Thursday, May 5th 2022

Three Things (5/5)

Commentary

“Man is a deterministic device thrown into a probabilistic universe. In this match, surprises are expected.” —Michael Lewis

The below content and projections are the opinion of the authors. Any conclusions or takeaways are their own. This should not be considered as investment advice. Investing involves the risk of loss and returns are not guaranteed.

1) Federal Reserve raises rates by most since 2000, stocks soar after comments from Fed chair Powell

  • The U.S. central bank raised its benchmark interest rate by 0.5% on Wednesday, the first move of this magnitude in over 20 years.
  • In a press conference, Fed chair Jay Powell signaled future rate increases would be of the same magnitude; some investors anticipated 0.75% rate increases in future meetings.
  • All three major U.S. stock indexes gained over 2.8% on Wednesday following this news.

Titan’s Takeaway: The Fed raised interest rates by 0.5% on Wednesday and will likely do so again in six weeks, which in this environment counts as good news. Higher interest rates have pressured markets for months, and Wednesday’s market rally shows investors are ready to cheer any signs the central bank will hold steady — rather than get more aggressive — in its efforts to fight inflation.

2) Meta pares back hiring goals amid what company calls an “industry-wide downturn”

  • The company has paused hiring across most of its engineering teams for the rest of the year, according to an internal memo obtained by Insider.
  • Meta’s employee headcount totaled 77,805 as of March 31, 2022, up 28% from the prior year.
  • In its earnings release last week, Meta cut the range for its forecasted expenses this year by $3 billion.

Titan’s Takeaway: Slumping stock prices have spurred changes across the tech industry in employee compensation structures this year. But lower stock prices also suggest a dimmer view of growth prospects from investors, and slower hiring against this backdrop comes as little surprise.

3) Wordle drives New York Times subscriber growth as digital media playbooks continue to expand

  • The company added 387,000 net new digital subscribers in the first quarter, its best Q1 in two years.
  • Management said Wordle – the word teaser game the Times acquired in January 2022 — played an “outsized role” in Q1 subscriber growth.
  • Tens of millions of new users were brought to the company’s sites as a result of its Wordle acquisition, though most users only play the game, which remains free to play.

Titan’s Takeaway: Subscription models, and the recurring revenue streams they generate, have become the preferred business strategy for most media brands over the last several years. The New York Times’ growth through sports, cooking, and now gaming, however, shows this model requires businesses to remain creative in finding new ways to delight subscribers — reporting the news every day won’t cut it.

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