Your Financial News Roundup
February 7, 2024
TL;DR
- Economy: The benchmark 30-year fixed rate mortgage hit 7% on better-than-expected economic data; while the cooling economy faces four potential “landing” scenarios.
- Tech: Google faces a new antitrust trial over its digital ad dominance; meanwhile, lawmakers force the Justice Department to vet predictive policing AI tools for bias.
- World: A new survey shows that 80%+ of Americans are hopeful about the future, and India flexes its navy prowess to assert its regional dominance.
Personal Finance Concept: The World of Digital Transactions [Part 2/4]
Economy
📈 Good Economy… But Not For Housing: Though the economy added 335K jobs in January, the average rate on the benchmark 30-year fixed rate mortgage crossed 7% this week. This increase was partially fueled by news of a better-than-expected monthly manufacturing report. Previously, rates declined as investors anticipated incoming rate cuts from the Federal Reserve. The Fed will let economic data signal when it’s time to cut rates, but it’s been a disparaging signal so far.The recent decline in the mortgage rate increased homebuyer demand, but supply remains at an all-time low. Coupled with increasing prices, this makes for the worst housing market since 1995. Yet, some predict 2024 will be a better year for homebuyers as the spring buying season nears. (CNBC)
Our Take: Interest rate cuts will incentivize more sellers to put their homes on the market, helping correct supply-demand imbalances by boosting inventory levels. The Fed will closely watch the housing market as it cuts rates to avoid a repeat of 2021.
🛬 Coming In For A Landing: It’s been said (too many times) that the goal of high interest rates was to bring inflation back to Earth and “softly land” the economy. But what does this mean, exactly? There are four potential landing scenarios:
- Soft landing: Inflation falls back to the 2% target, growth is below average but above recession levels, and unemployment rises slightly.
- Hard landing: There are at least a few quarters of contraction and a 1%+ rise in unemployment, causing inflation to fall.
- No landing: The economy experiences above-average growth (overheats) and inflation stops falling and even rises again, causing the Fed to sharply raise rates. This ultimately results in a hard landing.
- No landing with Target Inflation: Inflation reaches the 2% target, while the economy experiences average/above-average growth due to increases in productivity and the (natural) growth rate, even with lower-than-usual unemployment. (MarketWatch)
Our Take: Of these four scenarios, the first is the most likely. January’s inflation read is 2.8%, so target inflation is in sight. But unemployment could rise as companies respond to rate cuts.
Tech
🔪 To The Chopping Block: A judge has approved a September trial date for an antitrust suit against Google brought to the court by the Department of Justice (DOJ) and a group of states. The plaintiffs are accusing Google of monopolizing the digital ads market and killing competition. The DOJ wants Google to sell its ad management products. But, Google claims the lawsuit would hurt thousands of small businesses and publishers. Additionally, Texas and other states will take Google to federal court in March 2025 over its ad tech business, while a D.C. federal court will finish a separate antitrust case over Google’s web search dominance in May. (Reuters)
Our Take: Google’s cornering of the digital ads market has stymied innovation, limited user privacy, and forced most businesses to interact with its ad platforms to market themselves. As Big Tech scrutiny has translated into more and more antitrust action, the market power of the tech giants as we know them today may be limited.
🕵️♂️ Preventing Robocop’s Rise: A group of U.S. lawmakers expressed dismay that the Dept. of Justice gives federal grants to local police to buy AI-enabled policing tools that entrench existing biases. Since the DOJ is not tracking how police departments used that funding, lawmakers want it to pause grants until it can ensure predictive policing tools do not further discriminate. Third-parties found that policing tools trained on historical data replicate biases and one study found that only 1% of predicted crimes were accurate. Lawmakers believe the tools will only create “dangerous” feedback loops and want reports on their risks and “evidence standards” to evaluate these tools. (WIRED)
Our Take: A major societal fear about AI is how it could strip away the human element of policing and make the criminal justice system more impersonal. When the U.S. writes its own AI laws, it’s likely to impose strict rules on the use of AI for legal and other sensitive use cases.
World
🇮🇳 India v. Rivals: As a rising global power, India primarily focuses on its land defense. However, the nation is now projecting its military power at sea to grow its influence, seeking to be a “proactive contributor” to maritime security. India is scaling its deployments to assume a bigger security role in its home region. Its growing competition with China is leading the country to modernize its navy and expand its strategic alliances with other democracies in a new military alliance called the “Quad” (India, Japan, Australia, U.S.). (ABC)
Our Take: If the 20th century was defined by the U.S., then the 21st century looks to become defined by the rise and competition of India and China. Both nations seek to expand their spheres of influence, secure their interests and natural resources, and challenge the established western world order.
🙏🏽 Hopeful Despite the Odds: Americans are as optimistic as ever. The “Hope In America: Visions of the Future” report put together by the Archbridge Institutes’s Human Flourishing Lab indicates that:
- 82% of Americans are hopeful about their futures
- 85% are hopeful for their families’ futures
- 75% feel good about the future of their local community
- 56% feel hopeful about the country’s future
A key takeaway is that each demographic group feels hopeful about futures for themselves and their families, with 75% of people in every gender, age, income level, and ethnic group reporting as such. A person’s mental health is an indicator of hope as those who viewed their mental health positively were more optimistic. The study’s author urges people to cultivate their mental health, nurture hope, and use hope to inspire others, increase community engagement, and tackle bigger challenges. (GNN)
The World of Digital Transactions [Part 2/4]
FinTech – Mobile Payment Tech
With technology seamlessly blending into our on-the-go lives and speed becoming the norm, mobile payments have altered how we handle finances. The adoption of digital wallets, contactless payments, and e-commerce have transformed consumer spending patterns, offering more accessibility, convenience, and security than ever before.
With a simple tap or by scanning a QR code, we can easily make payments with our smartphones. This ease of use has led to a huge surge in the popularity of mobile payments, especially among young people.
Pros
- Ease and Speed: Mobile payments streamline transactions, allowing for quick and easy purchases without needing physical cards or cash.
- Budget Tracking: Many payment apps include features to track spending, categorize expenses, and set budgets to help you manage your finances.
- Enhanced Security: Mobile payment platforms use advanced security measures like encryption, biometrics, and tokenization to protect user data and comply with the law.
- Reduced Physical Contact: Since the pandemic, contactless payments offer a more hygienic alternative to cash and cards.
- Rewards and Incentives: Many digital wallets offer rewards, cashback, or points for using their services, adding an extra benefit to using them. Some credit cards, such as the U.S. Bank Altitude™ Reserve Visa Infinite® Card, reward you for mobile wallet spending as well.
Cons
- Dependence on Technology: Mobile payments require a functioning mobile device and an internet connection. This dependency is a drawback in areas with poor data connection or for less tech-savvy people.
- Limited Acceptance: Not all merchants accept mobile payments, limiting their usefulness, particularly with mom-and-pop firms that dislike the extra fees that may come with such apps. That said, more merchants accept these apps each day.
- Spending Habits: The ease of paying by smartphone influences personal spending, potentially leading to more frequent transactions.
- Privacy Concerns: The digital nature of these transactions raises concerns about security and privacy and how personal data is collected or misused, especially if an app gets hacked.
Examples of Mobile Payment Technologies
- Apple Pay and Google Wallet: These apps are among the most widely used digital wallets. They enable users to store their credit and debit card info securely and make payments via a simple tap using NFC (Near Field Communication) tech.
- Samsung Pay: Unique for its compatibility with both NFC and magnetic stripe terminals, Samsung Pay offers a wider range of usability as it works with regular credit card readers.
- PayPal and Venmo: Known for their peer-to-peer payment features, these apps now cover merchant transactions, enabling users to pay businesses directly from their phones.
Tips for Using Mobile Payment Technologies
- Ensure Device Security: Keep your device’s software updated and use secure passwords or biometrics (e.g., fingerprint or face ID) to protect your digital wallet.
- Embrace Budgeting Tools: Use built-in budgeting and tracking features to monitor your spending closely and maintain financial discipline.
- Understand the Terms: Be aware of any fees, limits, or terms associated with your mobile payment app, especially when linking to credit cards or bank accounts.
- Check Merchant Compatibility: Before relying solely on mobile payments, check if the merchants you frequent accept them.
Mobile payment technologies are not just a trend, but a fundamental shift in how we interact with money. They offer a glimpse into a future where financial transactions are faster, more secure, and more integrated into our digital lives. As these technologies evolve, they will continue to influence consumer behavior and provide new ways to interact with our money.
What Else Is New?
- Ukraine reports fraud in key weapons purchasing.
- French farmers continue protesting in Paris against globalization and for better work conditions.
- Nvidia sets a record for monthly market value increase.
- On news of 25% growth in its Q4 revenue, Meta’s share price rose over 20% increasing index values.
- Americans enjoy the social side of the Superbowl rather than the game itself.
#Oof
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