• Chris Simpson

Fed Assures Assistance Until 2023- Market Update Sep 18, 2020

This week, the Federal Reserve announced that they plan to keep interest rates low until at least 2023. This is meant to help reinvigorate the economy in light of the coronavirus. Lower interest rates mean:

  1. It will be easier to get a loan.

  2. More loans create more opportunities to buy things or start businesses.

  3. Less interest paid on things like credit cards and mortgages.

This is good news for consumers and could mean a quicker economic recovery. However, it’s important to remember that Fed Policy can always change in light of new updates.

Let’s take a look at some of the biggest business updates from this week.

The movie industry struggles

The movie industry is one of many that have been having a rough year. Movie theaters have been closed since March and even though they just got cleared to reopen, demand hasn’t returned. Two of the more widely anticipated movies completely flopped recently:

➢ Warner Bros Tenet grossed less than $30 million in the US (it cost about $205 million to produce).

➢ Disney’s live action Mulan was released on Disney+ for $30 and reportedly brought in about $32 million. Disney said they were “very pleased” with this number, however, we can’t imagine that that’s entirely true.

The movie industry is now in the hot seat as these two flops won’t encourage companies to push out more movies. Additionally, many films have delayed filming due to the virus.

TikTok and Oracle finalize a deal (kind of)

TikTok has looked through its suitors and finally chosen U.S.-based Oracle to takeover its U.S. operations. After this deal, TikTok will still be allowed to operate in the U.S. but Oracle will be in charge of its U.S. operations. According to the deal, Oracle will act as their “trusted technology partner”.

This deal still needs to get signed off by the President, who isn’t satisfied and wants Bytedance (TikTok’s Chinese parent company) to lose their majority stake in TikTok. To help move the deal forward, TikTok has offered to move its global HQ to the U.S., bringing in tens of thousands of jobs.

It seems like both sides are eager to reach an agreement and one should be finalized in the next week or so.

Postmates partners with the NFL

This partnership will be a huge win for Postmates for a few reasons:

1. The NFL is one of the hottest advertising spots for companies (41 out of 50 of the top broadcasts last year were NFL games).

2. Since the NFL is practicing social distancing, more people will be watching from home. While they’re watching, what will they do? Probably order food. This works out perfectly for Postmate’s core business.

3. If the United States can agree on one thing, it’s a love for football. Postmates has struggled to reach a national audience and compete with other companies. Hopefully, this partnership can bring them to a national audience.

Airlines raise money off loyalty

Delta, American, and United are getting creative in ways to raise money in the midst of the coronavirus recession. Airlines have been struggling for almost the entire year as air travel has been significantly reduced. Even though air travel has stopped, costs for airlines definitely haven’t (Delta burns through about $27 million per day). Here are a few ways they’ve been staying afloat:

● Government assistance to the tune of $60 billion (as long as airlines don’t lay off any employees).

● Now, Delta and Co. are using their loyalty programs as collateral to raise billions. Delta is raising about $9 billion.

Airlines have been treading water for months now in an industry that was already notorious for high costs and low margins. If things don’t turn around quickly they will be in even more trouble.

A few other updates:

➢ Curious where you could invest $5,000 right now? Here are a few good options.

➢ Pet company Chewy announces an offering of Class A common stock.

➢ NYC restaurants can now add a 10% “COVID-19 Recover Charge” to customers’ bills.

That’s it for this week -- Join us next week for another market update.

Securities and investment advisory services offered through NEXT Financial Group Inc. Member FINRA/SIPC. Sierra Ridge Wealth Management is not an affiliate of NEXT Financial Group Inc.

This material is not intended as an offer or solicitation for the purchase or sale of a security or any other financial instrument. Past performance does not guarantee future performance.

All the views expressed are those of Chris Simpson and not those of Sierra Ridge Wealth Management or NEXT Financial Group Inc.

The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.

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