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It’s been quite the week since we last popped up in your inbox. Let’s review the highlights, er, lowlights, shall we?
First, there’s the stock market, which apparently got the message that it’s the season to fall. The Dow slipped into a bear market on Monday, meaning it’s down 20% from its most recent high. Wednesday brought some bounce back from the lows, but as of Tuesday evening, the Dow had reached its lowest level since November 2020, with the S&P hitting the same milestone.
The Fed’s decision to raise interest rates (again) last week is one driving force behind stocks’ plunge, but rate hikes are having an opposite impact on the value of the US dollar, which keeps rising. That’s good for Americans traveling abroad or buying imported wine, but the rising dollar is fueling inflation elsewhere, ratcheting up the risk of a global recession, and could weaken the earnings of companies with significant international operations.
And the British pound dropped like the mercury in the northern US as investors reacted to two big pieces of news: the government’s plan to slash taxes and the Bank of England’s interest rate jump. On Monday, the pound briefly touched its lowest-ever level against the US dollar. If you’re curious what the ballooning dollar means for your finances, you can find some answers here.
And there is a hurricane blasting the State of Florida — thinking of all our FWIW Florida friends right now! In a speech Tuesday about the importance of a clean energy future, Treasury Secretary Janet Yellen reminded us there’s been a five-fold increase in the annual number of billion-dollar disasters over the past five years compared to the 1980s, even after adjusting for inflation.
Amid the financial tumult, the best thing to do is keep calm, stay invested and focus on your long-term goals. Remember: the stock market is not the only measure of the economy. One bit of positive news is that the labor market remains strong (especially for manufacturing jobs). Let’s hope October brings more treats than tricks for investors. If nothing else, at least we can enjoy Fat Bear Week while waiting for this bear market to pass.
News you can use
- Could Green Steel be the sequel to Zoolander’s Blue Steel? Six big banks have agreed to measure and report emissions resulting from their $23 billion in loans to the steel industry. Citi, Crédit Agricole CIB, ING, Societe Generale, Standard Chartered, and UniCredit have signed the Sustainable STEEL Principles (SSP). Because of the reliance on coal power, steel-making is the world’s largest source of industrial CO2 emissions. Decarbonizing efforts include using green hydrogen, carbon capture and other technologies.
- More than two-thirds of “expert/advanced” investors believe sustainability is key to driving long-term returns. This is compared to 52% of “intermediate” investors and 43% of those who believe they have “beginner/rudimentary” investment knowledge, according to a new survey of more than 23,000 investors around the world.
- Yet another study revealed that investors benefit when companies do things like pay employees a living wage and combat climate change. JUST Capital found that companies at the top of its America’s Most JUST Companies list outperformed their “less just” peers, achieving returns of 51.26% between January 2018 and June 2022 compared to returns of 19.02% for companies at bottom of the ranking.