October 31, 2023

TLDR

MARKET RECAP → Today “Uptober” comes to a close with Bitcoin (BTC) living up to expectations, up nearly 30% for the month. Stocks weren’t so lucky, with the S&P 500 (VOO) closing out its first three-month losing streak since 2020. The Fed is set to release its next interest rate decision on Wednesday, and investors are betting that there’s a slim chance that the Fed will do anything but leave the overnight rate unchanged at 5.25-5.50%.

BOND, I-BOND → ? The Treasury Department announced a new inflation-protected Series I bond at a crisp 5.27% interest rate. At the fourth-highest level since I bonds were introduced in 1998, the announcement signals a savvy savings strategy amidst a world of rising prices.

PINTEREST IMPRESSES INVESTORS → ? Pinterest’s (PINS) Q3 earnings soared past expectations with a user base increasingly dominated by Gen Z and innovative ad strategies, sparking an 18% stock leap and proving it’s more than just a digital scrapbook.

ZOMBIE FIRMS FACE EXTINCTION→ ? In 2023’s financial horror show, 516 ‘zombie firms’ bit the dust, filing for bankruptcy as the Fed’s rate hikes turned the debt-laden walking dead into a graveyard of failed businesses, signaling a harsh but cleansing economic winter.

Sean Horgan

Head of Investor Relations @ MoneyLion

$shorgan

Today’s S&P 500 Heatmap

Source: finviz.com

Today’s Top News

BOND, I-BOND

? The U.S. Treasury unveiled the Series I-Bond rate at a tantalizing 5.27% for the period extending up to April 2024. Investors may have thought they’d stepped into a time machine, harkening back to juicier interest rates of yesteryears.

? Given the inflationary trends, this rate was set as a sizzling antidote, ensuring that the I-Bond holders aren’t just preserving capital but growing it. It was the Treasury’s way of saying, “Inflation? We’ve got a bond for that.”

? The bond’s appeal isn’t just its rate; it’s the government’s implied wink to the market that they’re committed to supporting personal savings amidst turbulent times. A fiscal flotation device in stormy economic waters, if you will.

Source: shutterstock

PINTEREST IMPRESSES INVESTORS

? Earnings Exceed Expectations: Pinterest’s (PINS) stock surged over 18% after reporting a robust Q3, with an adjusted EPS of 28 cents, outstripping the expected 20 cents. Revenue also topped estimates at $763.2 million, defying the ad market’s wariness amid the Israel-Hamas conflict.

? Strong User Engagement and Growth: The platform not only maintained but grew its user base, with an 8% year-over-year increase in monthly active users. Notably, Gen Z users now comprise 42% of this base, doubling their content saves in their first year.

? Innovative Ad Products and AI Use: Pinterest’s mobile deep linking ad product shone with a 200% conversion rate increase. Analysts praised its simultaneous ad load and engagement increase, and the effective use of AI in features like ‘Shop the Look’, enhancing user experience and merchant relevance.

Source: shutterstock

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ZOMBIE FIRMS FACE EXTINCTION

? Rising Bankruptcies Among ‘Zombies’: In 2023, 516 U.S. publicly listed ‘zombie firms’—companies surviving on debt despite poor sales—filed for bankruptcy, a trend exacerbated by the Federal Reserve’s interest rate hikes.

? Fed’s Tough Stance on Debt: The Fed’s interest rate increases, with the federal funds rate reaching 5.33% in October 2023, have pressured these firms. This policy aims to discourage banks from extending credit to financially weak companies, promoting a healthier financial ecosystem.

? Economic Impact and Future Outlook: The Fed’s strategy, part of its broader economic tightening, is seen as a move towards ‘creative destruction’, clearing the market of unviable businesses. With interest rates expected to stay high, the trend of zombie firm bankruptcies is likely to continue.