Three Things to Know: Danger Lurks Around Every Corner
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By Ryan Casey Stephens, FPQP®
Special Contributor
History is full of moments when the right leader or decision turned the tide. Events like Gettysburg or the storming of the beaches of Normandy come to mind. Thousands of less notable moments have gone almost unnoticed through the ages, and I can’t shake the feeling we’re in one of those times now. If so, the decisions made by those in authority will have a lasting effect on our collective experience.
Let’s examine the forces surrounding us in this week’s Three Things to Know.
Inflation Isn’t Equal
Rising inflation is considered our arch enemy by economists, and last week’s CPI inflation report was a letdown.
While overall inflation dropped from 8.5 percent to 8.3 percent year-over-year, the reading that excludes food and fuel rose from 5.9 percent to 6.3 percent. Inflation can vary regionally, and according to WalletHub Dallas/Fort Worth is suffering from the 5th highest inflation in the nation. There’s now a unanimous certainty among experts that the Fed will raise rates another .75 percent this week at their meeting, with one in five experts predicting a full 1 percent hike.
The Fed meeting is the big story this week, and their ability to get this under control is their most important challenge. Many are skeptical (this Fed called inflation transitory into this spring), but hope might be on the horizon. For more on that, check out my video below.
No Brakes on This Freight Train
Disaster was averted last week when an agreement was reached to keep more than 50,000 key rail employees working. The looming strike had the potential to cause power outages and ‘boil water’ notices nationwide since coal and water sanitation chemicals travel by train.
The agreement provided employees a 14 percent raise and back pay to 2020 and raises that equate to 24 percent over their five-year work agreements. It was a brutal example of what I’m calling ‘pick your inflation.’ While the cost of the new union deal is going to be passed onto consumers, the immediate inflationary effect of a rail strike might have been catastrophic to our current markets, which seem to be on a teeter-totter.
Worldwide Recession Risks
What hath FedEx to do with economic predictions? Quite a bit, it turns out.
Seen as a canary in the coal mine, a wane in shipping activity and earnings might signal a slowdown in the global economy. That’s why the CEO made headlines last week when he prophesied an imminent global recession. Media were all over the story, and by Friday I had multiple friends in real estate sharing links on Facebook and LinkedIn, but there’s a catch.
Looking to corporations for data risks introducing spin, and claiming global recession might just be a convenient excuse to hide missed earnings as one Bloomberg columnist points out. Unfortunately, we won’t know if FedEx’s leader is right until we’re in for it, and the current average of the data suggests the U.S. economy is still expanding, not shrinking.
Mortgage bonds have begun the week in the red, pressuring lenders to reprice with higher rates. The moment to watch this week will be Jerome Powell’s press conference Wednesday afternoon. His statements will likely influence the markets and determine where mortgage rates go from here.
Ryan Casey Stephens FPQP® is a mortgage banker with Watermark Capital. You can reach him at [email protected].
