PayPal missed the mark | The UK dodged a recession |

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Hi John, here's what you need to know for February 13th in 3:09 minutes.

❤️ Valentine’s Day might be all about celebrating your one true love, but you can be a bit more experimental when it comes to investing. Join IG’s Martin Harris for How To Build A Smart Portfolio on February 14th, and discover the benefits of keeping your options open. Get your free ticket now

Today's big stories

  1. The UK avoided a recession by the skin of its teeth last quarter
  2. China could be putting a new shine on iron ore and aluminum – Read Now
  3. PayPal’s disappointing results left investors with a pretty painful headache

Near Miss

Near Miss

What’s Going On Here?

Data released on Friday revealed that the UK economy had a brush with disaster, narrowly escaping a recession last year.

What Does This Mean?

Economists were biting their nails as this report approached: after all, the previous quarter’s economic shrinkage meant the slightest stumble would catapult Britain into a technical recession, with the economy contracting for two straight quarters. But the UK dodged that fate by a hair’s breadth, scraping by with zero growth last quarter thanks to a bonus bank holiday and some extra World Cup spending. That said, the UK could be in for even more trouble if the tail end of the period is anything to go by: December fell short of even the gloomiest predictions, with output dropping 0.5% as folk economized and strikes walloped the country.

Why Should I Care?

The bigger picture: Long haul.
This result means the UK economy is still down 0.8% from where it was at the same time in 2019 – making it the only G7 economy that hasn't yet bounced back from the pandemic. To put that in context, the US has grown an impressive 5.1% in the meantime, and even the war-plagued eurozone has managed a decent 2.4%. But the Bank of England says the UK’s in for a marathon before it gets back to where it was: with energy prices and borrowing costs set to shrink the economy this year, the central bank thinks it’ll be 2026 before the economy’s in pre-pandemic shape (tweet this).

For markets: FTSE’s flying.
The British economy might be staggering, but the FTSE 100 – which tracks the country’s 100 biggest stocks – strode ahead last week and smashed its own record highs. It's not hard to guess why: 80% of the revenue that FTSE 100 companies make comes from abroad – so when the pound takes a nosedive, the exchange rate works in their favor. Plus, financial, commodity, and energy firms make up a big chunk of the index, and they’re all cruising high right now.

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Analyst Take

These Two Assets May Gleam Especially Brightly With China’s Reopening

These Two Assets May Gleam Especially Brightly With China’s Reopening

By Luke Suddards, Analyst

In terms of market-moving events, they don’t get much bigger than what’s going on in China right now. 

The government’s decisions to reverse its Covid restrictions and to inject its moribund property market with fresh stimulus are huge. 

It means a boost for stocks, sure, but also for the stuff right under your feet. And Morgan Stanley believes that two commodities – iron ore and aluminum – are in prime position to benefit. 

That’s today’s Insight: why China may put a new shine on iron ore and aluminum. 

Read or listen to the Insight here

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Fall in love with diversification all over again

You might’ve been lucky enough to find your one true love, perfect in every way.

But when it comes to investing, you might want to stay in the dating pool a little while longer: see, no one asset can give you everything you want, so you’ll need to mix it up a bit.

Yup, we’re talking polygamy: a diversified portfolio could get you through the tough times, and build you up during the good ones. And this Valentine’s, IG is walking you through your options.

You’ll find out the pros and cons of different asset classes, and when they tend to thrive and fail. By the end of the session, you’ll know which ones could make your portfolio’s heart flutter.

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Your capital is at risk. The value of shares, ETFs and ETCs can fall as well as rise, which could mean getting back less than you originally put in.

PayPain

PayPain

What’s Going On Here?

PayPal left investors squirming late last week, with some painful quarterly results.

What Does This Mean?

It might have been the festive season, but last quarter’s spending won’t have anyone celebrating: after all, Visa and Mastercard both felt the chill of the lackluster holiday, and now it looks like PayPal’s wound up in the same, sad boat. The total value of payments made on the platform grew by a measly 9% last quarter, marking an even starker slowdown than analysts predicted. And sure, overall revenue did hit the mark, but consumer spending looks set to stay tight – leaving the firm with only one real option: slashing costs. So far, 7% of the workforce have been shown the door, which might be why the firm gave a hopeful profit forecast for the year ahead. But spooked investors were more skeptical, and shares took a tumble when the news broke.

Why Should I Care?

The bigger picture: Winning a losing game.
Squeezed consumers do present PayPal with one upside: more interest in its buy-now-pay-later (BNPL) services. Data out last month showed demand for BNPL offerings is on the up across all age groups, including a concerning rise among the elderly. The thing is, though, that’s not really the kind of business PayPal needs right now: offering interest-free loans is a tough gig, what with central banks on an all-out rate-hiking crusade. And that’s not to mention the higher risk of bad loans now that so many households are in dire straits…

Zooming out: A soft Affirm.
Pure-play BNPL firms certainly aren’t having a good time right now: late last week, US-based Affirm reported whopper losses that confirmed investors' worst fears. The business said it's planning to right things by cutting flailing crypto offerings and (surprise, surprise) axing jobs, but investors have been hearing that spiel a lot lately, and they lost no time in ditching its stock.

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💬 Quote of the day

“Between two evils, I always pick the one I never tried before.”

– Mae West (an American stage and film actress)
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🌍 Finimize Live

🥳 Coming Up This Week…

All events in UK time.

💰 How To Build A Smart Portfolio: 1pm, February 14th
💸 Healthy Investing Habits For Uncertain Times: 6pm, February 14th
👩‍💻 Opportunities For Women In Blockchain 2023: 12.30pm, February 16th

👀 And After That…

🏠 How To Start Investing In UK Real Estate: 6pm, February 20th
🗞 The Relationship Between News And The Markets: 5pm, February 21st
✍️ What Are Investment DAOs And How Do They Work?: 6pm, February 22nd
🌥 Do Recessions Have A Silver Lining?: 5pm, March 8th

🎯 On Our Radar

  1. Vampires suck. Here’s the bloody history of our famous fanged friends.
  2. So-called “imposter syndrome”. Everyone feels like they’re faking it, but that isn’t necessarily helpful.
  3. A bunch of Benjamin Buttons. AI is helping movie stars look younger.
  4. Gatecrashing the Grammys. Here’s what it’s like to be a seat filler at the mammoth music party.
  5. House proud. Architectural Digest is having a moment.
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