July 30, 2021

Market recap

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Amid evolving news surrounding COVID-19 and the economic reopening, your financial needs are our top priority. For more information,click here.


Top Story

Inflation and Prices Continue to Climb

Consumers Should Brace for Higher Prices

US consumers should be prepared for even higher prices as companies across the country respond to inflation rates not seen in years.

Take the food and beverage industry. Nestlé (NSRGY), Diageo (DEO), AB InBev (BUD), and Danone (DANOY) have all raised their prices recently. The companies have pointed to increasing costs for ingredients, packaging, and transportation costs as reasons for price hikes when they reported quarterly earnings earlier this week. Meanwhile, toy makers like Hasbro (HAS) and Mattel (MAT) said supply-chain disruptions and increasing prices for materials and labor are prompting them to increase their prices as well. Toy companies are racing to build up enough inventory ahead of the holiday season.

Material, Transportation, and Labor Costs Weigh on Margins

Companies across most industries are dealing with rising material and transportation costs. At the same time, demand for many products is surging after a year and a half of restrictions on businesses. These two trends combined have caused prices to surge.

Inflation in the US is rising at the quickest rate in over 10 years. In the first half of this year, Nestlé raised prices by an average of 1.3% across its categories. Prices for its milk-based products including ice cream are up 3.5%. Prices for its water increased 1.6%. For the year, Nestlé expects its input costs to increase by 4%, which will hurt profitability.

Meanwhile, AB InBev said rising prices for barley, transportation, and cans are causing its costs to increase even as it benefits from the economy reopening. Diageo, which posted an 8.3% rise in second-quarter sales, said North American margins took a hit largely because of the increase in the cost of agave, a key tequila ingredient.

Delays Ahead of the Holidays?

The toy companies racing to stock up ahead of the holidays are facing similar issues. Shipping bottlenecks are resulting in delays for products from China, where most of the toys for the US market are made. Meanwhile, shipping rates are up significantly, which is hurting toy makers’ margins. These trends are prompting Hasbro to source products from different countries to ensure it has enough inventory to meet demand. It is prompting MGA Entertainment, the toy company behind the popular LOL Surprise dolls, to raise prices to offset rising costs. Some of its products priced at $10 will increase to $12, while toys which sell for $29 will soon sell for $35.

From supply bottlenecks to increasing material and labor costs, prices for everything from ice cream to dolls are increasing. It will be interesting to see how much consumers are willing to absorb.

Does Everyone Need an Estate Plan?

The short answer is, yes, estate planning can be a smart move for everyone.

Though it’s not much fun to think about what will happen to your loved ones after you are gone, doing some estate planning early on, and readjusting it as needed throughout your lifetime, can help you prepare for the future and protect the people you care about.

One of the biggest reasons why is that without an estate plan, any assets you have may not go to the people you would have wanted to have them. And, if you have children, you won’t have a say in who becomes their guardian.

Not having an estate plan can also create a lot of legal and administrative headaches for your family members and friends.

Contrary to what many people assume, you don’t have to be old, rich, or have children to benefit from making a financial plan for after you are gone.

SoFi, in partnership with Ladder, now offers estate planning as part of SoFi Protect. Draft your will for free and plan for your long-term financial future—because no financial plan is complete without considering the needs and goals of those you love.


Vacasa to Go Public Via SPAC Deal

Vacasa Will Sport a $4.5 Billion Valuation

Vacasa, a vacation rental startup, is gearing up to launch an initial public offering this fall via a SPAC deal with TPG Pace Solutions (TPGS). The $400 million deal gives the company a valuation of $4.5 billion. The SPAC market cooled off a bit in the spring after a frenzy earlier this year, but the number of SPAC transactions is picking up speed again.

Vacasa is trying to capitalize on the increase in demand for travel as the economy reopens. It is also benefiting from an increase in demand for alternative lodging accommodations. Some consumers want to travel but are still wary of staying in hotels because of COVID-19, so they are turning to platforms like Vacasa and Airbnb (ABNB).

Vacasa’s Plans for its Funding

Vacasa has been mulling an IPO via a SPAC transaction since April. It opted to move forward with TPG, partly because the company was an early investor in Airbnb, Uber (UBER), and other startups in the travel and transportation industries. TPG Pace Group also has a track record in the SPAC industry, and has already sponsored seven deals.

Vacasa wants to use some of the proceeds from the deal to boost its position in the market by increasing the amount of homes it offers for rental. It also wants to invest in its technology and grow its workforce.

Questions About the Delta Variant Loom

Heading toward Vacasa’s public debut, some investors are concerned about the Delta variant’s impact on demand for travel. The infectious variant of COVID-19 is spreading in the US and around the world. So far, Vacasa says it has not seen demand for travel slow due to concerns about the variant and it hopes this trend will continue. Vacasa expects to lodge gross bookings of $1.6 billion in 2021.

Vacasa is the latest in a string of startups going public via SPAC transactions. With a few weeks left before Vacasa’s debut, investors will be paying close attention to trends in the travel industry around the world.

Friday Fundings: PsiQuantum, Fireblocks, and NotCo

Quantum Computing Startup Gets a $3.15 Billion Valuation

PsiQuantum, a startup focused on quantum computing, raised $450 million in venture funding led by BlackRock (BLK). The investment, which gives the company a valuation of $3.15 billion, comes at a time when investor interest in advanced computing is increasing.

PsiQuantum and its investors are betting that within the next 10 years, applications based on quantum computing will solve problems millions of times faster than today’s systems. They also believe that their technology will be able to solve problems that a supercomputer is not capable of solving today.

The Series D round of funding brings PsiQuantum’s total capital raised to $665 million since it launched in 2016. Proceeds from the round will be used to expand the company’s workforce and to construct a powerful quantum machine.

Digital Token Infrastructure Startup Raises $310 Million

Fireblocks, a digital token infrastructure startup, raised $310 million in venture funding led by Sequoia Capital, Stripes, and Spark Capital. The Series D fundraising round gives Fireblock a valuation of $2.2 billion. In February, Fireblocks raised $133 million at a valuation of $700 million.

Fireblocks operates a platform which allows financial firms to manage their digital assets. Companies can store, transfer, and issue digital assets using Fireblocks. The startup has secured more than $1 trillion in digital assets for institutional investors. Proceeds from the fundraising round will be used to grow its engineering team and customer service staff. The company is also eyeing expansion into the Asia-Pacific region.

Plant-Based Food Company Raises $235 Million

NotCo, a startup developing plant-based food products, raised $235 million in venture funding led by Tiger Global. The Series D fundraising round gives the company a valuation of $1.5 billion. Investors in the round included athletes Lewis Hamilton and Roger Federer as well as the musician, DJ Questlove.

NotCo is making plant-based alternatives for milk and meat products. It is capitalizing on growing demand for healthy alternatives to meat-based proteins. The company raised over $350 million in total venture funding. Proceeds from the round will help the company enter the Mexican and Canadian markets and increase its market share in the US and Chile.

Not-So-Breaking News

  • Nikola’s (NKLA) founder Trevor Milton was charged with three counts of criminal fraud for lying about aspects of Nikola’s business to inflate its share price. Milton resigned as chairman of the company in September.

  • Volkswagen’s (VWAGY) earnings for the first half of the year set a record, lifted by demand for high-end cars in Europe and the Americas. This marks a significant improvement from last year. The German vehicle manufacturer also raised its profit margin target for the year.

  • Royal Dutch Shell (RDS.A) raised its quarterly dividend and announced plans to repurchase $2 billion shares by the end of 2021. This comes as the oil company reported second-quarter earnings which topped expectations.

  • Comcast (CMCSA) added 294,000 total customers for the second quarter, a record for the cable company. It also had the highest number of new high-speed internet customers in the three-month period.

  • GDP growth from April through June increased 6.5% year-over-year, better than the 6.3% increase in GDP during the first quarter. However, the growth rate was much lower than the 8.4% increase economists predicted.

  • The pandemic taught us many lessons about our finances. As the economy reopens, read on for 103 money lessons from our SoFi Members.

Financial Planner Tip of the Day

“Life insurance isn’t necessarily a must-have for everyone. But if you have dependents or debt—or think you might someday—you may want to take a closer look at whether life insurance could be a financial tool to help protect your loved ones and your legacy.”

Brian Walsh, CFP® at SoFi

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