Over The Moon

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Welcome to September!

We may be jumping the gun on how excited we are to see August slip away as we dance into September, but if you’re reading this with a #PSL in hand, you might have noticed that sweet and spiced latte cost about 4% more this year. As we talked about last week, inflation is hitting everything, everywhere. And the latest comments from central bank leaders make it clear they are planning to squash it — even if it hurts job growth, makes purchasing a house more expensive, or depresses the stock market.

That’s right. Fed Chair Jerome Powell made headlines after declaring last Friday that he and his colleagues will keep raising interest rates until they get inflation under control — and if that causes some pain, so be it. Powell’s global peers echoed that message. Isabel Schnabel, a top European Central Bank official, said central banks must act aggressively, even if that means tipping their economies into recession.

This is not a surprise, as inflation is 3 times higher than the Fed’s target of 2 percent, but the dreaded ‘R’ word spooked investors, with the Dow promptly falling by just over 3%, the S&P 500 by 3.4%, and the Nasdaq Composite by 3.9% — erasing all of August’s gains by Friday’s market close. Stocks have continued to fall this week, with businesses expecting consumers to continue tightening their belts and economists predicting jaw-dropping job losses if the Fed sticks to its targets. This has led to reports of airlines bracing for a grim winter, oil prices dropping (remember when this was a good sign?!?) because of an expected downturn in economic activity and even discount retailers are seeing shoppers pull back.

If you feel your anxiety ratcheting up, here are some tips from experts on how to manage your money during a recession. In addition, Kiplinger offers a rundown on how to protect your assets and your emotions amid a looming market slowdown. For those looking for a silver lining, some economists continue pointing to encouraging signs (like the declining unemployment rate), but these voices seem to be getting fewer and fainter.

The advice experts usually give to young investors during times like this is to stay invested in strong companies that you think will stay that way for the long term, diversify your portfolio with different sectors and assets to protect it from big blows, and maintain an emergency fund so that you always have access to cash. This also has a way of keeping the day-to-day stock watching anxiety at bay. With T-minus 20 days until the next Fed meeting, most market watchers are predicting another rate hike of three-quarters of a point. In the meantime, we’ve got some insights for you this week on why you might do well looking toward space, as well as other news you might have missed while the Fed has been dominating headlines and staying up late to watch Serena.

News you can use

• Warren Buffett’s energy favorite Occidental Petroleum will begin construction for its first carbon capture project this fall. New tax credits in the Inflation Reduction Act are expected to kickstart more such projects soon, which could become another way for sustainable investors to measure progress. Occidental is just one of the large oil producers exploring diversification into areas meant to curb climate change.
  
• Monday is Labor Day here in the US, and many Americans will be hitting the road as gas prices ease. If you know about the shopping and BBQs but are hazy on the history, the Department of Labor dropped a new animated video. Gallup says US approval of labor unions is at its highest point (71%) since 1965 amid “a burst of 2022 union victories across the country,” including at Amazon and Starbucks.
  
• First Solar, the largest solar panel manufacturer in the country, is investing up to $1.2 billion in a new factory in the Southeast and an expansion of its Ohio unit. While the technology was invented here, the US has lagged behind other countries in production. Seven of the world’s top 10 solar panel makers are headquartered in China. First Solar says it was spurred to act by the passing of the Inflation Reduction Act this year. Their stock is up a whopping 38% in 2022, massively outperforming the Invesco Solar ETF (TAN).