💰 5 Fact Friday: Is Return Stacking A Wealth Hack?

ECONOMY
1. America’s Not Feeling It 😬

As it turns out, us maniacs are a more bullish bunch than the rest of the U.S.

Last week’s poll revealed that 75% of you are feeling optimistic about the economy. Meanwhile, consumer confidence across the country just hit a major speed bump.

The Conference Board’s Consumer Confidence Index dropped from 105.6 in August to 98.7 in September—the biggest plunge in over three years.

For perspective, it was sitting at a healthy 132.6 before COVID hit in early 2020. This means Americans are getting nervous about jobs, inflation, and overall business conditions.

What’s driving the slump? Job market jitters and rising prices.

The percentage of people saying jobs are “plentiful” dipped to 30.9%, while those saying jobs are “hard to get” climbed to 18.3%. And inflation? It’s still looming large, with expectations for a 5.2% price increase over the next year.

Digging deeper, the Present Situation Index (how people feel right now) slid more than 10 points to 124.3. The Expectations Index (the future outlook) fell to 81.7, nearing the recession territory reading of 80 or below.

In short, while our crew is staying positive, the broader public is getting a bit jittery about what’s next. We’ll have to see how long it takes for lower rates to trickle through and offer some real relief.

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INVESTING
2. Return Stacking Goes Mainstream 💸

WisdomTree’s U.S. Efficient Core Fund, $NTSX, recently crossed $1 billion in assets under management. That milestone caught my eye—what’s driving the buzz around this fund?

At its core, $NTSX employs a strategy called return stacking, which gives investors more exposure for each dollar invested. But is it too good to be true?

Let’s break it down.

What Is Return Stacking?

Return stacking provides more than $1 of exposure for every $1 invested by using a modest amount of leverage.

NTSX, for example, offers 90% exposure to U.S. large-cap stocks and 60% to intermediate-term treasuries, giving you 150% exposure. This is essentially a 60/40 portfolio on steroids—all for a low 0.2% fee.

Other return stacking ETFs include:

• NTSI

• RPAR

• RSBT

• RSSB

• RSST

• And more

The goal? Capture higher long-term returns without magnifying your risk.

What’s The Catch?

Leverage is a double-edged sword. Although it amplifies gains, it could do the same for losses.

Return stacking ETFs attempt to mitigate this by pairing uncorrelated assets like stocks and bonds. In theory, if one rises, the other falls, balancing the portfolio.

But, of course, that’s just theory. The single biggest risk is if correlations fail to hold during a crisis.

In a black swan event or prolonged market downturn, both stocks and bonds could tank simultaneously, leading to compounded losses. This is where leverage bites back.

Who Is Return Stacking For?

Return stacking isn’t for everyone. If you’re a conservative investor or nearing retirement, the potential downside almost certainly outweighs the upside.

But if you’re in wealth accumulation mode with a long-term horizon, return stacking may work in your favor. Investors with a 10+ year view could benefit from the enhanced returns without taking on much additional risk—if market correlations hold.

In short, return stacking is a bet—one with promising upside but real risks. If you’re playing the long game and can handle more volatility, it might be worth exploring.

Just remember: there’s no such thing as a free lunch. Proceed with caution.

Community Check-In 💬

Let’s tap into the wisdom of our community! Over the next few weeks, I’ll be gathering your thoughts on the markets and where things might be headed.

Please tap your answer below! 👇

MARKETS
3. Who's In, Who's Out Of The S&P 500 🔄

On Monday, the S&P 500 welcomed three new additions and said goodbye to three old friends.

Dell, Palantir, and Erie Indemnity joined the club, while Bio-Rad Laboratories, American Airlines, and Etsy packed their bags.

When a stock gets added to a major index like the S&P 500, it’s like winning an Oscar—cue the applause, attention, and a nice bump in price.

Studies show that stocks typically enjoy 6% excess returns between the announcement of their inclusion and the actual day they join the index.

This surge is largely driven by passive funds—think pension funds, mutual funds, and ETFs—rebalancing their portfolios. These funds are required to buy the new additions and sell off the stocks being removed to match the index’s composition.

After that, the party often dies down.

In fact, over the year following inclusion, these stocks tend to underperform the broader market by 1-2%. This phenomenon is known as mean reversion, where the stock price adjusts back to its true value after the inclusion buzz fades.

Meanwhile, stocks kicked out of an index may experience an initial drop due to selling pressure but often outperform over the next five years.

So, what’s the lesson here?

Index inclusion can present short-term trading opportunities, but don’t get too attached. The price pop is often a result of technical factors—like fund managers being forced to buy.

Like Benjamin Graham wisely said, “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.”

As the initial excitement wears off, it’s the company’s real performance that ultimately tips the scales.

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INTERNATIONAL
4. China’s Stimulus Sparks Markets 🚀

China’s economy is currently a dumpster fire, and not the fun, s’mores-making kind. After five straight quarters of deflation (yikes), the world’s second-largest economy is in a full-blown slump.

Its real estate market—where a whopping 62% of household wealth is tied up—has completely tanked, with property values in top cities down nearly 30% since the pandemic. As a result, consumers are tightening their belts, and businesses are slashing prices and wages to stay afloat.

So, what’s the fix?

Beijing is pulling out all the stops. Here’s a quick rundown of the economic CPR they just announced:

• Cutting mortgage rates on outstanding loans (by ~0.5%)

• Lowering the minimum down payment on second homes from 25% to 15%

• Reducing the reserve requirement for banks, pushing them to lend more

• Trimming the 7-day interest rate by 0.2%

• Pumping 800 billion yuan ($113 billion) into the stock market

The short-term reaction?

Chinese stocks like Alibaba ($BABA, +7.9%) and JD.com ($JD, +13.9%) ripped. Plus, Bernard Arnault (founder of LVMH) added $6 billion to his net worth thanks to a rally in luxury stocks.

But let’s not get too excited—China’s CSI 300 index is still down nearly 40% from its 2021 high. In contrast, the S&P 500 has hit 42 all-time highs this year alone.

What does this mean for us?

For starters, U.S. companies with a Chinese presence—hello, Apple and Tesla—could see a boost. But here’s the kicker: China’s moves are inflationary at their core.

If their recovery heats up too fast, the Fed could face more challenges keeping inflation under control. That’s not exactly great news for our wallets.

In short: keep an eye on China. Their next moves could shake up your portfolio.

MANIAC PICKS

🚗 Car Wars: The Biden administration is ready to pull the plug on Chinese vehicle tech, citing concerns over potential cyber threats and road safety.

💰 Benefit Bump: Social Security benefits will rise 2.5% in 2025, offering retirees a bit more breathing room—but watch out for Medicare hikes.

👁️ Eyes on the Future: Neuralink’s vision-restoring 'Blindsight' tech gets the FDA’s breakthrough nod, bringing hope to three trial patients aiming to regain their vision.

💉 Insulin Inflation: The FTC is suing major pharmacy benefit managers, accusing them of inflating insulin prices by over 1,200% and blocking affordable alternatives.

🎢 Brace for Impact: Forget September—October leads the pack in stock market volatility, fueled by mutual fund sell-offs and pre-election uncertainty.

STOCKS
5. Guess Today’s Mystery Stock 🕵️‍♂️

Think you can crack this week’s stock mystery? Here are 5 clues about a company that’s been struggling in the cutthroat world of chip manufacturing.

1. This tech giant has taken a beating this year. Its stock is down 50%, while its sector index is up 27%.

2. As a result of its struggles, the vultures are circling. Apollo Global Management is considering a $5 billion “equity-like investment,” and Qualcomm has shown interest in a potential takeover.

3. The company is undergoing a major restructuring, separating its manufacturing division from its design arm. This move positions its new subsidiary to better compete with semiconductor heavyweights like TSMC.

4. Signs of a turnaround are emerging. The company recently secured a multi-billion dollar deal to produce custom AI chips for Amazon Web Services.

5. After suspending its dividend and laying off over 15% of its workforce, this pioneer in microprocessor development is still fighting to reclaim its once-dominant position in the semiconductor industry.

Got a guess? Tap here to reveal the answer → 

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