Good Thursday AM,
Man, is the Fed in a pickle now or what? I mentioned that we could already be slipping into a recession and according to the GDP release this morning, the economy lost 1.2%. Meaning we shrunk, and GDP went negative. It is said that we need two consecutive quarters to consider ourselves in recession. I see it differently than Q1, we entered a recession. We will not know if Q2 will tell the same story, but from my perspective, things seem worse.
Now, what does the FED do? Does he ignore inflation and try to be the hero who saves us all? No, I do not think we can count on this. Since the yield curve inverted, it has been clear that the FED does not care about the economy when faced with inflation. While I agree that is how he should think, I’m not convinced that raising rates will stop inflation. The supply chain caused it, and we need the supply chain to get us out of it. This could take a couple of more quarters. Meanwhile, it is rather shocking to see bonds down after seeing such a stunningly terrible GDP number. My advice does not change; you must stay locked until the charts tell us otherwise.
Tomorrow is a huge day for data; the Fed’s PCE inflation gauge, personal income and spending, Q1 employment cost index., April Chicago purchasing mgrs. index and the U. of Michigan consumer sentiment index.
According to Redfin, an online real estate brokerage, 65 percent of homes received a competing bid during the selling process in March 2022, down 1.7 percentage points from February. This is the first decrease since September 2021 and is a key indicator that demand is beginning to cool as the combination of mortgage rates and home prices are pushing people out of the market. Yet bidding wars are still more common on a year-over-year basis. A year ago, 62.2% of offers encountered a competing bid. On an unadjusted basis, March’s bidding-war rate was 69.3%, down from 71.9% in February.
Please remain safe and healthy, make today great.