#3 Daily Financial News Round Up - Nov 3,2021
Market Snapshot
Dow Jones is down by 0.17%, S&P500 is down by 0.11%, and Nasdaq Composite is up by 0.06% compared to yesterday’s 0.22%.
How’s crypto-market?
Bitcoin is down by 2.40%. The top three traded cryptocurrencies in the last 24 hours are XRP, Shiba Inu and Solana. It’s not all green. Instead, there are some glaring reds in the leading cryptocurrencies, but Shiba Inu continues its downward trend by 7.27% compared to yesterday’s downward direction by 2.60%.
What news caught my attention?
Global financial system participants such as the banks, regulators and investors with total assets worth $130 trillion have committed to programs to cut emissions. As of 2020, the dollar value in commitments towards cutting emissions was $5 Trillion. Much innovation has stemmed from private industries in the last 30-40 years, and the investing climate is changing the tide. Since most of these commitments are voluntary, the impact of these commitments needs to be assessed. However, these private actors' voluntary nature of these commitments signals that private industry is taking charge of the climate change action. Investing landscape shapes enterprises and the business environment. These climate finance commitments will have broader implications than just climate change. My prediction is that these commitments will also impact the finance industry.
Fed is preparing to taper. What is tapering? To keep the economy moving and not get into a recession, one of the Fed's arsenal tools is to buy Treasuries and MBS that helps push down interest rates to keep the borrowing costs low for consumers and businesses. Low-interest rates incentivize people and businesses to borrow more, spend more and invest more in companies. More investment usually means a rapid recovery to good times. Now that the economy seems to have stabilized and inflation is increasing, i.e. the value for a buck is going down, it's time to rein in the inflation. One way to do that is to buy fewer Treasuries and MBSs, which is tapering. And the other way is to raise interest rates. Now, the Fed announced that they would buy fewer Treasuries and MBSs. Specifically, beginning mid-November, the Central bank will reduce its asset-buying by $15 billion a month. But, the Fed officials haven't indicated if they are going to raise interest rates yet. Inflation expectations can be self-fulfilling, making raising interest rates too soon a disaster for the economy as investors tend to act on this information. Mr Powell is taking the middle ground and watching the labour markets and the financial markets before declaring their intentions to raise the interest rates.
My Takeaways:
Financial commitments by the finance industry are good news. The downtrend in the market indicators could be a reaction to these commitments?
Climate Finance is here! 8-10 years ago, I got into finance academic research with an interest in climate finance, and some of the academics said it was too fringe an area for academic research. Close to a decade later, climate finance is having its moment. Or it is about to be!
Inflation concerns and expectations are to be closely watched.