Finance

It’s the most wonderful time of the year, and for investors in America’s stockmarket that is saying something. They have had a marvellous 2024, as share prices that had already soared in 2023 just kept on going. The S&P 500 index of large firms is now 54% higher than it was two years ago, a winning streak it has bettered just a handful of times since its inception in 1957. To be sure, there have been jitters along the way. The most recent came on December 18th, when share prices fell by 3% in a single day after the Federal Reserve predicted it would cut rates by less than the market expected in 2025. Yet share prices have recovered a little since and the mood is still upbeat. Stockmarkets elsewhere in the world have also raced higher; America’s has left them in the dust. More

Investors may want to consider adding exposure to the world’s second-largest emerging market.
According to EMQQ Global founder Kevin Carter, India’s technology sector is extremely attractive right now.

“It’s the tip of the spear of growth [in e-commerce] … not just in emerging markets, but on the planet,” Carter told CNBC’s “ETF Edge” this week. 
His firm is behind the INQQ The India Internet ETF, which was launched in 2022. The India Internet ETF is up almost 21% so far this year, as of Friday’s close.

Arrows pointing outwards

‘DoorDash of India’

One of Carter’s top plays is Zomato, which he calls “the DoorDash of India.” Zomato stock is up 128% this year.
“One of the reasons Zomato has done so well this year is because the quick commerce business blanket has exceeded expectations,” Carter said. “It now looks like it’s going to be the biggest business at Zomato.”
Carter noted his bullishness comes from a population that is just starting to go online.
“They’re getting their first-ever computer today basically,” he said, “You’re giving billions of people super computers in their pocket internet access.”

Disclaimer More

The Federal Reserve lowered its interest rate target three times in 2024.
This has many Americans waiting for mortgage rates to fall. But that may not happen for some time.

“I think the best case scenario is we’re going to continue to see mortgage rates hover around six and a half to 7%,” said Jordan Jackson, a global market strategist at J.P. Morgan Asset Management. “So unfortunately for those homeowners who are looking for a bit of a reprieve on the mortgage rate side, that may not come to fruition,” Jordan said in an interview with CNBC.
Mortgage rates can be influenced by Fed policy. But the rates are more closely tied to long-term borrowing rates for government debt. The 10-year Treasury note yield has been increasing in recent months as investors consider more expansionary fiscal policies that may come from Washington in 2025. This, combined with signals sent from the market for mortgage-backed securities, determine the rates issued within new mortgages.
Economists at Fannie Mae say the Fed’s management of its mortgage-backed securities portfolio may contribute to today’s mortgage rates.
In the pandemic, the Fed bought huge amounts of assets, including mortgage-backed securities, to adjust demand and supply dynamics within the bond market. Economists also refer to the technique as “quantitative easing.”Quantitative easing can reduce the spread between mortgage rates and Treasury yields, which leads to cheaper loan terms for home buyers. It can also provide opportunities for owners looking to refinance their mortgages. The Fed’s use of this technique in the pandemic brought mortgages rates to record lows in 2021.”They were extra aggressive in 2021 with buying mortgage-backed securities. So, the [quantitative easing] was probably ill-advised at the time.” said Matthew Graham, COO of Mortgage News Daily.
In 2022, the Federal Reserve kicked off plans to reduce the balance of its holdings, primarily by allowing those assets to mature and “roll-off” of its balance sheet. This process is known as “quantitative tightening,” and it may add upward pressure on the spread between mortgage rates and Treasury yields.

“I think that’s one of the reasons the mortgage rates are still going in the wrong direction from the Federal Reserve’s standpoint,” said George Calhoun, director of the Hanlon Financial Systems Center at Stevens Institute of Technology.
Watch the video above to learn how the Fed’s decisions affect mortgage rates. More

The Consumer Financial Protection Bureau on Friday sued the operator of the Zelle payments network and the three U.S. banks that dominant transactions on it.
The agency alleges that the firms failed to properly investigate fraud complaints or give victims reimbursements.
Zelle said in a statement Friday that it was prepared to defend itself against this “meritless lawsuit.”

Rohit Chopra, director of the CFPB, testifies during the Senate Banking, Housing and Urban Affairs Committee hearing titled “The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress,” in the Dirksen Building on Nov. 30, 2023.
Tom Williams | Cq-roll Call, Inc. | Getty Images

The Consumer Financial Protection Bureau on Friday sued the operator of the Zelle payments network and the three U.S. banks that dominate transactions on it, alleging that the firms failed to properly investigate fraud complaints or give victims reimbursement.
The CFPB said customers of the three banks — JPMorgan Chase, Bank of America and Wells Fargo — have lost more than $870 million since the launch of Zelle in 2017.

Zelle, a peer-to-peer payments network run by bank-owned fintech firm Early Warning Services, allows for instant payments to other consumers and businesses and has quickly surged to become the biggest such service in the country. At the same time, Democrat lawmakers have stepped up criticism of banks in recent years over the financial crimes happening on Zelle.
“The nation’s largest banks felt threatened by competing payment apps, so they rushed to put out Zelle,” CFPB Director Rohit Chopra said in a statement. “By their failing to put in place proper safeguards, Zelle became a gold mine for fraudsters, while often leaving victims to fend for themselves.”
The suit is the latest move by the CFPB in the waning days of the Biden administration. Many of the actions it has taken, including steps to limit credit card late fees and overdraft charges, have been met with stiff opposition from banks and their trade groups. Corporations have had success pushing back against regulators by choosing legal venues known as friendly to suits challenging federal oversight.
In fact, JPMorgan said in August that it was considering litigation against the CFPB if the regulator sought to punish the bank for its role in the Zelle network.
The CFPB wants to force banks to stop their allegedly unlawful practices around Zelle and to pay an unspecified amount in penalties, it said.

‘Glaring flaws’

The vast majority of Zelle activity is uneventful. Of the $806 billion that flowed across the network last year, only $166 million in transactions was disputed as fraud by customers of JPMorgan, Bank of America and Wells Fargo, the three biggest players on the platform.
But the three banks collectively reimbursed just 38% of those claims, according to a July Senate report that looked at disputed unauthorized transactions.
Banks say they investigate each fraud claim, but they often find that what customers say was fraud was technically a scam where customers authorized payments. In those cases, banks aren’t usually required to make customers whole.
The CFPB claimed that Zelle’s “limited identity verification methods” have allowed criminals to infiltrate the network, enabling them to divert payments and move between member banks that didn’t share information among institutions.

The Zelle online banking logo is displayed on a smartphone with the Zelle web page visible in the background in this photo in Brussels, Belgium, on Dec. 10, 2023.
Jonathan Raa | Nurphoto | Getty Images

The agency also said banks failed to properly investigate complaints about Zelle activity and didn’t consistently report fraud activity.
“The banks failed to fix glaring flaws in their systems even as hundreds of thousands of customers filed complaints about fraud,” Chopra told reporters during a call on Friday. “The banks knew their customers were having their money stolen, but since they weren’t bearing the cost of these losses themselves, they dragged their feet on fixing the problems.”
Zelle is the preferred way for cyber criminals to extract funds because it is faster than other remittance options, according to Tom Peacock, director of global fraud intelligence for cybersecurity firm BioCatch.

‘Meritless’ and misleading

 Early Warning Services said in a statement Friday that it was prepared to defend itself against this “meritless lawsuit.”
“Zelle leads the fight against scams and fraud and has industry-leading reimbursement policies that go above and beyond the law,” said Jane Khodos, an Early Warning Services spokeswoman. “The CFPB’s misguided attacks will embolden criminals, cost consumers more in fees, stifle small businesses and make it harder for thousands of community banks and credit unions to compete.”
Furthermore, the $870 million figure cited by the CFPB for fraud losses is misleading because it includes incidents where the bank found that cases didn’t involve fraud, but errors or false claims, according to Early Warning Services.
Early Warning Services has said that while transaction volumes rose in 2023, reports of scams and fraud fell almost 50%, and that only a tiny fraction of payment volumes are disputed as fraud.

Don’t miss these insights from CNBC PRO More

Fintech firm Dave came back from the brink of collapse, turned profitable and has consistently topped Wall Street analyst expectations.
It’s the top gainer for 2024 among U.S. financial stocks, with a 934% year-to-date surge through Thursday.
Fintech firms like Dave and Robinhood are the most promising heading into next year, according to JMP Securities analyst Devin Ryan.

Jason Wilk
Source: Jason Wilk

Jason Wilk, the CEO of digital banking service Dave, remembers the absolute low point in his brief career as head of a publicly-traded firm.
It was June 2023, and shares of his company had recently dipped below $5 apiece. Desperate to keep Dave afloat, Wilk found himself at a Los Angeles conference for micro-cap stocks, where he pitched investors on tiny $5,000 stakes in his firm.

“I’m not going to lie, this was probably the hardest time of my life,” Wilk told CNBC. “To go from being a $5 billion company to $50 million in 12 months, it was so freaking hard.”
But in the months that followed, Dave turned profitable and consistently topped Wall Street analyst expectations for revenue and profit. Now, Wilk’s company is the top gainer for 2024 among U.S. financial stocks, with a 934% year-to-date surge through Thursday.
The fintech firm, which makes money by extending small loans to cash-strapped Americans, is emblematic of a larger shift that’s still in its early stages, according to JMP Securities analyst Devin Ryan.
Investors had dumped high-flying fintech companies in 2022 as a wave of unprofitable firms like Dave went public via special purpose acquisition companies. The environment turned suddenly, from rewarding growth at any cost to deep skepticism of how money-losing firms would navigate rising interest rates as the Federal Reserve battled inflation.
Now, with the Fed easing rates, investors have rushed back into financial firms of all sizes, including alternative asset managers like KKR and credit card companies like American Express, the top performers among financial stocks this year with market caps of at least $100 billion and $200 billion, respectively.

Big investment banks including Goldman Sachs, the top gainer among the six largest U.S. banks, have also surged this year on hope for a rebound in Wall Street deals activity.

Stock chart icon

Dave, a fintech firm taking on big banks like JPMorgan Chase, is a standout stock this year.

But it’s fintech firms like Dave and Robinhood, the commission-free trading app, that are the most promising heading into next year, Ryan said.
Robinhood, whose shares have surged 190% this year, is the top gainer among financial firms with a market cap of at least $10 billion.
“Both Dave and Robinhood went from losing money to being incredibly profitable firms,” Ryan said. “They’ve gotten their house in order by growing their revenues at an accelerating rate while managing expenses at the same time.”
While Ryan views valuations for investment banks and alternative asset manages as approaching “stretched” levels, he said that “fintechs still have a long way to run; they are early in their journey.”
Financials broadly had already begun benefitting from the Fed easing cycle when the election victory of Donald Trump last month intensified interest in the sector. Investors expect Trump will ease regulation and allow for more innovation with government appointments including ex-PayPal executive and Silicon Valley investor David Sacks as AI and crypto czar.
Those expectations have boosted the shares of entrenched players like JPMorgan Chase and Citigroup, but have had a greater impact on potential disruptors like Dave that could see even more upside from a looser regulatory environment.

Gas & groceries

Dave has built a niche among Americans underserved by traditional banks by offering fee-free checking and savings accounts.
It makes money mostly by extending small loans of around $180 each to help users “pay for gas and groceries” until their next paycheck, according to Wilk; Dave makes roughly $9 per loan on average.
Customers come out ahead by avoiding more expensive forms of credit from other institutions, including $35 overdraft fees charged by banks, he said. Dave, which is not a bank, but partners with one, does not charge late fees or interest on cash advances.
The company also offers a debit card, and interchange fees from transactions made by Dave customers will make up an increasing share of revenue, Wilk said.
While the fintech firm faces far less skepticism now than it did in mid-2023— of the seven analysts who track it, all rate the stock a “buy,” according to Factset — Wilk said the company still has more to prove.
“Our business is so much better now than we went public, but it’s still priced 60% below the IPO price,” he said. “Hopefully we can claw our way back.” More

Warren Buffett poses with Martin, the Geico gecko, ahead of the Berkshire Hathaway Annual Shareholder’s Meeting in Omaha, Nebraska on May 3rd, 2024.
David A. Grogan | CNBC

Warren Buffett went on bit of a shopping spree in the stock market before Christmas, picking up shares of Occidental Petroleum among others during a swift December sell-off.
Berkshire Hathaway purchased additional 8.9 million shares in the Houston-based energy producer for $405 million through transactions Tuesday, Wednesday and Thursday, pushing its stake above 28%, according to a regulatory filing late Thursday night.

During the same time frame, the Omaha-based conglomerate also bought about 5 million shares of Sirius XM for around $113 million as well as about 234,000 shares of VeriSign for roughly $45 million. These two stakes are much smaller in size, so these transactions could be made by Buffett’s investing lieutenants Todd Combs and Ted Weschler.
All told, Berkshire bought over $560 million worth of stocks over the last three sessions.
The 92-year-old legendary investor appeared to have taken advantage of a broad market pullback that made these stocks much cheaper.
Occidental shares have dropped more than 10% this month, bringing its 2024 losses to 24%. The energy company, once known for being founded by legendary oilman Armand Hammer, is Berkshire’s sixth-biggest equity holding. Buffett has ruled out a full takeover.

Stock chart icon

Occidental Petroleum

The sell-off in Sirius XM has been more dramatic. The New York-based satellite radio company is currently in its six-day losing streak, falling 23% this month and 62% this year.

Berkshire started hiking this bet after billionaire John Malone’s Liberty Media completed its deal in early September to combine its tracking stocks with the rest of the audio entertainment company. Now, Berkshire’s stake has risen to about 35%. SiriusXM has been grappling with subscriber losses and unfavorable demographic shifts.
Internet name VeriSign has also had a rough year with its stock down 6% in 2024, significantly underperforming the tech sector. Berkshire first bought the tech stock in 2013 and hasn’t adjusted the stake in years. More

A television station broadcasts the Federal Reserve’s interest-rate cut on the floor of the New York Stock Exchange (NYSE) in New York, US, on Wednesday, Dec. 18, 2024.
Michael Nagle | Bloomberg | Getty Images

Wall Street’s fear gauge — the VIX — spiked by the second biggest percentage in its history on Wednesday, after the Federal Reserve jolted the stock market by saying it would dial back its rate-cutting campaign.
The CBOE Volatility Index surged 74% to close at 27.62, up from around 15 earlier in the day. That surge is the second-greatest in history, behind a 115% leap to above the 37 handle back in February 2018 when there was a blow-up in funds tracking the volatility index.

Arrows pointing outwards

Wednesday’s move comes after the central bank said it will likely lower interest rates just twice next year, down from the four cuts it projected back in September, alarming investors who wanted low rates to keep fueling the bull market. The Dow Jones Industrial Average tumbled by 1,100 points to its 10th straight loss.
Typically, a value greater than 20 in the VIX indicates a higher level of fear in the market. However, for most of this year, the VIX had been suppressed below that level, worrying investors who believed the market had gotten overly complacent.
The VIX is calculated based on the prices of put and call options on the S&P 500. A spike could indicate a rush by investors to purchase put options for protection in a decline.

Stock chart icon

CBOE Volatility Index, 5 days

Still, there have been one other significant surge in the VIX in 2024. The third-biggest surge in the VIX in history occurred in Aug. 5, 2024, when fears of a U.S. recession, and a major unwind in the yen carry trade, spurred a roughly 65% increase in the VIX to close above 38. On an intraday basis, the VIX briefly topped 65 that day.
On Thursday, the VIX was last floating just above the 20 handle, down more than 25% from the prior day. More

WHY IS HOUSING so expensive? Explanations have tended to fall into two camps. One emphasises a gummed-up supply side: a range of restrictions on land use and NIMBY campaigners have stymied housebuilding across the rich world. The other camp focuses on demand: a long-term fall in real interest rates has bid up the prices of all assets. Cheaper credit means more expensive housing. Yet even as interest rates rose across the rich world in the early 2020s, prices barely budged. Why? A range of recent papers suggests that the interaction between fixed supply and changes in demand explains the puzzle. More