Welcome to a bear market, Gen Z. Some Gen Zers may recall the 2008 recession and the short Covid crash, but mostly they’ve seen stocks rise. Take Ella Gupta, who first invested at age 10. With her parents’ help, she took half of the profits of a bracelet-making business and bought stocks. At 14, she opened a Roth IRA, after starting her first job cleaning dental instruments. Now, at 17, she sees stocks falling. “There’s a lot of fear and uncertainty,” she says.
Gen Zers, like Gupta, are investors. An Investopedia survey says that more than half of Gen Z adults—ages 18 to 24—have invested, with 26% buying stocks. That makes them more financially active than any prior generation at that age. Gen Z is also a social-media generation. In a Gen Z survey, half of respondents said they learned investing on YouTube and other videos, a third on TikTok.
Still, the bear can wreck groupthink. Many stocks touted in online forums like Reddit have tanked. And Gen Z investors appear to be quicker to sell than their elders, which might not be wise. A Bankrate survey found that 73% of Gen Z investors traded actively this year, compared with 28% of Gen Xers, ages 42 to 57, and 25% of baby boomers. “A lot of stuff on social media is excellent advice; it’s just not nuanced,” says Anne Lester, former head of retirement solutions at J.P. Morgan. “It’s got to be short and digestible, so some of the nuance gets lost.”
As for Gupta, she’s not panicking. She engages in dollar-cost averaging and does due diligence on stocks. “Whenever I purchase a stock, I do it with the intention of holding it for the long term,” she says, sounding a bit like 91-year-old Warren Buffett.
A Sunny July
Amazon.com and Walmart reduced guidance in the face of inflation and a strong dollar; Walmart issued its second profit warning in 10 weeks. Solid tech earnings sent stocks up before the Federal Reserve raised rates and left hints of near-future easing. Stocks continued their giddy July run, even after news that the economy shrank for the second consecutive quarter. On the week, the Dow Jones Industrial Average rose 2.97%, to 32,845.13; the S&P 500 was up 4.26%, to 4130.29; and the Nasdaq Composite gained 4.7%, to 12,390.69.
The Fed Raises
The Fed hiked federal-fund rates by 0.75%, to 2.25%-2.5%. Chairman Jerome Powell was vaguely dovish on future moves and didn’t think a recession had begun. A day later, gross domestic product fell by 0.9%, mostly on inventory reductions, triggering a debate over whether a “technical” recession was a real recession.
The Earnings Beat: Big Hitters
Goldman Sachs warned of the effect of a strong dollar on earnings as the busiest week of earnings season began. Mostly, tech beat, retail missed. Microsoft , Alphabet , Apple , and Amazon were upbeat, but Intel warned on profits. Unilever and Coca-Cola missed; Procter & Gamble beat, but warned on consumer spending. McDonald’s, General Electric , and 3M beat. General Motors missed, but Ford Motor beat. Meta Platforms sustained the social-media rout with its first quarterly loss. Big Oil hit a gusher.
Ahead of the August recess, Congress passed the much-delayed science and tech competitiveness bill, featuring $52 billion for semiconductor production subsidies, $24 billion for manufacturing tax credits, and $200 billion for science over the next decade. In a dramatic turnabout, West Virginia Sen. Joe Manchin backed a new Senate tax, spending, prescription-drug, and climate-change bill.
Russia’s Bear Hugs
Russian missiles hit Odessa two days after it agreed to a plan to ship grain out of Ukraine. Gazprom said it would cut flows through Nord Stream 1 to Germany to 20% of capacity, claiming maintenance issues, renewing fears of winter shortages. Gas prices rose, and European Union energy ministers met to discuss securing more supplies.
Annals of Deal Making
China’s central bank said it would mobilize $148 billion in loans for property developers and help complete unfinished projects… Alibaba Group Holding will make its primary listing in Hong Kong, as talks stall between the U.S. and China on audit rules. Alibaba’s Jack Ma plans to give up control of Ant Group…Sam Bankman-Fried’s FTX made a cash bid for crypto assets of bankrupt Voyager Digital, which dismissed it as a “lowball bid dressed up as a white knight rescue”…The U.K. and France will take board seats if satellite operators Eutelsat and OneWeb pull off an all-share merger to create a European rival to Elon Musk’s and Jeff Bezos’ space ventures…The Wall Street Journal reported that Elliott Management is building a stake in PayPal… JetBlue Airways finally won Spirit Airlines after Frontier pulled out. Next hurdle: gaining regulatory approval.
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