IN THE NEWS

🔥 The Economy Was Supposed to Slow Down, But It’s Revving Up

Somewhere in this galaxy, market gods are laughing pretty hard.

By now, the economy was supposed to be slowing down. There were calls for recessions and stock market plunges, plus soaring unemployment. This time last year, nearly every economist and pundit was calling for the next 2008.

Instead, the opposite is playing out.

Rising forecasts: Sure, there are some signs of weakness, but recent economic data shows that the economy is accelerating despite higher borrowing costs, wars in Ukraine and the Middle East, and the resumption of student loan payments.

• Analysts that predicted a recession this year continue to raise their forecasts: Goldman Sachs economists, for instance, raised their growth estimate for the quarter to an annual rate of 4%, up from 3.7%.

Strength abound: September was a good month for the economy. The labor market strengthened as employers added 336,000 jobs, up from 227,000 in August and 236,000 in July.

• Despite still-high prices, that hiring has fueled spending as monthly food and retail sales rose 0.7% in September and 0.8% in August after rising just 0.2% in June.

• Manufacturing is rebounding, and the big banks kicked off earnings season on a strong note last week. American Airlines expects travel demand to be stronger this year than last year, and inflation has come down to 3.7% in September from a peak of 9.1% in June 2022.

To be sure, the stock market isn’t the economy. Many times, they move in opposite directions in the short run. But economists polled by The Wall Street Journal now believe the economy will avoid a recession in the next 12 months.

🤦 No, A Cartel of Asset Managers Don’t Control America

You’ve probably seen TikToks, Reels, and other viral videos warning about the ‘cartel’ of companies that ‘secretly’ own America’s biggest companies (lucky you, if not!).

Big investment managers like Vanguard, BlackRock, and State Street sit at the center of the fearmongering — you probably recognize their names from your company’s 401(k) offerings.

But it’s not just conspiracist influencers raising alarm bells; the conversation has reached Congress, too. While the popular narrative is that these firms ‘own’ or ‘control’ companies like Apple, Lockheed Martin, and Disney, the reality isn’t so black and white.

Big Three: While you can look up many of America’s biggest companies and find Vanguard, BlackRock, and State Street, which we’ll call the “Big Three,” listed as the biggest shareholders, that’s because they hold these shares on your behalf.

• As one Morningstar analyst put it, “They don’t own them for their own personal corporate reasons. They didn’t just go out there with their own money and start buying up stakes in these companies.”

BlackRock holds $9 trillion of investors’ assets, largely in basic index funds tracking benchmarks like the S&P 500, but the company itself is only worth $92 billion.

• As a company, BlackRock’s value comes from the fees it charges investors to manage their assets, not from the actual assets themselves.

🚗 Car Owners Fall Behind on Payments at Record Rate

Americans are falling behind on their auto loans at the highest rate on record, according to a Bloomberg report.

As of last month, 6.11% of subprime auto borrowers were at least 60 days past due on their loans, per Fitch — the highest since data was first collected in 1994. The Federal Reserve will likely keep rates steady — or even increase them — meaning the percentage of drivers behind might worsen.

Getting squeezed: Subprime loans are for people with credit scores between 501 and 600. Their rates aren’t ideal: 11.75% on new cars and 18.5% on used cars.

• Americans are spending $500-$700 per month on car payments, not including insurance. Over 90% of U.S. households own at least one car.

• “The subprime borrower is getting squeezed,” a Fitch analyst said. “They can often be a first line of where we start to see the negative effects of macroeconomic headwinds.”

As an aside: The Wall Street Journal reported that April and May are the best months to purchase a car because people feel richer with their tax refunds.