Finance U — Issue #5

Welcome to the 5th Issue of Finance U — August 1st, 2025

📈 Wall Street & Beyond

Stock Market Reacts to Weak Jobs Report and New Tariffs

U.S. stock markets fell sharply following weaker-than-expected July jobs data and the announcement of new tariffs on imports from around 70 countries. On August 1, the Dow Jones Industrial Average dropped over 600 points, while the S&P 500 and Nasdaq also experienced significant declines. The new tariffs will raise average import duties from roughly 2.3% to about 18%, increasing costs for many businesses and fueling investor concerns about slower economic growth. This market volatility highlights uncertainty stemming from ongoing trade tensions and softer labor market conditions.

Why it matters: Stock market movements often reflect investor sentiment about the economy’s health. Large drops can impact retirement savings, student investments, and overall economic confidence.

Student Takeaway: Markets react quickly to economic data and policy shifts. Understanding these reactions helps you make informed investment decisions and stay composed during periods of volatility.

Federal Reserve Faces Pressure Amid Economic Slowdown

The Federal Reserve is under mounting pressure to cut interest rates after July’s surprisingly weak jobs report. The U.S. economy added just 73,000 jobs last month, far below expectations (100,000), and the unemployment rate rose to 4.2%. President Trump publicly criticized Fed Chair Jerome Powell and called for rate cuts to help stimulate growth. Economists warn that the labor market could worsen as the full impact of tariffs on imports and business uncertainty unfolds. Investors are now closely watching the Fed’s next moves, expected at the September meeting, for signals on easing monetary policy.

Why it matters: The Fed’s interest rate decisions affect borrowing costs, consumer spending, and investment. With the economy showing signs of slowing, how the Fed responds can influence everything from the stock market to job growth.

Student Takeaway: Understanding how monetary policy reacts to economic data helps you make sense of market moves and economic trends. Watching the Fed’s decisions is key for anyone interested in finance or investing.

🧠 Finance 101: Diving Deeper into Discounted Cash Flow

Last issue, we introduced DCFs and why they matter. Now, let’s unpack the core pieces of a DCF model so you can better understand what’s happening behind the scenes.

1. Forecast Period
This is the number of years you estimate future cash flows, typically 5 to 10 years. During this period, you project how much cash the company will generate annually based on expected revenue growth, operating expenses, taxes, and capital investments.

2. Free Cash Flow (FCF)
Free Cash Flow is the cash a company generates after paying for operating expenses and necessary capital expenditures. It’s the money available to be distributed to investors or reinvested in the business.
Formula: FCF = Operating Cash Flow − Capital Expenditures

3. Discount Rate (Weighted Average Cost of Capital “WACC”)
The discount rate accounts for the time value of money and investment risk. It represents the average return required by all capital providers, weighted between debt and equity costs. Generally, the higher the risk, the higher the WACC, which means future cash flows are discounted more steeply. WACC is frequently used as the discount rate in Discounted Cash Flow (DCF) analysis to determine the present value of a company's future cash flows, providing a valuation of the business. However, if you’re valuing equity cash flows only, you would use the cost of equity as the discount rate instead.

4. Terminal Value
Since companies are assumed to continue operating beyond the forecast period, terminal value estimates the value of all future cash flows after the projection horizon. This often makes up a large portion of total valuation. Two common methods to calculate terminal value are:

• Perpetuity Growth Model: Assumes cash flows grow at a constant rate forever (usually close to inflation or GDP growth).

• Exit Multiple Method: Uses a multiple of a financial metric (like EBITDA or EBIT) based on comparable companies or past transactions.

5. Present Value Calculation
Each year’s projected FCF and the terminal value are discounted back to today’s dollars using the discount rate. Summing these discounted values gives you the intrinsic value estimate of the company.

Why it matters: DCF analysis isn’t just plugging numbers into a spreadsheet — it’s about critically evaluating assumptions on growth, risk, and financial health. Mastering DCF models equips you with a powerful tool to assess investments and corporate value beyond just market prices.

💼 Prep Like a Pro: Time Management

Balancing classes, internships, networking, and personal life can quickly feel overwhelming, especially in finance where deadlines and learning curves are steep. Here are practical strategies to help you stay organized and productive without burning out:

1. Prioritize with Purpose
Not all tasks are created equal. Use the Eisenhower Matrix to categorize tasks by urgency and importance. Focus first on what is both urgent and important, like exam prep or internship deliverables, and schedule time for less urgent but important goals like networking.

2. Use a Digital Calendar Habitually
Block out your class times, study sessions, meetings, and breaks. Tools like Google Calendar let you set reminders and color-code events to visualize your week clearly.

3. Break Tasks into Manageable Chunks
Large projects, such as building a financial model or preparing a presentation, are easier to tackle in smaller steps. Set mini-deadlines for each part to avoid last-minute rushes.

4. Limit Distractions
Create a study environment that minimizes interruptions. Turn off non-essential phone notifications, and consider noise-cancelling headphones.

5. Schedule Regular Breaks and Self-Care
Short breaks improve focus and prevent burnout. The Pomodoro Technique (25 minutes work, 5 minutes break) is popular for maintaining energy. Do not skip sleep, exercise, and time with friends because they help fuel long-term success.

6. Learn to Say No
It is tempting to say yes to every opportunity, but overcommitting hurts your productivity and well-being. Evaluate new tasks or events carefully, and do not be afraid to decline when your plate is full or you have deadlines approaching.

7. Review and Adjust Weekly
Take time at the end of each week to review what worked and what did not. Adjust your schedule and priorities accordingly to stay on track.

Student Takeaway: Mastering time management is one of the most valuable skills you can develop as a finance student. It helps you juggle responsibilities, reduce stress, and make the most of every opportunity, both in school and your career.

🧰 Toolbox: Resources to Reinforce Learning

Watch: This video walks step by step through a DCF and lets you practice along the way with a free template. Super helpful to start and help you get comfortable.

🔁 The Rundown

In Issue 5 of Finance U, we covered how weak jobs data and rising tariff tensions influenced the stock market, and why the Federal Reserve is facing increased pressure over its rate decisions. We continued our look into DCFs in Finance 101 by breaking down the core pieces of a DCF. And in Prep Like a Pro, we shared simple tips to help improve your time management and productivity.

✝️ Verse of The Week

Colossians 3:23 “Whatever you do, work at it with all your heart, as working for the Lord, not for human masters.”

Student Takeaway: It’s easy to get caught up chasing recognition like a recruiter’s reply, a professor’s praise, or a job title that sounds impressive. But this verse shifts our perspective. Your work, no matter how small it seems, matters when it’s done with excellence and the right intention. Whether you’re building a resume, studying for exams, or serving others, do it with all your heart. You’re not just working for a grade or a paycheck, you’re working for something greater. Let that truth guide your efforts and attitude this week.

Thanks for reading the 5th issue of Finance U!

Feel free to reply with feedback, share with a friend, or let me know what you would like to see in future issues.

-Wrigley Stevens