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Hi John, here's what you need to know for October 9th in 3:07 minutes.

🎓 Finimized while checking out the low rates on student loan refinancing at Earnest.

⏳ Keep it brief

Economic Slo-Mo

What’s Going On Here?

The World Bank warned that its June forecast – global economic growth of 2.6% this year compared to last – might prove too optimistic. So much for slow and steady wins the race...

What Does This Mean?

The trifecta of reasons for its dour outlook shouldn’t come as a much of a surprise to economists, investors, or Finimizers. One: British businesses appear to have postponed some investment until there’s clarity on Brexit, weighing on growth. Two: the German economy is shrinking, which may well drag the rest of the eurozone into recessionary doldrums. And that’s partly due to – three – the ongoing US-China trade war with the US.

But you know what they say: misery loves company. So the World Bank’s heart will be all aflutter next week when the International Monetary Fund (a sort of bank for countries) publishes its own updated economic forecasts – probably slashing its predictions.

Why Should I Care?

For you personally: Nothing but mood music.
Large institutions like the World Bank aren’t renowned for being quick to make fresh economic predictions. By the time the World Bank updates its estimates, investors usually have a handle on the state of the global economy thanks to official data releases and company earnings reports. Still, these forecasts often guide companies in their own predictions. They’re worth keeping an eye on, then, to see how the various goings-on drive the bigger economic picture.

For markets: In a slowdown, bonds pep up.
It’s harder for companies to grow their profits when economies are slowing or shrinking. So rather than owning shares that might fall in value, investors typically buy bonds that should pay investors whatever the weather. Bond investors were afforded a refreshing option this week: PepsiCo sold $1 billion worth of “green” bonds that’ll be used for things like improving waste-water management. Investors gulped them down: Pepsi raised more than it hoped at a lower interest rate than expected.

Drum Roll, Please

What’s Going On Here?

Third-quarter earnings season is upon us, fellow Finimizers, and while investors are expecting US profits to decline overall, what's next for individual companies is yet to be settled...

What Does This Mean?

According to estimates compiled by FactSet, major US companies’ third-quarter profits will be 4% lower than the same time last year. Forecasted drops like this one have been common among investors this year, who predicted shrinking profits in both the first and second quarters. But higher earnings per share – partly driven by buybacks which reduced the number of shares in circulation – meant companies have all but erased what would have been profit declines.

Companies are pretty good at tempering investor expectations, so they tend to earn slightly more than the predictions say – which in turn often gives their shares a small boost. More important as far as share prices go, of course, are the promises a company makes about future earnings… (tweet this)

Why Should I Care?

For markets: Banks and tech lead the way again.
Tech companies like Microsoft and Facebook (now considered a “communication services” stock) represent a third of the US stock market – and the sector is expected to reveal falling third-quarter profit. If these companies don’t hint at a pick-up soon, investors might choose to sell their shares – sending the entire market down. At 13% of the stock market, banks are influential too. And since they’re at the coal face of the economy, their outlooks could shape investors’ fourth-quarter thinking.

The bigger picture: Musical shares.
This time last year, investors were worried the low interest rate music the US economy was dancing to would soon stop – and leave growth without a seat to sit on. So come December, their selling had wiped out 2018’s stock market gains. This year, though, investors have bought up safer bonds – so any fresh concerns might not be accompanied by wholesale stock sales.

💬 Quote of the day

– Terry Pratchett (an English humorist, satirist, and author of fantasy novels)