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We're closing in on the weekend, folks. Thursday is basically the new Friday, right?

Today's newsletter is 941 words, 3.5 minutes.

1 big thing: About that rate hike pain

Illustration: Shoshana Gordon/Axios

Higher interest rates were supposed to bring a lot of pain for Americans. So far that hasn't happened.

Why it matters: The Federal Reserve left interest rates unchanged yesterday, keeping rates at 23-year highs, but in his afternoon news conference Fed chair Jerome Powell made it clear he's ready to pivot in the event the pain makes an appearance.

The intrigue: When the Fed started hiking rates in 2022, some progressives feared that higher interest rates would eventually drive up unemployment, causing a lot of pain.

  • That hasn't happened — the job market is incredibly strong.
  • "We thought — and most people thought — there would have to be probably significant dislocations somewhere in the economy, perhaps the labor market, to get inflation all the way down from the very high levels it was at," Powell said.
  • "That didn't happen. That's a tremendous result," he added.

State of play: Rich folks are, to put it technically, crushing it in the high-rate world.

  • For middle- and high-earners, especially those who own homes outright or who locked in cheap mortgages, it's a "fairly sunny moment," Jeanna Smialek writes in the New York Times.
  • Home values are nearly 50% higher than pre-pandemic levels — and they're still rising, per Case-Shiller.
  • The stock market is near record highs and you can actually earn interest on your savings.

The other side: The experience of lower-income Americans is more mixed.

  • They're experiencing a great labor market and historically high rates of real wage growth.
  • They're also feeling the pain of higher borrowing costs for auto loans and credit card debt while rising mortgage rates are putting home buying out of reach for those trying to get a foot up on the ownership ladder.
  • Delinquency rates on credit cards and auto loans are now rising past their pre-pandemic levels. On car loans that increase is most pronounced for those in low-income areas, per data from the NY Fed.

The big picture: There are a lot of competing narratives over how rate hikes affect Americans. Going into 2022, the understanding was that if you keep rates high for long enough, you'd break the job market, as happened in the 1970s.

  • Since that hasn't happened (yet), there have been some new attempts at figuring this all out. One possibility is that the Fed hikes haven't had much effect, as Axios' Neil Irwin recently wrote.

What to watch: The jobs report out tomorrow will give us an update on the state of the labor market.

The bottom line: There's no doubt that monetary policy has a huge effect on markets and the financial sector. Its effects on everyday Americans, however, are more tenuous.

2. The sentiment divide

Consumer sentiment, though still lower than it was in 2019, has gone up since the Fed started hiking rates, and inflation began moving down. That holds across all income groups.

The big picture: Consumer vibes among higher earners have been at or near positive territory for the past year, per Morning Consult's sentiment index.

  • Middle-income Americans are getting closer to positive territory.
  • Those earning less than $50,000 a year are in the worst spot — likely because these are the people most impacted by inflation, particularly gas and food prices.

3. Americans cash out of sustainable funds

Data: Morningstar; Chart: Axios Visuals

U.S. sustainable investment funds, including ETFs, suffered their worst-ever exodus in Q1. They saw $8.8 billion in net outflows, per new data from Morningstar.

Why it matters: That outflow stands in stark contrast to consistent inflows through the first quarter of 2022 and to the continued net inflows to sustainable funds outside the U.S.

  • Sustainable funds are defined by Morningstar as open-end funds and ETFs that focus on sustainability; impact; or ESG factors.

Follow the money: Europe saw $10.9 billion in net inflows in the first quarter of this year — down significantly from a high of $133 billion in the fourth quarter of 2021, but still positive.

The big picture: Europe is home to the overwhelming majority of the world's $3 trillion in sustainable funds, accounting for more than $2.5 trillion of the total.

  • That's up 37% from when we last checked in on these funds in mid-2021. Meanwhile, even after investment gains, U.S. sustainable funds' assets under management are up by less than 12% since Q1 2021, to $335 billion in total.

Between the lines: When interest rates rise, that makes the future less valuable compared to the present. That's bad news for ESG investments, which broadly seek to bet on a brighter, greener future rather than on next quarter's cash flows.

  • "The continued politicization of ESG investing" also played a role in pushing Americans out of the asset class, notes Morningstar.

The bottom line: In the U.S., sustainable investing seems to have missed its moment.

4. One pasta thing: Ravioli's "day of reckoning"

Illustration: Shoshana Gordon/Axios

"As a society, we are being criminally under-served ravioli at every turn."
— Sophie Vershbow, speaking truth to Big Pasta

Restaurants typically only give you around three to six pieces of ravioli when you order the delicious stuffed pasta as an entree, writes Vershbow for Jezebel. At Danny Meyer's storied Union Square Cafe, you only get one singular raviolo.

Why it matters: Finally, someone is getting the word out about the under-portioning of ravioli.

  • "There isn't enough sage butter in the world to make up for the fact that I'm still hungry at the bottom of my elegantly shallow bowl so cavernous it only highlights the need for more ravioli," she writes.

Felix's thought bubble: This is yet another reason why German Maultaschen are superior to Italian ravioli. You might not get more of them, but they're much fatter and more filling.

  • Readers, feel free to email us your thoughts on why you get so few ravioli at restaurants. [email protected]

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Axios Markets is edited by Kate Marino and copy edited by Carolyn DiPaolo.