Hey Snackers,
So far, 2021 has moved fast. Here at Robinhood Snacks, we’re dedicated to making financial news and the markets digestible (#snacky).
Today, we’re taking a step back to zero in on the biggest business news of the past three months, helping you prepare for the months ahead.
Biden's "New Deal".... Since President Biden's inauguration, one major theme has emerged: spend big on America. Biden's ambitious "Build Back Better" plan involves proposed investments at a scale we haven't seen for decades. On the "Build Back" side: a $1.9T stimulus to speed up recovery — plus, a "Buy American" executive order to boost purchases of US-made goods and services. On the "Better" side, the Biden admin is crafting a massive infrastructure package that could cost $3T. It includes spending on roads, bridges, and clean energy infrastructure. Now, economists are predicting a much faster recovery than previously expected.
The Swinging Bull Market... This year, the only question asked more than "did you get vaxed" is "are we in a bubble?" The stock market has continued its surge, with the S&P 500 and the Dow hitting fresh records this month. But there's a key difference between this quarter and last year: as the economy recovers and interest rates rise, investors are moving away from tech and into "Recovery Stocks" (aka: cyclical stocks). These are stocks in industries that tend to do well when the economy is growing (and vice versa). Think: travel, construction, retail, and banking. The cyclical-heavy Dow is up 8% this quarter — the tech-heavy Nasdaq index is up barely 2%.
Crypto "Mainstream-ification"... Cryptocurrencies and alternative assets reached a peak of social relevance. In January, bitcoin hit its "big $40K" record, pushing the total value of the crypto market above $1T for the first time. It continued surging through March, as corporate investors like Tesla, MassMutual, and Square bought in. Retail investors poured into crypto too, on apps like Robinhood (aka: us) and Coinbase (which is now going public at a $68B valuation). Paypal said it will let users shop with crypto — and Tesla will now let you buy a Model 3 with bitcoin. Meanwhile, the NFT craze underscored the power of the blockchain, and an appetite for alt investments.
The "Revenge Economy"... is this the quarter the world returns to "normal"? For a year, sweatpants replaced shopping, screens replaced travel, and microwaves replaced restaurants. Thanks to all this non-spending (plus stimulus checks), Americans have socked away $1.5T in excess savings. Consumer spending tanked in 2020, but it’s expected to spike in the summer and fall. As life slowly returns to semi-normalcy, we're seeing leading indicators of the "revenge spending" economy. Since mid-March, pandemic travel has been notching record highs, with over 1M people passing through TSA check points each day. "Revenge spending" outside the home on things like vacays, concerts, dining, and (non-stretchy) clothes could be coming.
The Bull or Bear Market... Will the bull market continue? The pessimist case: interest rates have risen, the new $1.9T stimulus is sparking inflation fears, and Big Tech is losing its coronaconomy edge. And with the new Dem-controlled government, tech might see more aggressive regulation. Tech stocks carry massive weight, so a move away from them could depress the market. The optimist case: the Fed says it won't raise rates any time soon, the $1.9T stimulus could bring faster economic healing, and more than 25% of Americans have been vaccinated. Also: infrastructure investments could boost cyclical stocks longer-term, lifting the market.
The Future of Labor... The pandemic has exacerbated income inequality — will reopening help narrow the gap? America is waiting for unemployment to snap back to pre-pandemic levels (3.5%), but this'll likely take longer than three months. 2.5M+ women dropped out of the labor force between February 2020 and this January — will they return to work? Wages, unions, and WFH are also top of mind: The Biden admin is trying to raise the federal minimum wage to $15/hour, but it wasn't included in the last stimulus — will we see any federal minimum wage increases? Will there be more major pushes for unionization, like we're seeing now at Amazon? Will companies return to the office, or will a hybrid WFH model become the norm?
ICYMI: Some of our biggest stories from this quarter...
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