough to put them off the road, this might be: the price of used cars was 41% higher than the same time last year. In fact, the prices Americans paid for goods and services overall climbed by a higher-than-expected 7.9% – the biggest jump since January 1982. And even when you strip out unstable food and energy prices to get to the “core” inflation, you’re still talking about a nearly 40-year high…

Why Should I Care?

For markets: Cue the rate hikes.
Most economists thought inflation would peak in February, but that was before Russia invaded Ukraine. The effects of the war have already sent retail gas prices – responsible for about a third of February’s monthly increase – up nearly 20% this month, and they might not come down for months. So chances are that the Federal Reserve (the Fed) will stick with its plan to raise interest rates when it meets next week – probably in the first in a series of hikes aiming to limit inflation.

The bigger picture: The ECB wavers.
The European Central Bank (ECB) still isn’t ready to follow in the Fed’s footsteps, but it did unexpectedly announce plans on Thursday to withdraw its bond-buying support faster than expected, which could see it ending the program altogether by as soon as the third quarter. The move shows just how concerned the ECB is about the effect of record-high inflation on the region’s economy, and it isn’t the only one: Goldman Sachs cut its 2022 growth outlook for the region from 3.9% to 2.5% this week.

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Analyst Take

Should You Buy The Stock Market Dip?

Should You Buy The Stock Market Dip?
Photo of Stéphane Renevier

Stéphane Renevier, Analyst

What’s Going On Here?

The S&P 500 has now slipped 10% from its peak at the start of the year.

That’s not ideal, but it might’ve got you hopeful that there’s some upside potential for US stocks that have been so high for so long.

But here’s the thing: history shows us that any upside after a correction of this size depends heavily on whether we see a recession in the next 12 months.

And while there is a case to be made that we won’t, there are also six very compelling reasons – backed up by six very compelling indicators – that suggest a recession is on the way.

So that’s today’s Insight: whether you should buy the dip right now, and all the reasons you probably shouldn’t.

Read or listen to the Insight here

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Special Delivery

Special Delivery

What’s Going On Here?

Amazon announced that it’s rolling out a “20-for-1 stock split” this week, which will hopefully be arriving sometime in June between 7am to 9pm.

What Does This Mean?

Amazon will be splitting each of its shares into 20, meaning every investor who owns a share in Amazon will receive 19 more come June. That won’t change much, mind you: investors will still own as much of the business as they did before, they’ll just have more stocks to show for it. And Amazon threw in another announcement while it had everyone’s attention: the company said it’s planning to buy back $10 billion worth of its own shares – a move that’ll reduce their supply significantly and push up the price of those left over (tweet this). That went down a treat: investors initially sent its stock up 11%.

Why Should I Care?

For markets: Amazon’s ulterior motive.
One key reason Amazon might’ve opted to split its stock is because the decision could pave the way for its inclusion in the Dow Jones Industrial Average. The Dow is a US stock index that weighs stocks based on their price rather than their market capitalization, which means it tends to avoid expensive stocks that would have an outsized influence on its price. But if Amazon slashes its stock, it’s more likely to be added to the Dow’s roster. That matters: investors plow billions of dollars into passive investment funds that track the index, so they’d be obliged to buy in and push Amazon’s stock even higher.

For you personally: Big whoop.
There’s another reason Amazon might be keen: it should make it easier for retail investors like you – who currently have to stump up nearly $3,000 for one of its shares – to buy into the company. But for all the hype, it’s important to remember that this isn’t exactly revolutionary. Plenty of investment platforms offer fractional investing, after all, so you’ve been able to buy into eye-wateringly expensive companies for a few years now.

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💬 Quote of the day

“The greatest mistake you can make is to be continually fearing that you’ll make one.”

– Elbert Hubbard (an American writer, artist, and philosopher)
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CRYPTO PULSE, IN PARTNERSHIP WITH FABRIIK

The different NFT blockchains

Three of the most popular NFT blockchains are Ethereum, Bitcoin SV, and Flow.

Ethereum makes it easy to buy, sell, and access NFTs via smart contracts, but it charges very high user fees while offering low transaction speed.

Bitcoin SV is almost infinitely scalable and offers lower fees than Ethereum, as well as on-chain data storage for extra security.

Flow was specifically created as a solution to Ethereum’s high fees and congestion: it speeds up transactions and brings down costs, if at the expense of the immutability of smart contracts.

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🤔 Q&A · RE: Unlockdown

Q: “When a merger or acquisition is announced, how will the buyer and the target’s stock prices move and why?”

– From Sylvester

A: “It depends on the situation, Sylvester, but the stock prices of the buyer and the target generally move in opposite directions after a takeover is announced. The target company’s stock tends to rise because the buyer pays more than it’s currently worth to incentivize the target’s shareholders to approve the deal. But since the buyer had to either reduce its cash reserves or even take on debt to pay that premium, investors tend to send its stock down – especially if they think the buyer overpaid or will struggle to integrate the two businesses. Still, if the deal does end up adding value to the buyer, the move should push up its share price in the long run.”

Finimize

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🤑 The Pros And Cons Of Syndicate Investing: 1pm UK time, March 14th
🥊 The Art Of Beating The Market: 6pm UK time, March 14th
🌲 How To Analyze Sustainable ETFs: 6pm UK time, March 15th
🧠 Everything You Need To Know Before The Fed Meeting: 4pm UK time, March 16th
👩‍🎨 NFT Investing Strategies Tailored To You: 5pm UK time, March 16th
🙋‍♀️ How Female Investors Can Learn About Blockchain: 5pm UK time, March 17th
💥 The Endless Potential Of Equity Tokenization: 5pm UK time, March 21st
👟 How To Dip A Toe Into Sneaker Investing: 5pm UK time, March 22nd
🐻 How To Survive A Bear Market Investing In Crypto: 1pm UK time, March 24th
☘️ How To Pick The Best ESG Stocks: 6pm UK time, March 28th
💰 How Much Do Your Trades Really Cost?: 5pm UK time, March 31st
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🎯 On Our Radar

  1. Come along to a strip club. No ordinary one, though: this is a night out in the metaverse.
  2. A good book really is a form of therapy. Turns out the right novel could transform your mental health.
  3. Japanese schools are banning ponytails. Along with colorful underwear and certain lengths of socks.
  4. The sound of space. You’ll never have to wonder what the universe sounds like again.
  5. Never mix money and friendship. Unless you really have to, then take this advice.
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