#17 - It's not looking pretty folks

Interest rates are going UP

A week ago the market came out with really bad inflation data, which send the stock market tumbling down.

This caused a reaction from both the FED and the ECB, to change their outlook and go more aggressive on the inflation.

First the ECB

They came out with this statement on the 15th of June.

And honestly? I don't know what to say about it.

Further - I'm quite frustrated with the ECB.

It seems that they don't know what they're doing.

Which is troubling, giving they are the central bank of Europe.

The statement is just pretty words, trying to mask whatever they're trying to do. The best they could come up with was, and I quite: "to accelerate the completion of the design of a new anti-fragmentation instrument for consideration by the Governing Council".

Seriously? There's some rumors that this might mean that they will buy back bonds of European countries who are not doing well.

Well...

I certainly don't know what it means. I've been reading news from all the big papers, and no one really knows what exactly is going on.

Well done.

We will have to wait for the end of Summer when their next meeting on the interest rate is coming up.

To the FED

Even though they are not succeeding in battling the inflation, they at least give clear guidance to what they are doing.

Here's a part of their statement: "The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1‑1/2 to 1-3/4 percent".

That's MUCH better.

Now we know that they will raise interest rates by 0,75%.

Further into the statement, they said that they might do that next time as well, if inflation continues to be high.

On Wednesday the stocks reacted positive to this, but then came down hard in Thursdays trading.

I'm not expecting anything else that up's and down's from here.

When it will end and how long it will take?

No one knows.

All we know is:

- The inflation is not doing well.

- The interest rates are going up.

- China is not sure where to stand on covid.

- War is still going on in Ukraine.

And that's not exactly how you want things to be, when you are investing.

To the ETFs we go.

What's the ETF fee's?

Last week we talked about different ETFs. Today I will explain the fee's. Like we talked about last week, the fee's are different from ETF to ETF. This is best seen on the active ETFs which are way more expensive than the passive ones. So why fee's? The reason for the fee, is that a company have created the ETF for you to invest into a certain area, sector, theme or geography. For doing so, they need payment, and that's the fee. If it's an active ETF, then they need more money since they're actively trading stocks in and out of their ETF. Let's take an example: This is the iShares Core S&P 500 ETF. And it simply follows the S&P 500 index. If you follow the link and scroll down, you will see the "Total expense Ratio" which is the fee. You can also see that it's a accumulating ETF, so they don't pay out dividends, and the benchmark index is S&P 500.

How nice of them to tell us. So if you want to invest in the S&P 500 index, you can do that through this ETF and you will pay 0,07% in fee. This means that if you buy €1.000 worth of this ETF, you will pay €70 per year for it. That's a pretty good deal for having invested in the 500 largest companies in the US. The actual payment will be taken care of by your broker, as they will take the money from your account. You don't need to actively do anything. Alright, that was it! The next two weeks might either be very short newsletters, or not there at all, since I will be on vacation. But check in at 9:30 am CET on Sunday to see. I hope you will have a good summer :)

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