Finance

Ahead of Siemens Energy’s fourth-quarter earnings, analysts at Kepler Cheuvreux suggested in a research note Tuesday that despite having already warned on profits, the company “remains vulnerable to large negative cashflow swings in the next fiscal year.”
Deutsche Bank earlier this week slashed its 12-month share price forecast for Danish energy giant Ørsted by 36%, citing supplier delays, lower tax credits and rising rates.
ONYX Insight, which monitors wind turbines and tracks over 14,000 across 30 countries, revealed in a report Tuesday that supply chains remain the greatest challenge to operations across the sector.

A Siemens Gamesa blade factory on the banks of the River Humber in Hull, England on October 11, 2021.
PAUL ELLIS | AFP | Getty Images

As the biggest players in wind energy gear up to report quarterly earnings, supply-chain reliability issues are front and center for both stock analysts and industry leaders.
Siemens Energy made the headlines earlier this year when it scrapped its profit forecast and warned that costly failures at wind turbine subsidiary Siemens Gamesa could drag on for years.

It sparked concerns about wider problems across the industry and thrust Europe’s wind energy giants’ earnings into the spotlight.
Siemens Energy is set to report its fiscal fourth-quarter results on Nov. 15. Its shares are currently down more than 35% year-to-date.
Aside from the turbine problems, the German energy giant posted orders of around 14.9 billion euros ($15.7 billion) for its third quarter, a more-than 50% increase from the previous year, primarily driven by large orders at Siemens Gamesa and Grid Technologies. Yet the 2.2 billion euro charge due to Gamesa’s quality issues prompted Siemens Energy to forecast a net loss for the fiscal year of 4.5 billion euros.
Ahead of its fourth-quarter earnings, analysts at Kepler Cheuvreux suggested in a research note Tuesday that despite having already warned on profits, the company “remains vulnerable to large negative cashflow swings in the next fiscal year.”

“We expect Siemens Gamesa to suffer very weak order intake in H1, which will combine with extensive delivery delays and rising customer penalty payments. Challenges at Siemens Gamesa will continue to overshadow resilience in the group’s other divisions,” they added.

Morgan Stanley cut its price target for Siemens Energy from 20 euros per share to 18 euros per share, but retains an overweight long-term strategic position on the company’s stock.
“Valuation for Siemens Energy is currently factoring in a negative value for the Gamesa division, which we believe may have been over penalized,” Morgan Stanley capital goods analyst Ben Uglow said in a research note Monday.
“While we acknowledge the low visibility on Gamesa margin trajectory and that rebuilding investor confidence will take time, we remain Overweight on undemanding valuation and good fundamentals of the Gas & Grid businesses.”
Elsewhere, Deutsche Bank earlier this week slashed its 12-month share price forecast for Danish wind energy producer Ørsted by 36% ahead of its interim earnings report on Nov. 1. The stock has already halved in value so far this year.
Read more:

Deutsche Bank just cut its price target on nearly 30 global stocks ahead of earnings — and upgraded 1

Deutsche had previously highlighted challenges in the wind turbine industry including supplier delays, lower tax credits and rising rates. However, Ørsted’s share price tanked further earlier this year when it raised the possibility of a 2.1-billion-euro impairment charge in its U.S. offshore wind portfolio.
Meanwhile, Danish wind turbine manufacturer Vestas — despite continuing to bag significant orders — has seen its shares plunge by around 30% year-to-date as reliability concerns plague the wider industry. Vestas publishes its interim financial report for the third quarter on Nov. 8.
Supply chain worries
ONYX Insight, which monitors wind turbines and tracks over 14,000 across 30 countries, revealed in a report Tuesday that supply chains remain the greatest challenge to the sector, with reliability not far behind.
The analytics firm, which is owned by British energy giant BP, interviewed senior personnel at over 40 owners and operators of wind turbines around the world in order to gauge the mood of industry leaders, and found that 57% cited the supply chain as the main obstacle to their operations.
ONYX Chief Commercial Officer Ashley Crowther said the lingering impacts of Covid-19 on manufacturing had just begun to heal — and then Russia’s invasion of Ukraine and the subsequent surge in inflation hit.

“Survey participants are now citing delays on new projects due to longer lead times for supply of new turbines and significant price increases,” Crowther said in the report.
“This is in line with what OEMs have told their investors, for example Vestas noting in their 2022 annual report they ‘increased our average selling prices of our wind energy solutions by 29%’. Similarly for major components, particularly main bearings on newer turbines with large rotor diameters, long delays are leaving turbines offline for extended periods.”
Although supply chain issues are creating problems for operators, the most direct impact has been on OEMs like Siemens Gamesa and Vestas, Crowther noted, as has been evident in recent financial results.
“Major western OEMs have recently reported losses or profit warnings and announced major restructuring projects in order to address the challenges they are facing. Some are even re-thinking their approach to the aftermarket which was always seen as the most profitable part of the business,” he added.
Reliability issues
Those surveyed by ONYX also expressed reliability concerns, with 69% expecting more reliability issues due to aging assets and 56% seeing problems associated with new turbine technology. Just 22% expected fewer reliability issues due to new turbine technology improvements.
“As the sector matures, turbines are getting older and the failure rate of electromechanical systems are increasing with age,” Crowther noted.
“Likewise, the initial operating period of newer turbines are seeing a rash of failures due to shorter development cycles, new turbine designs, and a squeeze on turbine prices. This is resulting in machines that are not durable enough.”
During an initial boom in the wind industry a number of years ago, OEMs faced huge market demand and, in turn, created a variety of turbine designs delivered on short cycles to a customer base seeking to generate more energy with greater efficiency at lower cost, Crowther explained.

“Fast-forward to the present and between the perfect storm of supply chain issues and too many turbine designs to support, OEMs have been losing significant amounts of money, including those paid out in liquidated damages (LDs),” he said.
“Manufacturers have been locked into a price competition spiral, attempting to produce larger turbines for more competitive pricing. But with bigger turbines produced in shorter production cycles, it’s no surprise that manufacturing quality has diminished.” More

Even as the economy has surprised forecasters with its resilience, lenders have cut headcount or announced plans to do so, with the key exception being JPMorgan Chase.
The next five largest U.S. banks cut a combined 20,000 positions so far this year, according to company filings.
A key factor driving the cuts is that job-hopping in finance slowed drastically from earlier years, leaving banks with more people than they expected.

The largest American banks have been quietly laying off workers all year — and some of the deepest cuts are yet to come.
Even as the economy has surprised forecasters with its resilience, lenders have cut headcount or announced plans to do so, with the key exception being JPMorgan Chase, the biggest and most profitable U.S. bank.

Pressured by the impact of higher interest rates on the mortgage business, Wall Street deal-making and funding costs, the next five largest U.S. banks have cut a combined 20,000 positions so far this year, according to company filings.
The moves come after a two-year hiring boom during the Covid pandemic, fueled by a surge in Wall Street activity. That subsided after the Federal Reserve began raising interest rates last year to cool an overheated economy, and banks found themselves suddenly overstaffed for an environment in which fewer consumers sought out mortgages and fewer corporations issued debt or bought competitors.

“Banks are cutting costs where they can because things are really uncertain next year,” Chris Marinac, research director at Janney Montgomery Scott, said in a phone interview.
Job losses in the financial industry could pressure the broader U.S. labor market in 2024. Faced with rising defaults on corporate and consumer loans, lenders are poised to make deeper cuts next year, said Marinac.
“They need to find levers to keep earnings from falling further and to free up money for provisions as more loans go bad,” he said. “By the time we roll into January, you’ll hear a lot of companies talking about this.”

Deepest cuts

Banks disclose total headcount numbers every quarter. While the aggregate figures mask the hiring and firing going on beneath the surface, they are informative.
The deepest reductions have been at Wells Fargo and Goldman Sachs, institutions that are wrestling with revenue declines in key businesses. They each have cut roughly 5% of their workforce so far this year.
At Wells Fargo, job cuts came after the bank announced a strategic shift away from the mortgage business in January. And even though the bank cut 50,000 employees in the past three years as part of CEO Charlie Scharf’s cost-cutting plan, the firm isn’t done shrinking headcount, executives said Friday.
There are “very few parts of the company” that will be spared from cuts, said CFO Mike Santomassimo.
“We still have additional opportunities to reduce headcount,” he told analysts. “Attrition has remained low, which will likely result in additional severance expense for actions in 2024.”

Goldman firings

Meanwhile, after several rounds of cuts in the past year, Goldman executives said that they had “right-sized” the bank and don’t expect another mass layoff like the one enacted in January.
But headcount is still headed down at the New York-based bank. Last year, Goldman brought back annual performance reviews where people deemed low performers are cut. In the coming weeks, the bank will terminate around 1% or 2% of its employees, according to a person with knowledge of the plans.
Headcount will also drift lower because of Goldman’s pivot away from consumer finance; the firm agreed to sell two businesses in deals that will close in coming months, a wealth management unit and fintech lender GreenSky.

Pedestrians walk along Wall Street near the New York Stock Exchange in New York.
Michael Nagle | Bloomberg | Getty Images

A key factor driving the cuts is that job-hopping in finance slowed drastically from earlier years, leaving banks with more people than they expected.
“Attrition has been remarkably low, and that’s something that we’ve just got to work through,” Morgan Stanley CEO James Gorman said Wednesday. The bank has cut about 2% of its workforce this year amid a protracted slowdown in investment banking activity.
The aggregate figures obscure the hiring that banks are still doing. While headcount at Bank of America dipped 1.9% this year, the firm has hired 12,000 people so far, indicating that an even greater amount of people left their jobs.

Citigroup’s cuts

While Citigroup’s staff figures have been stable at 240,000 this year, there are significant changes afoot, CFO Mark Mason told analysts last week. The bank has already identified 7,000 job cuts linked to $600 million in “repositioning charges” disclosed so far this year.
CEO Jane Fraser’s latest plan to overhaul the bank’s corporate structure, as well as sales of overseas retail operations, will further lower headcount in coming quarters, executives said.
“As we continue to progress in those divestitures … we’ll see those heads come down,” Mason said.
Meanwhile, JPMorgan has been the industry’s outlier. The bank grew headcount by 5.1% this year as it expanded its branch network, invested aggressively in technology and acquired the failed regional lender First Republic, which added about 5,000 positions.
Even after its hiring spree, JPMorgan has more than 10,000 open positions, the company said.
But the bank appears to be the exception to the rule. Led by CEO Jamie Dimon since 2006, JPMorgan has best navigated the surging interest rate environment of the past year, managing to attract deposits and grow revenue while smaller rivals struggled. It’s the only one of the Big Six lenders whose shares have meaningfully climbed this year.  
“All these companies expanded year after year,” said Marinac. “You can easily see several more quarters where they go backwards, because there’s room to cut, and they have to find a way to survive.”

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– CNBC’s Gabriel Cortes contributed to this article. More

Federal Reserve Chairman Jerome Powell acknowledged recent signs of cooling inflation, but said Thursday that the central bank would be “resolute” in its commitment to its 2% mandate.
In a widely anticipated speech delivered to the Economic Club of New York, Powell evaded committing to a specific policy path but gave no indication that he was leaning toward a push higher for interest rates.

As Powell spoke, futures market traders erased any possibility of a rate hike in November and decreased the chances of a move even in December. He acknowledged the progress made toward bringing inflation back down to a manageable level but stressed vigilance in pursuing the central bank’s goals.
“Inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal,” Powell said in prepared remarks. “We cannot yet know how long these lower readings will persist, or where inflation will settle over coming quarters.”
“While the path is likely to be bumpy and take some time, my colleagues and I are united in our commitment to bringing inflation down sustainably to 2 percent,” Powell added.
The speech comes with questions over where the Fed heads from here after a succession of interest rate hikes aimed at cooling inflation. Stocks turned higher after Powell spoke and the 10-year Treasury yield backed off its highs for the session.
Powell said he doesn’t think rates are too high now.

“Does it feel like policy is too tight right now? I would have to say no,” he said. Still, he noted that “higher interest rates are difficult for everybody.”
Powell noted the progress made toward the Fed’s twin goals.

Federal Reserve Chairman Jerome Powell speaks during a meeting of the Economic Club of New York in New York City, U.S., October 19, 2023. 
Brendan Mcdermid | Reuters

In recent days, data has shown that while inflation remains well above the target rate, the pace of monthly increases has decelerated and the annual rate has slowed to 3.7% from more than 9% in June 2022.
“Incoming data over recent months show ongoing progress toward both of our dual mandate goals —maximum employment and stable prices,” he said.
The speech was delayed at the onset by protesters from the group Climate Defiance who charged the dais at the club’s dinner and held up a sign saying “Fed is burning” surrounded by the words “money, futures and planet.”
After a short delay, Powell noted the labor market and economic growth may need to slow to ultimately achieve the Fed’s goal.
“Still, the record suggests that a sustainable return to our 2 percent inflation goal is likely to require a period of below-trend growth and some further softening in labor market conditions,” Powell said.
Fed officials have been using interest rate hikes in part to try to level out a supply-demand imbalance in the jobs market. The Fed has raised rates 11 times since March 2022 for a total of 5.25 percentage points. Coming from the near-zero level for the fed funds rate, that has taken the benchmark rate to its highest level in some 22 years.
“We’re very far from the effective lower bound, and the economy is handling it just fine,” Powell said.
The comments come the same day initial jobless claims hit their lowest weekly level since early in 2023, indicating that the labor market is still tight and could exert upward pressure on inflation.
Robust job creation in September and a slow pace of layoffs could put progress on inflation at risk.
“Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy,” he said.
In recent days, other Fed officials have said they think the Fed can be patient from here. Even some members who favor tighter monetary policy have said they think the Fed can halt rate hikes at least for now while they watch the lagged impact the rate hikes are expected to have on the economy.
Markets widely expect the Fed to hold off on additional rate hikes, though there remain questions over when officials might begin cutting rates.
Powell was noncommittal on the future of policy.
Given the uncertainties and risks, and how far we have come, the Committee is proceeding carefully. We will make decisions about the extent of additional policy firming and how long policy will remain restrictive based on the totality of the incoming data, the evolving outlook, and the balance of risks,” he said. More

Americans will soon need to apply for a travel authorization to visit 30 countries in Europe.
The application has a nonrefundable fee of 7 euros a person, or about $7.40.
Travelers must get the authorization via the European Travel Information and Authorisation System prior to their trip. It’s expected to be operational sometime in 2024.
The new system is meant as a security measure.

Vernazza, a village in Cinque Terre, Italy.
Mstudioimages | E+ | Getty Images

Americans will soon have to apply for a travel authorization to visit Europe, and failing to get one may ruin your next trip.
The requirement, slated to start in 2024, currently applies to 30 European nations, including popular destinations such as France, Germany, Greece, Italy, Portugal and Spain.

Travelers must apply for the travel authorization via the European Travel Information and Authorisation System, or ETIAS, prior to their trip.
The online application carries a nonrefundable fee of 7 euros a person, or $7.40 at prevailing exchange rates as of noon ET on Thursday. People under 18 years old or over 70 years old are exempt from payment.
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Europe is the top destination region for international travelers from the U.S., according to travel app Hopper. But Americans won’t be allowed to visit without the authorization.
“If you forget to do it, you won’t board the plane,” said Sofia Markovich, a travel advisor and founder of Sofia’s Travel.

Why Europe is requiring a travel authorization

Mstudioimages | E+ | Getty Images

The authorization isn’t a visa and doesn’t guarantee entry. Travelers with a valid visa don’t need the authorization.
In 2016, the European Commission proposed to establish the ETIAS to strengthen security checks on Americans and nationals from roughly 60 other nations who are able to visit Europe’s Schengen area without a visa.  
The new European system is similar to one the U.S. put in place in 2008.
“After 9/11, things changed in the world,” Markovich said. “It’s really about keeping things safe and knowing who comes in and who goes out.”

When travelers should apply

A couple walking around the Sagrada Familia church in Barcelona, Spain.
Jordi Salas | Moment | Getty Images

The good news: Travelers don’t have to do anything yet.
The European Union expects the ETIAS to be operational in 2024 but hasn’t set a firm rollout date. The program isn’t yet accepting applications.
“There is nothing anyone can do or needs to do now,” Sally French, a travel expert at NerdWallet, said. “But it’s something they need to keep tabs on.”
The requirement has already been delayed a few times and could be again, French said. It was initially meant to take effect in 2021 and then in 2023.

Most applications will be processed in minutes and within 96 hours at the latest, according to the EU. However, it can take up to an additional 30 days for travelers asked to provide extra information or documentation or do an interview with national authorities, the EU said.
“As soon as you make the booking, make sure you file for your ETIAS,” Markovich said.
The EU even strongly advises obtaining the travel authorization before buying tickets and booking hotels.
“Seven euros is small potatoes in the scheme or your European trip,” French said of the application fee. “You don’t want to have paid for the flights, hotels and tours, and realize you can’t take the trip because of this small step.”
The ETIAS authorization is valid for three years or until your passport expires, whichever comes first. Travelers with a valid ETIAS don’t need to apply for a new one each time they visit Europe.Don’t miss these CNBC PRO stories: More

Global fintech giant Airwallex said it has acquired MexPago, a rival payments company based out of Mexico, for an undisclosed sum.
The deal will help Airwallex, which is backed by the likes of Tencent and Li-Kashing, Hong Kong’s richest man, expand in the Americas.
Latin America is a particularly attractive spot for fintech companies, not least because of its high proportion of young people in the population.

Airwallex’s cofounders, from left to right, Xijing Dai, Lucy Liu, Jack Zhang and Max Li.

Global fintech giant Airwallex on Thursday said it has agreed to acquire MexPago, a rival payments company based out of Mexico, for an undisclosed sum to help the firm expand its Latin America footprint.
The company, which competes with the likes of PayPal, Stripe, and Block, sells cross-border payment services to mainly small and medium-sized enterprises. Airwallex makes money by pocketing a fee each time a transaction is made.

The deal, which is subject to regulatory approvals and customary closing conditions, marks a major push from Airwallex into Latin America, a market that has become more attractive for fintech firms thanks to a primarily younger population and increasing online penetration.
Jack Zhang, SumUp’s CEO, said the company was looking at Mexico as something as a hedge as it deals with geopolitical and economic uncertainty going on between the U.S. and China.
“U.S. people export to Mexico to sell to the consumer there,” Zhang told CNBC. “Because of the supply chain, you can also export out of Mexico to other countries like the United States.”
“You get both the inflow and outflow of money,” he added. “That’s really what we like the most. We can take a global company to Mexico and also help the global companies making payments to the supply chain.”
U.S.-China trade tensions have escalated in recent years, as Washington seeks to address what it sees as China’s race to the bottom on trade.

The U.S. alleges China has been deliberately devaluing its currency by buying lots of U.S. dollars, thereby making Chinese exports cheaper and U.S. exports more expensive, and worsening the U.S. trade deficit with China.
China has sought to address these concerns, agreeing to “substantially reduce” the U.S. trade deficit by committing to “significantly increases” its purchases of American goods, although it’s struggled to make good on those commitments.
“Mexico is one of the largest populations in Latin America,” Zhang added. “As the trade war intensifies in China and the US, a lot is shifting from Asia to Mexico.”
“[Mexico] is very close to the U.S. Labour is cheaper compared to the U.S. domestically. A lot of the supply chain is shipping there. There’s a lot of opportunity from e-commerce as well.”

A maturing fintech

Airwallex operates around the world in markets including the U.S., Canada, China, the U.K., Australia, and Singapore. The Australia-founded company is the second-most valuable unicorn there, after design and presentations software startup Canva, which was last valued at $40 billion.

The company, whose customers include Papaya, Zip, Shein and Navan, processes more than $50 billion in a single year. It has also partnered with the likes of American Express, Shopify and Brex, to help it expand its services internationally.
It has been a tough environment for fintech companies to operate in lately, given how interest rates have risen sharply. That has made it more costly for startup firms to raise capital from investors.
For its part, Airwallex has raised more than $900 million in venture capital to date from investors including Salesforce Ventures, Sequoia, Tencent and Lone Pine Capital. The company was last valued at $5.6 billion.

At this stage we are still expanding against our mission, which is to enable those smaller businesses to operate anywhere in the world and keep building software on top.

Jack Zhang
CEO, Airwallex

Zhang said that the company is at a stage where it has reached enough maturity to consider an initial public offering — the company says it now processes more than $50 billion in annualized transactions. However, Airwallex won’t embark on the IPO route until it gets to a certain amount of annual revenue, Zhang added.
Zhang is targeting $100 million of annual recurring revenue (ARR) for the business within the next year or two. Once Airwallex reaches this point, he says, it will then look at a public listing.
“At this stage we are still expanding against our mission, which is to enable those smaller businesses to operate anywhere in the world and keep building software on top … to protect our margins [and] grow our margins from a cost point of view, not just infrastructure,” Zhang said.
MexPago offers much of the same services as Airwallex — multi-currency accounts for small and medium-sized businesses, foreign exchange services, and payment processing — but there are a few more payment methods it has on offer which Airwallex doesn’t currently provide.

Why Latin America?

A big selling point of the MexPago deal, Zhang said, is the ability to obtain a regulatory license in Mexico without having to embark on a long process of applying with the central bank. The company has secured an Institution of Electronic Payment Funds (IFPE) license from MexPago.

That will allow Airwallex’s customers, both in Mexico and around the world, to gain access to local payment methods such as SPEI, Mexico’s interbank electronic payment system, and OXXO, a voucher-based payment method that lets shoppers order things online, get a voucher, and then fulfill their order with cash.
“The ability to access the license for the native infrastructure over there will give us a significant advantage with our global proposition,” Zhang told CNBC.
Airwallex has seen huge levels of growth in the Americas in the past year — the company reported a 460% jump in revenues there year-over-year.
Airwallex isn’t the only company seeing the potential in Latin America.
SumUp, the British payments company, has been active in Latin America since 2013, opening an office in Brazil back in 2013. The firm’s CFO Hermione McKee told CNBC in June at the Money 20/20 conference that it plans to ramp up its expansion in the region.
“We’ve had very strong success in Latin America, in particular, Chile recently,” McKee told CNBC in an interview.
“We are looking at launching new countries over the coming months.”
More than 156 million people in Latin America and the Caribbean are between the ages of 15 and 29, accounting for over a fourth of its population. These consumers tend to be more digital-native and mistrusting of established banks. More

Net worth for the typical U.S. household grew 37%, after inflation, from 2019 to 2022, according to the Federal Reserve’s triennial Survey of Consumer Finances, issued Wednesday.
That growth was the highest on record, fueled by higher home and stock prices and pandemic-era government stimulus.
However, not all groups saw wealth grow equally, and large wealth gaps persist. Poverty also rose in 2022.

Standret | Istock | Getty Images

Net worth surged for the typical family during the pandemic era, largely on the back on higher home and stock prices and government stimulus measures, the Federal Reserve reported Wednesday in its triennial Survey of Consumer Finances.
Net worth is a measure of household assets after accounting for liabilities. After accounting for inflation, median net worth jumped to $192,900, a 37% increase from 2019-22, the Fed found.

That percentage growth was the largest since the Fed started its modern survey in 1989. It was also more than double the next-largest increase on record: Between 2004 and 2007, right before the Great Recession, real median net worth rose 18%.
Increases in net worth were “near universal across different types of families,” the Fed said.
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“Americans got a lot wealthier during the pandemic,” said Mark Zandi, chief economist of Moody’s Analytics.
In large part, that was due to the Federal Reserve lowering interest rates to rock bottom at the onset of the pandemic, easing borrowing costs for consumers, Zandi said. An expanded social safety net made it less likely people had to take on debt. And when became clear the U.S. economy would recover quickly from the early pandemic shocks, due to government support and vaccines, asset prices like stocks and homes “took off,” Zandi said.

Of course, not everyone benefited equally: Assets like homes and stocks are generally not held by families in the bottom 20% by income, for example, the Fed said.

And wealth gaps are still big: Families in the bottom 25% by wealth had a median net worth of $3,500 in 2022. The top 10% had $3.8 million.
“Those that have big a net worth in America keep getting bigger and those have no net worth are not making much progress,” said certified financial planner Ted Jenkin, CEO and founder of oXYGen Financial in Atlanta and a member of CNBC’s Advisor Council.

Home and stock values increased significantly

The pandemic saw an unprecedented scale of federal relief funds — like stimulus checks, and enhanced unemployment benefits and child tax credits — issued to prop up households. The government also took measures that alleviated debt burdens, like a pause on student loan payments and interest.
The typical family’s “transaction account” balances — like checking, savings and money market accounts — jumped 30% to $8,000 from 2019 to 2022, according to Fed data.
At the same time, the values of financial assets like homes and stocks increased significantly.

Those that have big a net worth in America keep getting bigger and those have no net worth are not making much progress.

Ted Jenkin
CEO and founder of oXYGen Financial

For example, the median net value of a house rose to $201,000 in 2022, from $139,100 in 2019 — a 45% increase, the Fed said. The S&P 500 stock index grew by roughly 20% from the end of 2019 through 2022. Balances of the typical retirement account like 401(k) or individual retirement account grew by 15% to $86,900, according to Fed data.
Not only did stock values grow, but more people also began investing. Direct ownership of stocks also increased “markedly” between 2019 and 2022, from 15% to 21% of families, the largest change on record, the Fed said.

Racial wealth gap narrowed, but remains significant

The racial wealth gap also narrowed over that three-year time frame, as home, stock and business ownership all increased relatively more for non-white than for white families, the Fed said.
However, these gaps are still large: The typical white family had about six times as much wealth as the typical Black family, and five times as much as the typical Hispanic family, the Fed said.
And, when it comes to income, Black and Hispanic families’ wages after inflation stagnated over 2019-22, the Fed added.

There are also signs many families are struggling despite pandemic-era wealth gains. The poverty rate jumped to 12.4% in 2022 — up 4.6 percentage points from 2021 and up 0.6 points from the pre-pandemic rate in 2019, according to the Census Bureau. (This poverty rate reflects the Supplemental Poverty Measure, which factors government benefits like food stamps and housing subsidies into income measures.)
The expanded pandemic-era social safety net had largely withered away by 2022, right around the same time that inflation was hitting 40-year highs.
In fact, household wealth likely peaked in mid-2022, Zandi said.
“If the Fed did another survey today, I suspect they’d find net worth is lower, particularly for folks in the lowest income groups, in part because their debt loads are now higher,” Zandi said. “They have been borrowing quite aggressively since the government support wore off.” More

The legal system that operates in the United Arab Emirates (uae)—like that in many countries across the Gulf—is a blend of French civil and Islamic Sharia law. But this summer Dubai announced that it was exploring the introduction of English common law to 26 free-trade zones. These are jurisdictions that are exempt from local taxes and customs duties, and have their own independent legal systems and courts. The region is increasingly dotted by such common-law islands, reflecting the belief that the Anglosphere’s legal tradition is better for business.Such an idea can be traced back to Friedrich Hayek. Fifty years ago this month, the Nobel-prize-winning economist and philosopher published the first volume of his magnum opus, “Law, Legislation and Liberty”. In it, he argued that the common-law approach is more amenable to freedom than its civil-law counterpart. Later, in the 1990s, Hayek’s ideas inspired the “legal-origins theory”, which made both an empirical and theoretical case that common law is better for the economy. The theory has been as influential as it has been controversial, leading to sweeping reforms in civil-law countries around the world.image: The EconomistThe common-law tradition emerged in England. Under its strictures, the judiciary is bound by precedent: principles established by judges in previous cases are binding for future ones. This establishes case law on an equal footing with legislation. In contrast, the civil-law tradition traces back to the Code Napoléon, a legal system that was set up in France under Napoleon Bonaparte, which restricted both the independence and the discretion of the judiciary, subordinating it to the legislature.England’s approach was transplanted across the globe by the British empire and underpins the legal systems of 80 or so countries, including America. The Code Napoléon was transplanted across Europe by French occupations during the Napoleonic Wars and was introduced around the world by the French empire. China, Japan, South Korea and Taiwan all based their modern legal systems on Germany’s approach, which is also based on civil law. In total, civil-law traditions underpin the legal systems of about 150 countries today, including around 30 mixed systems.Hayek argued that common law is a better basis for a legal system than civil law for similar reasons that markets are a better foundation for an economy than central planning. A decentralised judiciary has access to “local knowledge”—the subtleties and idiosyncrasies of actual legal cases—that a centralised legislature does not. This is analogous to the way in which the butcher, the brewer and the baker are better placed to know what goods to produce, in what quantities and at what market price than a collection of well-meaning bureaucrats. A legal system based on judicial precedent allows judges to adapt the body of law to real-world circumstances.Common senseThe arguments put forward by Hayek mostly concerned the law’s ability to protect individual liberty, but they apply to its ability to promote economic growth, too. Twenty-five years ago, in a landmark study in the Journal of Political Economy, Andrei Shleifer, Rafael La Porta and Florencio Lopez-de-Silanes, then at Harvard University, as well as Robert Vishny of the University of Chicago, used data from 49 countries to show that investors’ rights are better protected in common-law countries. The paper gave credence to Hayek’s ideas and set off a flurry of research into the relationship between legal origins and the economy.In three subsequent papers, Simeon Djankov, a World Bank economist, working with Messrs Shleifer, La Porta and Lopez-de-Silanes, used data from more than 100 countries to tease out the impact of legal origins on the regulation of startups, the stringency of labour protections and the efficiency of contract enforcement. “What we found is that regulation was consistently less onerous and contract enforcement consistently more efficient in common-law jurisdictions,” says Mr Shleifer. The difference was sharpest in the barriers facing entrepreneurs. The number of forms to fill out and business days needed to process an application, and the cost of administrative fees, were all higher under civil-law jurisdictions. In 2001 Paul Mahoney of the University of Virginia analysed data from across the world and found that, in the three decades to 1992, gdp per person had grown 0.7 percentage points a year slower in civil-law countries than in their common-law counterparts.These findings were influential, particularly at multilateral institutions. The World Bank’s Ease of Doing Business Index was shaped by the legal-origins theory. Indeed, Mr Djankov jointly founded and ran the initiative from 2003. In the decade and a half to 2020, more than 400 studies using data from the index were published. Leaders including France’s Emmanuel Macron, Germany’s Angela Merkel and Japan’s Abe Shinzo made rising up the rankings a goal. The result was a wave of reform in civil-law countries, which tended to rank lower. As Mr Djankov notes, there was “a dramatic international convergence in rules and regulation to the common-law standard”.Has this produced a surge in economic growth? Perhaps not. More recent studies have splashed cold water on the legal-origins theory, says Holger Spamann of Harvard University. Ones that control for a wider array of confounding factors have found that a country’s legal tradition does have an effect on its economic prospects, but one that is not nearly as strong as the original studies implied. Moreover, some economists argue that legal traditions act as a proxy, indirectly capturing the impact of entirely different inheritances, such as those relating to colonial legacies or cultural attitudes. Under this reading, moving from a civil-law approach to a common-law one is unlikely to be worth the significant hassle for places like Dubai.Yet such a switch may nevertheless have been worth it in an earlier era, albeit for the wrong reasons. Before it was discontinued in 2021, when World Bank staff were alleged to have fiddled data partly in response to pressure from China, the Ease of Doing Business Index made civil-law countries seem like a less attractive destination for foreign investors. For a time, then, the legal-origins theory may have become self-fulfilling—leading to faster economic growth simply because it was supposed to lead to faster economic growth. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Doctors are famously reluctant to hang up their stethoscopes. But a time comes in the career of every medic when their skills fade, and a gentle push is the best thing for them—and their patients. The same applies for the metaphorical physicians of the financial world, whose ability to diagnose the market’s health changes over time. Now the end may be nigh for the most illustrious of all such physicians: Dr Copper.Copper, a metal crucial to the construction of all manner of fittings, pipes and wires, has earned its nickname on Wall Street owing to its role as a bellwether for the health of global industry. A surge in copper prices is taken as an early sign of an economic upswing; a big drop is a portent of recession, or at the very least a manufacturing downturn.So what is going on at the moment? Manufacturing looks peaky. Global industrial output is up by just 0.5% year on year, well below the average of 2.6% over the past two decades, and the rich world is in an industrial recession. A wobble of a similar scale in 2015 sent copper prices plunging by about a quarter. Yet so far this year they are down by only 6%. Futures maturing in 2025 are flat, and those maturing in 2026 are up a bit.The breakdown in the usual rules of thumb is most striking in China, which consumes over half of the world’s annual copper supply. Its stricken housing market might have led you to think the metal was doomed. After all, investment in property, once a key driver of copper demand, is down by 9% year on year. Curiously, though, Chinese demand for the metal is up by around 10% this year.The explanation for this lies in the radical shifts that are under way in the energy system. China will install around 150 gigawatts (gw) of copper-intensive solar-energy capacity this year, according to Goldman Sachs, a bank, almost double the amount it installed last year. And methods for storing energy require the metal, too. Pumped-storage hydropower is one example. This involves moving water from one reservoir to another, either to hoard excess energy from wind and solar power or to release it. China already has 30% of the world’s hydropower-storage capacity, at 50gw. Another 89gw of capacity is being built, which will require vast amounts of copper.Other countries are also spending big on the green transition, and putting in place legislation that will increase appetite for the metal. s&p Global, a financial-data firm, suggests that demand for refined copper will almost double by 2035, to 49m tonnes. Batteries, energy transmission, solar cells, transport—all need the metal. An electric car contains over 50 kilograms of the stuff, more than twice the amount used in a conventional vehicle. Across the world new rules, intended to reduce emissions, will steer consumers towards electric vehicles and away from their copper-light predecessors. In Europe sales of new petrol-powered cars will be banned from 2035.The squeeze on supplies will therefore be historic, meaning that sky-high copper prices will no longer be indicative of optimism on the part of industrial machinery-makers, construction firms, electronics manufacturers and the like. Instead, rising demand for copper will increasingly reflect a desire among politicians for more environmentally friendly energy, and sometimes also a reduced dependence on imports.In normal times, building an electrical network from scratch would at least be a signal of greater economic activity to come. However, the energy transition is intended to replace existing activity, rather than add to it. In the case of energy infrastructure, China’s new solar investment this year can generate 150 gigawatt-hours of energy when working at full pelt, which is equivalent to almost 90,000 barrels of oil per hour. That is energy which China now does not need to purchase from overseas producers. The result may well be good for the planet, but it will not have much effect on aggregate economic activity.With so much of the growth in demand for copper locked in, and proceeding in large part according to legal diktat, the metal’s price will over time say less and less about the state of the global economy, and more and more about the state of the energy transition. Copper prices will still be worth watching, then, albeit for different reasons. Investors wanting a hint about the state of the global economy will be replaced by policymakers wanting a sense of how their green policies are faring. Dr Copper’s retirement may be a sad moment, but it is not the end of the story. ■Read more from Buttonwood, our columnist on financial markets: Investors should treat analysis of bond yields with caution (Oct 12th)Why investors cannot escape China exposure (Oct 5th)Investors’ enthusiasm for Japanese stocks has gone overboard (Sep 28th)Also: How the Buttonwood column got its name More