Matej Kranjc @ReturnInvest: "𝙃𝙚𝙡𝙡𝙤 𝙚𝙫𝙚𝙧𝙮𝙤𝙣𝙚, 𝙖𝙣𝙙 𝙬𝙚𝙡𝙘𝙤𝙢𝙚 𝙩𝙤..."

Slovenia

𝙃𝙚𝙡𝙡𝙤 𝙚𝙫𝙚𝙧𝙮𝙤𝙣𝙚, 𝙖𝙣𝙙 𝙬𝙚𝙡𝙘𝙤𝙢𝙚 𝙩𝙤 𝙩𝙝𝙚 𝙣𝙚𝙬 𝙘𝙤𝙥𝙞𝙚𝙧𝙨. In this post we go over the September developments in the market (inflation, jobs data, Fed's rate cut) and a bit on AI in general and how it is affecting the markets. 𝙎𝙀𝙋𝙏𝙀𝙈𝘽𝙀𝙍 𝙅𝙊𝘽𝙎 𝘿𝘼𝙏𝘼 Another miss on the jobs data with nonfarm payrolls increasing just 22 000 vs 75 000 expected. Unemployment rose to 4.3%. We have also received a 911,000 downward revision for the 12 months ending March 2025 marking a softer labor market than previously thought. All that puts us right on the edge of going negative on jobs growth in the last few months, more so if we happen to get even more downward revisions in the future, that would eventually push U.S. towards recession as buying power weakens. End of month should also bring new jobs numbers, but due to a looming gowernment shutdown they won't be releasing the numbers on schedule. 𝙄𝙉𝙁𝙇𝘼𝙏𝙄𝙊𝙉 Inflation remains elevated with 0.4% for the month of August and 2.9% for the 12 months ending August 2025. That's in line with expectations but getting more distant from the target of 2%. It is not tamed yet at all and that makes lowering rates risky, something Jerome Powell is trying to balance – risk of jobs numbers collapsing (followed by recession) vs the risk of inflation de-anchoring (consumer prices skyrocketing). 𝙁𝙀𝘿'𝙎 𝘿𝙀𝘾𝙄𝙎𝙄𝙊𝙉 The Fed decided to go forward with the much anticipated 0.25% federal interest rate cut, bringing the rate to a range of 4.00% - 4.25%. This is not a big enough cut to make a huge impact eaither way (making a big positive impact on jobs numbers, or on the risk side of things, push inflation meaningfully higher). In my opinion they are trying to buy time to see more data without pushing the market towards either extreme. Right now they seem to be acting much faster and better than during the booming inflation when they were in a 6-12 month hibernation sleep. The market is already pricing in another 2 rate cuts by the end of this year, bringing final rate to 3.5%-3.75% while Jerome Powell remains more cautious with any such expectations. 𝘼𝙄 𝙏𝙊 𝙏𝙃𝙀 𝙍𝙀𝙎𝘾𝙐𝙀 Starting a bit off topic, back at the beginning of August I watched Sam Altman speak that ChatGPT-5 will be such a big improvement over version 4 that even he is starting to feel like it can do anything better than himself and that they are potentially opening a Pandora's box. That thought kind of unsettled me a bit and I was actually a bit relieved that version 5 didn't actually seem such a big leap over version 4. Just 2 months later it already feels like a year has passed, the AI is developing and multiplying and growing so fast on all levels of the human world. From replacing people at many jobs and reducing headcounts needed for the same amount of results, to improving transportation, production, products, increasing the designing speed, making marketing easier and more accessible. I must say I was in fact expecting a huge AI boost to economic growth and general human use over the recent years, but the speed of it all is what is absolutely shocking to me. So many things are becoming obsolete literally overnight. And AI brought so many improvements to the typical business operations and spurred so much activities and investments that it has so far single-handedly prevented what would likely be a pretty bleak economic outcome. 𝙁𝙐𝙏𝙐𝙍𝙀 𝘾𝙃𝘼𝙉𝙂𝙀𝙎 One way I will look to provide more safety from inflation is through exposure to housing. With the federal rates subsiding, the mortgage rates will follow suit with a slight delay, reviving the recently cooling housing market. The size of investment I am looking for here would be roughly 2-4% exposure to 1 or 2 safer housing related stocks.

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