ABCs of the Market - March 10th 2024

Happy Friday! It’s Mar. 8, 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:

• A Year and Three Failures Later: what’s the latest with banks? Turns out, there’s a lot.
• Bitcoin Hits All-Time High. Plus, the Halvening is right around the corner.
• Is college still worth the cost? Spoiler alert: ****Yes (despite the AI-nxiety out there.)

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A Year and Three Failures Later, Are The Banks Back?

Remember when everybody in America was freaking out about bank failures last year? Everybody does, right? The demise of Silicon Valley Bank preceded the failure of two other major U.S. banks, which left savers rattled. But a year later, there has been little talk about banks in the mainstream media — even while there has been no shortage of things to talk about.

• What’s up? In recent weeks, banking angst has returned to the markets — with shares of New York Community Bank ($NYCB) falling as investors have weighed the impact of its commercial real estate (CRE) portfolio on the bank’s long-term health.
• Why CRE? Despite many companies now weighing return-to-office policies, commercial real estate (CRE) has remained a hot issue in the economy. Office buildings are rocking record vacancies — and some properties are selling for fractions of their mortgage price, leaving big developments (and banks) underwater.
• Is there cause for concern? Over the last year, regional banks and financial giants have survived the existential anxieties and rallied — with ETFs tracking both up more than 30% year-over-year. But despite higher investor confidence, Fed Chairman Jerome Powell has warned that commercial real estate’s problems could eventually cause more bank failures.

Why does it matter?

After the 2008 Financial Crisis, over 300 banks failed in the United States. By contrast, last year’s bank troubles stopped after just three banks failed — and most Americans have little to worry about as it pertains to their deposits. However, while that might be true, being current on financial events could help you avoid the kind of anxiety created by sudden surprises or changes — which force people into making hasty and messy decisions.

In other words, Chairman Powell’s warning is worth the weight, but it’s no reason to change what you’re doing (unless, for some reason, you’re investing in commercial real estate.) That’s particularly true after a noisy year for the commercial real estate sector. Instead, it makes sense to stay the course with investing, but tread lightly.

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Bitcoin Hits Record High As Fourth Halvening Approaches

It only took two and a half years, but Bitcoin is back. The world’s largest cryptocurrency rallied to a fresh all-time high this week, rallying more than 300% since the collapse of crypto exchange FTX in Nov. 2022. The coin’s unprecedented comeback has dumbfounded analysts and even its believers. And it all comes down to one thing — supply.

• First, you have the limited supply… Because of how it’s programmed, there will only ever be 21 million Bitcoin — and more than 19 million Bitcoin have already been mined. Of them, many have been lost to history, leaving us with a much lower supply of the most-sought after crypto.
• Second, then you have the ETFs… The last crypto bull cycle was driven by influencers, speculators, and grifters — but this one is driven by serious people, like the suits on Wall Street. Weeks ago, U.S. regulators greenlit the launch of Bitcoin exchange-traded funds, allowing trading of the crypto on Wall Street for the first time. Since then, nearly $20 billion in inflows have made their way into America’s ten Bitcoin ETFs — with institutional and retail interest rising.
• And then there’s the Halvening. Every four years, Bitcoin is programmed to reduce the amount of new Bitcoin entering circulation, an event called the Halvening. In less than 40 days, Bitcoin will have its fourth Halvening, which has Bitcoin fans ecstatic. The less new Bitcoin entering circulation, the more scarce it is — which is one reason why the Halvening usually precedes big run-ups in value.

Why does it matter?

Crypto is confusing, and frankly has a limited impact on your daily life — but understanding it could help you prepare for the possibility that it could one day play a big role in our economy. And discussing investing concepts with your kiddos could be a meaningful opportunity to open up age-appropriate discussions about money, wealth, and appreciation.

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College Remains Worth the Cost

They say hard work wins in the long run, but you know what’s beats hard work? A college degree (and then more hard work, obviously.) While that might be hard to believe given falling confidence in college education, the premium earned by degree-holders is higher than ever — and a new report from the New York Federal Reserve shows that recent college grads can expect to earn $24,000 more per year on average than similarly-aged peers with a high school diploma alone.

• What is the premium? Over a working lifetime, college grads can expect to make nearly $1 million more than peers without a college degree — and that earning power really expands as you age, with college grads earning just 27% more at 25 and 60% more by 55.
• But that premium comes at a cost… Let’s face it, the premium earnings that come with a college degree come at a premium price-tag. Today, the average annual cost of a public, in-state four-year degree will set you back $10,940 — or $28,240 for out-of-state undergrads. But practically speaking, many competitive admission schools and private colleges regularly bill those dollar amounts in a semester.
• So what do you do? Truthfully, the answer depends on what your child wants to study — and maybe you (or they) don’t even know what that is yet. The cost of an education will look different whether you pursue business, med school, or something else. But there’s an easy way to make it all pay off…
• Plan ahead. Two things can be true: 1) college is expensive; and 2) it’s still worth the investment given the earnings on the other side. But don’t expect the government to step in and make a college education free — instead, invest today to beat the rising price of tuition.

Why does it matter to EarlyBird families?

Instead of biding your time or leaving your child with the heavy burden of student debt, you could help them get a head start by investing money in either your EarlyBird account — like you’re probably already doing — which can then be rolled over into a qualified education account like a 529 if or when your child decides a college education is right for them.

The Other Letters…

• The S&P 500 is getting a facelift... You might not own UGGs or buy computer memory, but later this month, you’ll indirectly own two of the companies that do. Every quarter, the S&P selection committee updates the index’s holdings to stays current. This quarter, Super Micro Computer and UGGs creator Deckers are making their debut — replacing Whirlpool and Zions Bancorporation. Read more about the changes.
• A solid earnings season comes to a close. According to FactSet, 73% of S&P 500 companies reported a positive earnings surprise and 64% reported a positive revenue surprise. And with Q1 almost over, there's a lot to look forward to in Q2, which has analysts upgrading their S&P 500 outlooks for the year. Read the full report.
• AmEx is making big changes to its credit cards in 2024. AmEx started 2024 by changing the benefits and raising annual fees on Delta and Hilton-branded cards, but the company promises there’s more where that came from. This year, it plans to “refresh” more than 40 cards, including its mainstay Platinum and Gold card. Here's what you need to know about the changes.