Wednesday,
November 25, 2020

Market recap

Dow Jones

30045.91

454.64 (1.54%)

S&P 500

3635.42

57.83 (1.62%)

Nasdaq

12036.79

156.15 (1.31%)

Facebook

$277.39

$8.96 (3.34%)

Google

$1,763.90

$36.34 (2.10%)

Tesla

$555.38

$33.53 (6.43%)

Amid evolving news + uncertainty surrounding COVID-19, your financial needs are our top priority. For more information on COVID-19 and your finances click here.

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The SoFi Team

Top Story

How Janet Yellen Could Impact the Economy as Treasury Secretary

Strengthening a Battered Economy

Joe Biden selected Janet Yellen to be the Secretary of the Treasury under his administration, according to people familiar with the matter. Yellen is a familiar face on Wall Street and was formerly the Chair of the Federal Reserve. The Treasury Secretary makes important choices about taxes, regulations, and other policies which have far-reaching effects across the economy. Markets also tend to be highly sensitive to decisions from the Treasury Secretary.

If Yellen is confirmed by the Senate, which she likely will be, she will face a struggling economy and will play an important role in helping it recover. After a summer of economic gains, the economy is showing signs of distress as COVID-19 cases rise, shutdowns are put in place to stop the spread of the virus, and stimulus negotiations are stalled. Job growth has slowed and a number of stimulus measures that were put in place earlier in the year have run out. Last week, JPMorgan Chase (JPM) economists shared predictions that the economy will shrink during the first quarter of 2021.

Stimulus Disputes

Yellen will have her work cut out for her negotiating with lawmakers on both sides of the aisle to reach a consensus about which economic policies will be best for the struggling economy. During the early stages of the pandemic, members of Congress collaborated to pass stimulus bills which provided a total of $3.3 trillion in benefits, from loans for small businesses to one-time payments for households.

Now, leaders disagree about how to move forward. Senate Republicans have put together a $650 billion package aimed at helping faltering businesses like airlines and restaurants. Republicans have also cited concerns about budget deficits hitting record highs. On the other hand, Democrats are urging for a $2.2 trillion package which would provide support for jobless workers and state and local governments. The package also includes more funding for national COVID-19 testing.

Yellen’s Views

Yellen has said that reducing spending too drastically could lead to slow economic recovery, like what happened after the 2007-09 recession. She has also said that while interest rates and inflation remain low, there are few downsides to borrowing money and helping the economy regain strength. Though she holds these views, Yellen is seen as less progressive than some candidates Biden could have chosen for Treasury Secretary, like Senator Elizabeth Warren. However, because the democrats will not have a sizable majority in the Senate, it is likely that a choice like this would not have been approved. It is widely expected that the Senate will confirm Janet Yellen.

Investors cheered the news of the prospect of Yellen leading the treasury. During yesterday’s trading session the Dow Jones Industrial Average topped 30,000 for the first time. To be sure, the recovery rally was also driven by optimism surrounding 2021 growth prospects in light of recent coronavirus vaccine announcements from a handful of high-profile companies.

With the US election in the rearview mirror, political uncertainty is also fading to some extent. These combined factors, along with a low-interest-rate environment, are creating less friction for equities to move higher. Investors will be eagerly awaiting more clues about Yellen’s plans.

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Big Tech’s Impact on the Real Estate Industry

Tech Companies Snap Up Office and Other Space

The US commercial real estate market has been battered by the COVID-19 pandemic. However, large tech firms are snapping up office space and other real estate, as many non-tech companies scramble to get out of leases.

Big Tech’s influence in the real estate industry has grown stronger as a result of the pandemic, but tech companies’ demand for real estate was surging even before COVID-19. Over the past decade, Amazon (AMZN), Facebook (FB), Apple (AAPL), Google (GOOGL), and Microsoft (MSFT) have increased the space they occupy fivefold. These companies now take up about 589 million square feet of space in the US. This is more square footage than all the office space in New York City combined.

Pros and Cons for Local Communities

Big Tech’s appetite for real estate has been helpful for the economies of many cities and towns. When well-paid tech employees arrive in a new area, property taxes tend to rise, which gives local governments more resources. Local restaurants, retailers, and other businesses also tend to benefit.

On the other hand, tech companies’ impact on the real estate industry has also generated controversy about climbing rents and gentrification. Two years ago, Google canceled plans to open a tech startup campus in the neighborhood of Kreuzberg in Berlin due to protests about how the project would cause rent prices to spike. Around the same time Amazon backed out of plans to open an office campus in Long Island City, New York after facing criticism from residents and lawmakers in the area. Major tech companies have pledged to spend billions of dollars developing affordable housing, but even these initiatives are not enough to counteract their impact on rent prices in many communities.

The Pandemic’s Impact on Real Estate Trends

Though many tech industry employees are working remotely at the moment, and companies like Google (GOOGL) and Facebook (FB) have said they will allow some workers to stay remote even past the pandemic, this has not made tech companies any less eager to invest in real estate—even office space. Because many companies with smaller cash reserves are trying to get rid of leases and commercial property, tech companies can currently buy office space at a discount.

The pandemic and the rise of ecommerce has also caused tech companies to pile into warehouses and data centers. Just this year, the five largest tech companies have grown their real estate presence by more than 25%—the fastest growth rate seen during the past decade.

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Google Plans a New Fiber-Optic Network

Google’s Goals

Google (GOOGL) is planning to build a fiber-optic network that will connect Saudi Arabia and Israel, two historical enemies, for the first time. The new cable will also create a new corridor for internet traffic between Europe and India. Through the project, Google also hopes to fix internet issues in various parts of the world. For example, the cable could help with congestion and prevent outages in Egypt. Currently the country is at a high risk for internet outages, which are caused by cables breaking beneath busy shipping lanes in the Red Sea.

The project will allow Google to stay competitive with Facebook (FB) in the fiber-optic landscape. Recently the two companies have been racing to expand their network capacity as users around the world engage with an increasing amount of content on the internet.

The new network will also give Google the ability to launch data centers around the world and compete with Microsoft (MSFT) and Amazon (AMZN) for market share in the world of on-demand cloud-computing.

Building Blue-Raman

Google names most of its internet cables after scientists, and the new route will be called Blue-Raman in honor of Chandrasekhara Venkata Raman, an Indian physicist. Blue-Raman will be more than 5,000 miles long and could cost up to $400 million.

Google will likely partner with telecom companies that would help fund the initiative and share the fiber-optic infrastructure once it is completed. These partners could include Omantel, Telecom Italia, and others.

Geopolitical Considerations

The Blue-Raman project is still in its early stages and a number of negotiations still need to be completed. The cable will cross multiple borders and one regulatory disagreement could mean that the project will need to be redesigned.

However, a series of recent peace deals brokered by the US has made negotiations surrounding Blue-Raman easier. Earlier this year, the UAE, Bahrain, and Sudan formalized government relations with Israel’s Prime Minister Benjamin Netanyahu. Internet cable projects through this part of the world have been politically contentious in the past, but Google hopes the new agreements will make this one easier.

Not-So-Breaking News

  • BlackRock (BLK), the world’s largest asset manager, is buying Aperio Group LLC, a company which provides investment management services, for $1.05 billion in cash from the private equity firm, Golden Gate Capital. The deal is expected to close in Q1 of 2021. It will increase BlackRock’s separately managed account assets by about 30%.
  • The spice company McCormick (MKC) will pay $800 million to acquire the hot-sauce maker, Cholula, from L Catterton, a private equity firm. McCormick also owns French’s yellow mustard, Old Bay seasoning, Thai Kitchen, Frank’s RedHot, and a variety of other brands.
  • Best Buy (BBY) reported better-than-expected Q3 earnings yesterday. The retailer shared that same store sales were up 22.6% and online sales climbed 174% compared to the same period a year ago as consumers bought appliances and electronics, including Apple (AAPL)’s new iPhone. With that said, shares fell after the electronics retailer warned of inventory challenges and higher shipping costs ahead of the holiday shopping season.
  • Dick’s Sporting Goods (DKS) announced that Lauren Hobart will take over as CEO from Ed Stack on February 1. Dick’s has seen surging sales throughout the pandemic as consumers look for COVID-safe ways to entertain themselves and stay in shape.
  • Tesla’s (TSLA) market value has crossed the $500 billion mark for the first time. The EV maker’s CEO and co-founder Elon Musk has now surpassed Bill Gates as the world’s second wealthiest person, according to the Bloomberg Billionaire Index.
  • These five ways to get money back or reach your goals can help you make these unprecedented holidays stand out for the right reason: for being wonderful. Read more about how you can save for the holidays with SoFi.

Financial Planner Tip of the Day

"It is important to identify your financial goals for the short and long term. Not only will this impact what actions you need to take, but this can also impact your motivation to make sacrifices along the way. Think through bigger picture goals such as buying a home, paying down debt, or retirement."

Brian Walsh, CFP® at SoFi

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