💰 5 Fact Friday: How Does Your Salary Measure Up?

ECONOMY
1. U.S. Economy Defies Expectations 🚀

The U.S. economy grew at a 2.8% annualized rate in Q2 2024, outpacing the expected 2.0%. This growth is a strong rebound from Q1's 1.4%—a clear sign that the feared recession is not materializing.

Economists consider 2% to 3% GDP growth healthy for a mature economy like the U.S., making this quarter’s performance a positive indicator.

The Drivers

First and foremost, shoutout to the Maniacs among us who continue to donate to the economy.

Consumer spending contributed a whopping 1.6% to GDP growth, showing that even deal-hungry consumers will find a way to spend.

Businesses also ramped up inventory investments, adding another 0.8% to the GDP. Meanwhile, government spending provided an additional tailwind, with federal outlays up 3.9%, including a 5.2% jump in defense spending.

Goldilocks Scenario

Ordinarily, a GDP report this strong would beg the question: do we even need rate cuts?

However, the FedWatch tool now shows traders pricing in a 100% chance of a September rate cut. Why?

Cutting rates will materially impact the U.S. government’s massive and growing interest payments—which now account for 13% of total spending.

So, if this data holds up and September marks the beginning of a cutting cycle, the U.S. may just find itself in the Goldilocks scenario:

• A growing economy

• Easing inflation

• Low unemployment

• Loosening financial policy

Wherever you are, find some wood to knock on. 🤞

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GOVERNMENT
2. Congressional Trading Ban In Focus 🚫

Remember when four senators dumped stock after a Senate briefing on the impending Covid epidemic, helping them avoid the 30% crash?

Or when lawmakers regulating the financial industry sold bank stocks, including Silicon Valley Bank, just before its collapse?

And who could forget Nancy Pelosi and her husband's portfolio outperforming every hedge fund in 2023 with a jaw-dropping 65% return?

Jon Stewart joked, “How do they do it? The secret is an understanding of the intricate interconnectivity of global markets — I’m kidding. They have inside information.”

Well, those lawmakers with the suspiciously impeccable timing might soon be barred from playing the market game altogether. That is if they vote to restrict themselves.

Introducing The ETHICS Act

The Ending Trading and Holdings in Congressional Stocks (ETHICS) Act aims to put the kibosh on stock trading for Congress members, their spouses, and dependent children. And this isn’t just a slap on the wrist—we’re talking about a full-blown trading ban with some teeth.

Here's the lowdown:

• Immediate Restrictions: If the bill is signed into law, members of Congress will have 90 days to halt all stock purchases.

• Divestment Deadline: By March 31, 2027, lawmakers and their families must sell off all individual stock holdings.

• Penalties: Violators will face hefty fines—either one month's salary or 10% of the stock's value, whichever is greater.

• Transparency: A new searchable database of lawmakers' financial holdings will be created for public scrutiny.

Why Now?

Accusations of insider trading among Congress members have been swirling for years. A University of Maryland survey found overwhelming support for the ban among Americans: 87% of Republicans, 88% of Democrats, and 81% of independents are in favor.

Why It Matters

Though it would be a step in the right direction for public trust, don’t bank on this bill passing—let alone hitting the Senate floor. We’re looking at you, Majority Leader Chuck Schumer.

In the meantime, as the saying goes, "If you can't beat them, join them."

The STOCK Act of 2012 requires Congress members to disclose trades within 45 days. Many traders have joked, "Buffett who?" and started following Congress’ moves instead.

Know The Community: Poll Question 💬

I want to make sure 5 Fact Friday is hitting the mark for YOU! To do that, I’ll be running polls each week to learn how I can improve.

Here are the top 3 results from last week’s poll:

What is your #1 financial goal for the next year?
1. Build net worth (38%)
2. Save for major expense
3. Pay off debt

Vote in today’s poll and help me help you! 👇️

INVESTING
3. History Says Stay Invested 🏛️

Feeling like this year’s election antics are too much to handle? Don't sweat it.

History consistently shows that staying invested is your winning strategy.

The Data

Since 1950, the S&P 500 has averaged returns of 9.1% in election years. Whether it's a Democrat or a Republican in the White House, the long-term trend has been positive.

While the year before an election has the widest range of outcomes in the four-year cycle, the average returns are… pretty average. This indicates that elections usually aren’t major market movers.

The Magic of Gridlock

The reality is that markets don't care about political parties—they thrive on stability.

One of the only ways to ensure stability is with a divided government. Gridlock prevents major policy changes and creates a more predictable investing environment.

Key Takeaways

• No Knee-Jerk Reactions: Resist the urge to make quick decisions based on election news.

• Avoid Partisan Bets: Data shows that predicting which party will win, let alone which campaign promises will be kept, is challenging and risky.

• Stay the Course: Stick with your investment plan and focus on long-term goals.

In the words of every seasoned investor, "Time in the market beats timing the market." Keep your eye on the prize, and let the political theater play out in the background.

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PERSONAL FINANCE
4. How Does Your Salary Measure Up? 🤑

Ever wondered how your salary compares to others?

As of Q1 2024, the median salary in the U.S. is about $60,000 per year. This marks a 3.5% increase from the previous year, just edging out the 3.2% inflation rate.

We'll use median figures here, as they offer a clearer view of typical American income (by avoiding skew from ultra-high earners).

Let's break it down:

Education Pays

Those without a high school diploma earn around $37k annually, while high school grads pull in about $47k. A bachelor’s degree bumps that up to $81k, and an advanced degree nets closer to $100k a year!

Geography Matters

The lowest median salary is in Mississippi at $48k, whereas Washington, D.C. tops the chart at $112k.

California boasts four cities where the household income exceeds $100k, with San Francisco leading at $147k.

Demographic Differences

Women earn about 20% less than men, though this gap varies by race and income level.

Asian workers generally have the highest incomes, but also the largest gender wage gap. In contrast, Latino and Black workers earn less overall, with a smaller gender disparity.

Age and Earnings

Paychecks grow with age, until around 45 to 54 years, where the median income is $68k. After that, earnings typically decline as more people transition to retirement.

So, where do you stack up on America's pay scale? 🧐

TRADING
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MARKETS
5. Tesla and Alphabet's Tough Week 📉

Tesla and Alphabet shook up the markets and left investors with more questions than answers. Let’s dive into the nitty-gritty of their earnings reports and what they mean for your portfolio.

Tesla’s Tumble

• Stock: -11%

• Revenue: Up 2% to $25.5 billion

• Operating Margin: Shrunk from 9.6% to 6.3%

• Profit: Down 45% to $1.5 billion

Tesla took a nosedive after missing earnings expectations. Despite a small revenue increase, profits fell by a staggering 45%.

The company's aggressive price cuts and rising competition, especially from China, have put a serious dent in its margins. Despite the discounting, automotive sales still slipped by 7%.

On the flip side, Tesla’s energy-storage business doubled year over year. Plus, Musk continues to sell a bold vision of robotaxis and humanoid robots.

Alphabet’s Mixed Bag

• Stock: -8%

• Revenue: Up 14% to $84.7 billion

• Profit: Up 29% to $23.6 billion

Alphabet (Google’s parent company) beat expectations, but investors still hit the brakes, dropping the stock by 8%. The concern? YouTube ad revenue missed estimates and the high costs of AI investments are eating into profits.

Investors may not like the expensive AI buildout but CEO Sundar Pichai explained that, “The risk of underinvesting is dramatically greater than the risk of overinvesting for us here.”

After all, search is still Google’s breadwinner. If users begin turning to ChatGPT for answers instead of Google Search, the company would be in serious trouble.

Market Takeaway

Thanks to these earnings reports, the S&P 500 and Nasdaq had their worst day since 2022 on Wednesday. Now, investors are looking for a strong bounceback from the remaining Magnificent 7 companies to hopefully stabilize the tech sector.

Next week, we’ll get earnings from Microsoft, Meta, Apple, Amazon, and Buffett’s Berkshire Hathaway. Buckle up—it's going to be a wild ride! 🎢

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