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Market Insight November 21, 2022

This week young investors are in the spotlight as they may be hit the hardest in terms of crypto and credit.
Breakaway 5

Credit Card Debt 

What is it? 

Consumers are spending more money than they may have as the economy tightens with inflation remaining high. 

“Year over year, credit debt grew by 15%, the largest jump in more than 20 years. The New York Fed found younger borrowers — defined as those under 30 years old — registered the highest balances during the third quarter of 2022. Likewise, the share of credit card borrowers in the highest-income areas that were likely to transition into delinquency remained well under historical trends. Meanwhile, the percentage of low-income borrowers flowing into delinquency is now over the pre-pandemic level.”*

This could have broader implications for the younger generations of individual investors. 

Why does it matter?

A measure of consumer debt is analyzed as a part of our process. It is an aspect of our Blitz Index, which we discuss in our first Market Insight of each month. The impacts could continue to dampen the markets if people have higher debt burdens than they can afford. 

“‘With prices more than 8% higher than they were a year ago, it is perhaps unsurprising that balances are increasing,’ New York Fed researchers reported. ‘Notably, credit card balances have grown at nearly double the rate since last year.”* 

People and companies with lower levels of income and assets may be hurt the hardest if this trend continues. 

“The real test will be to follow whether these borrowers will be able to continue to make the payments on their credit cards.’”*

A Billionaire Hedge Fund CEO is Worried About Young Investors

What is it? 

“The collapse of FTX is likely to impact hundreds of thousands of investors, many of whom are Gen Zers. And Ken Griffin, founder and CEO of the Citadel hedge fund, says he’s worried the ripple effects could put generations off investing for some time. Griffin also mentioned “people are going to lose billions of dollars and that undermines trust in all financial markets.”**

If Griffin is correct, not only could some investors be put off investing, but the trust of the markets as a whole may be in question. We believe that people’s confidence in the markets will be restored. While the crypto market is highlighted in the prior quote, people should not assume to reach such outsized returns in the world of blockchain or crypto investments without managing or assuming the associated risks. 

Why does it matter?

“Because they were burned by heavy investments in crypto, Griffin theorized, younger people could be wary of traditional investments like stocks, bonds and debt. And that hesitation is where the trouble could lie.”** 

Griffin may have a point here as well. Some people have been burned by investing in crypto. From our perspective, those that have experienced financial hardship will be more inclined to seek out professional help from firms like ours. We do not believe that people will dismiss the idea of investments, but rather want reassurance that experts are handling it for them since they may not want the burden of trying to manage investments on top of what they already have going on. 

We still believe that crypto will grow and evolve from this current situation. If you are interested in investing in crypto, we do have a model we can allocate some of your funds to as we see fit. This is one of our tactical models that is sitting mostly in cash equivalents at the moment. We will add more exposure to cryptocurrency funds that are traded in the stock market as their performance improves. Please let us know now or in your next meeting and we can help you. 

Also, you may know someone that has experienced some financial challenges from trying to manage investments individually. If you want to help them out we would appreciate a referral to assess how we can help improve their financial future. 

Other articles we found interesting this week:

Target earnings miss by a mile amid ‘significant change in consumer shopping patterns’

Musk tells Twitter staff: Opt in for ‘intensity’ or take severance

Britain’s budget: What you need to know

Current 401(k) portfolio

Our last portfolio reallocation: 5/19/2022. 

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The weekly market insight provides a window into the process we use in our investment management process. At Breakaway, we believe markets are always changing and require a nimble yet data-oriented approach. 

Our process attempts to identify trends and momentum in the financial markets. With that information, we align our clients’ portfolio accordingly in the hope to help our clients accomplish their life goals while attempting to lower the risk of a large drop in their portfolio.

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Sources:

*Gabriella Cruz-Martinez. “Credit card debt jumps by largest amount in two decades, Fed report says”. 11/15/2022. Yahoo Finance. https://finance.yahoo.com/news/credit-card-debt-222049660.html

**Chris Morris. “Billionaire investor Ken Griffin is worried about ‘the 20-something-year-olds to 40-year-olds who are so engaged in crypto’ and FTX’s trust-destroying blowup”. 11/15/2022. Yahoo Finance. https://finance.yahoo.com/news/billionaire-investor-ken-griffin-worried-164812190.html

IMPORTANT DISCLOSURES: 

Educational use Only. The market update published by Breakaway Financial Group LLC (“Breakaway”) is intended to be educational in nature and is not intended to be a recommendation for any specific investment product, strategy, plan feature or other purposes. Accordingly, it should not be construed by any consumer and/or prospective client as solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation. 

Advertising and Marketing. Communications such as this are not impartial and are provided in connection with advertising and marketing. This material is not suggesting a specific course of action or any action at all. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, insurance, legal or tax professional that takes into account all of the particular facts and circumstances of an investor’s own situation. No person associated with Breakaway is a licensed attorney or tax professional and the information contained herein should not be considered tax or legal advice. 

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Important Information regarding Registration Breakaway Financial Group, LLC and/or Patrick Traverse offer investment advisory and financial planning services through Belpointe Asset Management, LLC, (“Belpointe”)500 Damonte Ranch, Parkway Building 700, Unit 700, Reno, NV 89521, an investment adviser registered with the Securities and Exchange Commission (“SEC”). Registration with the SEC should not be construed to imply that the SEC has approved or endorsed qualifications or the services Belpointe offers, or that its personnel possess a particular level of skill, expertise or training. It is important to read disclosures pertaining to Belpointe Asset Management at this link https://belpointeasset.com/disclosure/.  Additional information about Belpointe and Patrick Traverse is available on the SEC’s website at www.adviserinfo.sec.gov.

Craig Stahlecker

Craig Stahlecker

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IMPORTANT DISCLOSURES:
The information provided is intended to be educational in nature and is not intended to be a recommendation for any specific investment product, strategy, plan feature or other purposes. Accordingly, it should not be construed by any consumer and/or prospective client as solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation.

Communications such as this are not impartial and are provided in connection with advertising and marketing. This material is not suggesting a specific course of action or any action at all. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, insurance, legal or tax professional that takes into account all of the particular facts and circumstances of an investor’s own situation. No person associated with Money Coach is a licensed attorney or tax professional and the information contained herein should not be considered tax or legal advice.