Finimize - ⚔️ JetBlue's outbidding Frontier

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Today's big stories

The Federal Reserve suggested it could step up its fight against inflation
One investment manager has laid out how the various possible outcomes in Ukraine should influence your investments – Read Now
US airline JetBlue made a $3.6 billion rival offer for Spirit Airlines

Backup Plan

What’s Going On Here?

The Federal Reserve (the Fed) revealed this week that it’s planning to sell off billions of dollars of bonds – just in case interest rate hikes aren’t up to the job.

What Does This Mean?

The Fed has two main ways of fighting inflation: it can raise interest rates, or it can sell off some of the $9 trillion worth of bonds it’s accumulated – a move that drives down their prices, pushes up their yields, and increases the overall cost of borrowing. The central bank already started doing the first of the two last month, but now it’s resorting to the latter: the central bank said it could ramp up to selling $95 billion worth of bonds every month – almost twice as much as when it did the same thing in 2017. It suggested it’d be more aggressive with rate hikes too, which analysts took to mean we can expect at least two 0.5% hikes – rather than the typical 0.25% – sometime this year.

Why Should I Care?

For you personally: You have been warned.
The tech-heavy Nasdaq index fell on the news, and the message was loud and clear: tech stocks are at risk. See, investors value a stock based on what they think a company’s future profit is worth today. And since tech companies are expected to generate a higher proportion of their profits in the future than other companies, they’re the first to suffer when yields rise. Then again, you might just want to ride it out: data shows that fast-growing stocks like tech have beaten cheap-looking value stocks in three of the last four periods of Fed rate hikes (tweet this).

The bigger picture: The R word.
It’s no secret that the Fed’s efforts to limit inflation will drag on economic growth, but some economists are more pessimistic than others. Take Deutsche Bank: it said this week that it’s expecting the US economy to fall into recession next year.

You might also like: The markets that could inherit a fortune from rising interest rates.

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Analyst Take

Your Updated Guide To The Russia-Ukraine Crisis

Carl Hazeley, Analyst

What’s Going On Here?

It’s now been six weeks since Russia invaded Ukraine, and there’s no end in sight.

So investment manager abrdn – which came out with a series of potential war scenarios in February – is back with new analysis on how the crisis is likely to play out from here on.

There are some more likely possibilities: abrdn sees a 30-40% probability over the next 12 to 18 months of either ongoing conflict or an effective split of Ukraine, for example.

And then there are some wildcards, like a Russian U-turn that could come from a coup against Putin, or from the sanction-fueled collapse of the Russian military.

So that’s today’s Insight: where abrdn’s economists think the war might head next, and what each of those scenarios would mean for your portfolio.

Read or listen to the Insight here

Make that a double

Occasionally, The Motley Fool gets so excited about a stock that it issues a “double-down recommendation”.

But today, it isn’t just excited about one, but three.

These are three stocks it’s handpicked that have already performed well, and that The Motley Fool thinks might have a lot further to run.

Get The Motley Fool’s special report here, and find out more about its double-down recommendations.

Find Out More

Reality Check

What’s Going On Here?

US carrier JetBlue made a $3.6 billion offer to buy Spirit Airlines this week, in hopes its head can be turned from another eligible admirer.

What Does This Mean?

Domestic travel has bounced back from the pandemic much more quickly than long-haul flights, and Spirit – which specializes in cheap, largely US-based travel – has been reaping the rewards of that shift in momentum. That caught the eye of Frontier Group, which offered to buy the airline for $2.9 billion in February – a bid Spirit was happy to accept.

But a deal’s not done till it’s done, and JetBlue’s now swooped in with a $3.6 billion offer of its own. If Spirit decides to take it, the deal would make JetBlue the fifth-biggest airline in the US, and could allow it to offer more flights in more parts of the country. It’ll shore up the airline’s bottom line too: JetBlue reckons the sales boost and cost savings combined could be worth about $700 million a year.

Why Should I Care?

Zooming in: No cheaper tickets for you.
Fuel costs are putting a lot of pressure on airlines at the moment, but a bigger carrier should have the financial flexibility to better absorb those costs and offer cheaper tickets anyway. Trouble is, ticket prices haven’t tended to drop following mergers in the industry, but instead risen toward those of the more expensive carrier. And since that would undermine Spirit’s whole “budget airline” schtick, analysts think regulators might end up stepping in.

The bigger picture: Little old JetBlue.
That wouldn’t be JetBlue's first regulation rodeo: it’s already dealing with a lawsuit after teaming up with American Airlines to coordinate flight times in the north-east of the US. Regulators say that it’s hurting customers by dint of fewer choices of flights, but JetBlue is arguing the opposite: that the move helps it better compete with the biggest airlines, who are otherwise blocking it out of the region.

You might also like: The highs and lows of investing in the airline industry.

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💬 Quote of the day

“Forever is composed of nows.”

– Emily Dickinson (an American poet)

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🌎 Finimize Live

🥳 Coming up this week…

(All events given in UK time)

🚫 A Guide To Stop Losses: 1pm April 7th
🌍 Scenario Analysis Of The Ukraine Crisis Impact: 1pm April 8th
🎙 Live Crypto Community Q&A: 5pm April 8th
💰 How Investors Can Profit From Real-Time Payments: 6pm April 11th
🧑‍💻 Strategies To Find The Best Web3 Projects and DAOs: 5pm April 12th
♻️ Investing Opportunities Beyond Wind And Solar: 1pm April 13th
🧠 How To Master The Investor Mindset: 6pm April 13th
🚀 How To Invest In The Space Economy: 1pm April 14th
🚑 How To Invest In Insuretech: 6pm April 14th

🤯 And after that…

💰 Understanding Use Cases To Generate Crypto Wealth: 6pm April 20th
👷‍♀️ How To Protect Your Portfolio: 1pm April 21st
📈 How To Identify High-Growth Metaverse Stocks: 6pm April 21st
🌍 2022 Macro And Fixed Income Opportunities: 1pm April 22nd
🎙 Live Crypto Community Q&A: 5pm April 22nd
💸 Top Crypto Investing Strategies: 5pm April 25th
🪐 An Impact Investor’s Guide to Web3: 6pm April 28th
🎙 Live Crypto Community Q&A: 5pm April 29th

🎯 On Our Radar

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This chair’s been famous for 100 years. And it’s done it all with just two legs.
Fairness? Diversity? You can’t talk like that at this huge company.
Lizzo’s hiking shoes are crazy. There’s nothing like a ten-inch platform to get you up a hill.
Inside an Olympic weightlifter’s psyche. Here’s how lifting made her treat herself better.

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Key phrases

big storiesThe Federal Reserve cheap largely USbased travel inflationOne investment manager various possible outcomes techheavy Nasdaq index last four periods RussiaUkraine CrisisCarl Hazeley two main ways cheaplooking value stocks The R word rising interest rates The Motley Fool Interest rate hikes investment manager abrdn Spirit AirlinesBackup PlanWhat potential war scenarios Fed rate hikes US carrier JetBlue NowUS airline JetBlue

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