☕️ Unpacking the sell-off

Everyone is calling in sick...
January 10, 2022 View Online | Sign Up | Shop

Morning Brew

Fundrise

Good morning. If you went to bed before the end of the Chargers-Raiders game last night (don't blame you, it was late), you missed one of the wildest hours of sports in recent memory.

Remember, if the Steelers and Jaguars won earlier in the day, then the Chargers and Raiders could both make the playoffs by playing to a tie. Well, the Steelers and Jaguars did win, and the Chargers and Raiders came within a mere 2 seconds of tying…until the Raiders kicked a field goal in overtime to boot the Chargers from the playoffs.

Not sure anything this week—or in 2022—can top that drama.

Neal Freyman

MARKETS: YEAR-TO-DATE

Nasdaq

14,935.90

S&P

4,677.03

Dow

36,231.66

10-Year

1.767%

Bitcoin

$42,400.04

Ethereum

$3,193.03

*Stock data as of market close, cryptocurrency data as of 5:00pm ET. Here's what these numbers mean.

  • Markets: Stocks are off to a sputtering start in 2022, and they could be in for more upheaval this week with a big inflation report due, Fed Chair Jerome Powell's confirmation hearing on Capitol Hill, and the beginning of earnings season.

ECONOMY

The Great Sickout

Napoleon Dynamite saying Giphy

In workplaces across the country, Americans who have Covid are asking their colleagues to cover for them while they're out sick. And when those coworkers can't, because, well, they also have Covid, you get the kind of severe economic disruptions the US is facing right now.

The numbers: The US is averaging about 650,000 cases a day, more than double the peak during last winter's surge. It's also likely a big undercount, given how many people are testing positive using at-home tests or who aren't getting tested at all.

With so many people getting sick, up to 5 million US workers were forced to stay home last week, Capital Economics researcher Andrew Hunter calculated. That means about 3% of the labor force was knocked offline, setting off a cascade of damaging effects across critical industries like health care and education.

  • About 20% of US hospitals reported critical staffing shortages last week, the highest share since December 2020.
  • One California superintendent taught a high school physics class last Monday after 300 teachers were absent from schools, primarily because they got infected with Covid.

And even in the aviation industry, where staffing shortages are well documented, it's still worth noting that Alaska Airlines canceled 10% of its flights for the remainder of January, citing an "unprecedented" number of employees calling in sick.

But sometimes, it's not so easy to do that

Many low-wage workers in the US are being forced to choose between going to work sick or losing out on a paycheck. Only 33% of workers in the bottom 10% of the wage bracket get paid sick leave, compared to 95% in the top 10%. And while companies juiced up their paid leave policies early in the pandemic, they're starting to wind them down.

  • Walmart and Amazon, the two largest private employers in the US, cut paid leave last week after the CDC shortened its isolation guidance for infected people.

Bottom line: Economists have likened the Omicron surge to a blizzard—a sharp, sudden shock to the economy that will take some time to dig out from but, once it's over, won't produce many lingering effects.

        

STOCKS

Unpacking the Tech Sell-off

Man walking in front of the NYSE Spencer Platt/Getty Images

Investors in tech companies are learning that stocks don't always go up—in fact, sometimes they stay flat and at other moments, like in the first week of 2022, they drop sharply.

Last week, the tech-heavy Nasdaq fell 4.5% for its worst week since February 2021. And the ARK Innovation ETF, which is full of high-growth tech companies, plunged 11%.

What's going on? If you want to understand what's happening in the stock market, you also have to look at the bond market, which, while perhaps less sexy, is influencing your Robinhood portfolio more than you might think.

Over in the bond market, yields (or the return you can get from buying a bond) are surging. On Friday, the yield for the 10-year Treasury note hit its highest level since January 2020.

While rising yields are generally a bullish sign for the economy, they also make riskier assets—like expensive tech stocks—less attractive compared to other names that may get a boost from higher interest rates. The Dow, for example, with its many financial services companies, lost just 0.29% last week.

Big picture: Higher borrowing costs are sprouting up across the economy. The average 30-year mortgage rate hit 3.22% last week, its highest level in nearly two years.

        

GAMBLING

Welcome to New York, Mobile Sports Betting

A view of Madison Square Garden during a game between the New York Knicks and the Orlando Magic Steven Ryan/Getty Images

For the first time since Linsanity, New York City sports fans have something to be excited about. Four mobile sports betting operators, including FanDuel and DraftKings, went live in NY on Saturday morning, and five more are set to be approved down the line.

With the NFL postseason starting and the Super Bowl just weeks away, the timing couldn't be better. In all, the industry could bring in as much as $500 million in annual tax revenue for New York.

The backstory: A Supreme Court decision in 2018 paved the way for legal sports betting, and since then, about half of states have rolled out sports betting in some form.

Big picture: The rise of mobile betting, in particular, has transformed the gambling landscape in the country. New Jersey, which moved into mobile betting early and aggressively, has supplanted Nevada as the top US sports gambling market. But with New York's move, it's unclear whether that will last: NY residents popping over the Hudson River have placed 25%–30% of all sports bets in NJ, according to industry estimates.

        

TOGETHER WITH FUNDRISE

Portfolio Growth vs. Portfolio Stability

Fundrise

Believe it or not, you can have both. Because with Fundrise, you'll invest in private-market real estate—the same asset class that professional investors have used for decades to generate long-term wealth *while* stabilizing their long-term portfolios. Boom.

Fundrise is America's largest direct-to-investor real estate investment platform, with assets like apartment complexes, single-family rentals, and industrial facilities.

Basically, Fundrise has revolutionized the process entirely, making high-end, private-market investing effortless and accessible for everyone, so you can bring stability to your portfolio without sacrificing growth.

In less than five minutes and with as little as $10, you can join over 210,000 investors building a better portfolio with private real estate.

So position yourself for the growth you want and stability you need. Sign up for Fundrise here.

GRAB BAG

Key Performance Indicators

Bob Saget Astrid Stawiarz/Getty Images

Quote: "I don't know why everyone has to be so angry. I meet lots of people and so many of them just want to live in peace with everyone. Peace out "

That's what Bob Saget tweeted just over a month ago. The beloved actor, TV host, and comedian was found dead in an Orlando hotel room yesterday at 65. Authorities said they saw no signs of foul play or drug use.

Stat: Vinyl isn't the only audio format enjoying a renaissance: CD sales increased in 2021 for the first time in 17 years. Adele's new album, 30, was the bestselling CD last year, followed by re-recorded albums from Taylor Swift.

Read: All of these things happened in greater China last week. (Sofia Horta e Costa)

        

CALENDAR

The Week Ahead

The West confronts Russia: US diplomats will head to Europe this week for a series of meetings intended to pressure Russia against invading Ukraine. Russia has amassed ~100,000 troops at the Ukraine border, but it's not clear what Russian President Vladimir Putin's aims are.

Earnings season: It's baaack. Earnings season for the fourth quarter kicks off on Friday, giving investors a picture of company financials across the entirety of 2021. Expectations for Q4 are high but not astronomical: S&P 500 companies are expected to post 22% annual profit growth in Q4; compare that to Q2, when profits soared 91%.

Inflation: In what's become the biggest event on the economic calendar, the consumer price index will drop on Wednesday and provide an update on inflation. Price growth hit a 39-year high in November.

Everything else:

  • Georgia faces Alabama in the college football championship tonight.
  • The Senate will hold confirmation hearings for Fed Chair Jerome Powell and Fed Governor Lael Brainard, who's been nominated to be his vice chair.
  • Kiss a Ginger Day is Wednesday. Emma Watson might sit this one out.
        

WHAT ELSE IS BREWING

  • At least 19 people, including nine children, were killed in an apartment fire in the Bronx Sunday morning.
  • The US sued a Georgia shop owner who dumped 91,500 oily pennies in a former employee's driveway.
  • First-dose vaccination appointments quadrupled in Quebec after the government said only vaxed people could enter alcohol and cannabis stores.
  • A thread on why what's happening in Kazakhstan is such a big deal.

FROM THE CREW

A Pod That Packs a Punch

Founder's Journal promo image

Catch up on Founder's Journal with our favorite recent episodes.

This editorial content is supported by Stella Artois.

BREW'S BETS

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Dive back into the week.

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GAMES

The Puzzle Section

Turntable: Who would have thought that word games would be the talk of the internet in the first week of 2022? Level up your skills and play Turntable here.

NCAA logos

In honor of the college football championship tonight, here's a quiz on college sports logos. How many of the six can you name?

Six college sport logos

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ANSWER

1. Maryland Terrapins 2. Kansas St. Wildcats 3. Army Black Knights 4. SMU Mustangs 5. Fresno St. Bulldogs 6. Seton Hall Pirates

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Written by Neal Freyman

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