Happy Friday and Happy New Year! It’s Jan. 19, 2024. We have three great stories to wrap up the past few weeks in markets, business, and the economy for you and your family.
Here are the highlights:
- Apple has lost its crown. Microsoft is now more valuable than the iPhone creator… why?
- Bonds are the asset to watch in 2024. Here’s why they affect everything.
- Crypto’s first ETF has been approved. The first Bitcoin ETFs listed last week.
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Apple Lost Its Crown: Why Analysts are Turning on the iPhone Creator
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For more than a decade, Apple has been the world’s most valuable company. But even after a 48% increase in its stock last year, it started the year by ceding that crown to Microsoft — and analysts think it might not be in any shape to regain its glory anytime soon.
- What happened? Despite commanding a cult following, Apple’s COVID-era growth has been cooling off as consumers prioritize other types of spending. In the third quarter of 2023, it revealed that its Mac sales were down 34% year-over-year, iPad sales were down 10%, and iPhone sales grew just 3%. And in spite of strong results from its software services like iCloud and the App Store, Apple was the only big tech firm to see its revenues contract in the last four quarters.
- That’s why investors looked for other pastures. Apple’s stock was the worst-performing megacap tech stock of 2023 — and the least magnificent of the Magnificent 7 tech stocks, which includes names like NVIDIA (+238% in 2023), Meta (+194%), and Tesla (+101%). Those names became popular destinations for investors seeking exposure to artificial intelligence (AI) technology.
- And analysts are thinking more of the same is in store. To start the year, Apple received two downgrades from investment banks, who cited weaker iPhone sales. But Apple’s underlying diagnosis could be a lack of exciting innovation — and the company is arguably more focused on protecting its App Store monopoly than innovating through upcoming products like its $3,499 Vision Pro mixed reality headset or rumored electric vehicle.
Why does it matter for EarlyBird families?
Apple might be a convenient punching bag considering it underperformed the tech-heavy Nasdaq-100 last year, but its weak 2023 demonstrates the value of passive investing: some companies will have good years and others will have bad years. That’s why buying a diversified portfolio is the easiest and most-effective way to generate wealth — and worry less about individual stocks.
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Bonds are the Asset to Watch in 2024: Here’s Why
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Over the last 22 months, the Federal Reserve raised interest rates in an effort to diffuse sky-high inflation — and now, they’re preparing to declare victory. This year, Federal Reserve members expect that America’s central bank will start cutting rates from their highest point in 22-years. Their decisions could affect every aspect of the U.S. economy, but one asset in particular will be worth watching: bonds.
- What’s up with bonds? When the Fed began raising rates in March 2022 to combat inflation, the price of bonds began to plummet — investors abandoned their less-attractive, lower-yielding bonds for safer and more-attractive higher-yielding bonds. That created the “greatest bond bear market of all time” according to researchers at Bank of America******.******
- That’s been very bad if you’re a bond-heavy investor. Financial praxis would have you believing that bonds are supposed to be safe and stable assets; they’re supposed to stay steady when stocks prove volatile. But during the bizarre economic microcosm that was 2022, both stocks and bonds fell… and the losses would’ve been hard to ignore. The safest bonds — long-term treasuries — lost half of their value during the Fed’s rate cycle, eliciting comparisons to the Dot-Com Bubble crash.
- But what goes up, must come down… The Fed has assured that interest rates are the highest they’ll get in this cycle — which leaves interest rates with nowhere to go but down. That sets the stage for a bond recovery in 2024, but that recovery’s breadth will hinge on how many cuts the Fed ultimately delivers.
- It comes down to cuts. The Federal Reserve currently plans three rate cuts in 2024, which would bring interest rates down from 5.25-5.5% to 4.5-4.75%. On the other hand, the majority of bank analysts expect the Fed to cut between five and seven times before year end. That might just be wishful thinking, but if they’re right, it could mean a boom in bonds, stocks, and other assets.
Why does it matter for EarlyBird families?
Sometimes, things get weird — after all, it’s not very often that you see bonds and stocks fall in the same year. However, staying the course on your investing goals would have allowed you to buy both at depressed prices — which paid spades for stock investors in 2023, and could pay off for bond investors in 2024.
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Crypto ETFs are Here: What Does It Mean for Bitcoin?
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After a decade of waiting, bitcoin bulls are having their Wall Street moment. The Securities and Exchange Commission (SEC) finally approved the first spot bitcoin ETFs last week, which allows investors to buy the world’s most valuable cryptocurrency in their brokerage accounts, IRAs, and 401(K)s for the first time.
- Crypto’s come-to-market moment. More than 11 ETFs issued by institutions such as iShares, Fidelity, ARK Invest, VanEck, and Invesco started trading last Thursday — attracting more than $10B in trading volume in their first three days, which Bloomberg’s Eric Balchunas described as “insane” compared to other ETF launches.
- Investors could be staying for awhile. The impressive trading volume wasn’t all that they had to show for themselves — bitcoin ETFs saw more than **$1B** in net inflows by Wednesday, or more than $250M per trading day thus far.
Why does it matter for EarlyBird families?
The last few years have demonstrated that crypto is risky business, but the new bitcoin ETFs offer investors additional ways to gain access to the digital assets market. However, whether they’re right for you and your family requires personal evaluation and reflection — always weigh how an investment fits into your personal goals before throwing money in.
If you want to learn more about crypto, please go read our 7-part Series all about crypto here.
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What else is up?
- U.S. Election Season kicks off in Iowa. Former Republican President Donald Trump marched to victory on Monday by beating opponents in a frigid caucus in Iowa, setting up a rematch between incumbent Democrat Joe Biden and the ex-President in November. There are 289 days to the next Federal Election. ***Read more in AP.***
- Tax season is here. It doesn’t have to break the bank. Don’t want to pay $300 for TurboTax or a tax preparer? If you have a simple tax return, consider trying a cheaper and equivalent software this year like FreeTaxUSA (only $14.99) or TaxAct (from $29.99 or $89.98 with professional help). Alternatively, if you have less than $79,000 in adjusted gross income, you might be eligible for IRS Free File — which offers free, tax filings to qualifying households.
- Shipping route disruption could cause inflation to come back. As a result of the ongoing Israel-Gaza conflict, Iran-backed terrorists have been shooting attacking ships in the Red Sea — and although the U.S. is making an effort to blunt the attacks, shipping giants like Maersk and MSC have ships taking an expensive detour around Africa which could cause global inflation to creep back up. Read more in BBC.
This page contains general information and does not contain financial advice. All investments involve risk. Any hypothetical performance shown is for illustrative purposes only. Actual investment performance may be different for many reasons, including, but not limited to, market fluctuations, time horizon, taxes, and fees. Please consult a qualified financial advisor and/or tax professional for investment guidance.
