Investors are worried about an uncertain future despite strong macroeconomic indicators. The central bank is lowering rates and removing liquidity from the system. The real-world impact will be felt by consumers.

The inflation figures announced recently are higher than anticipated and have broken the downward trend seen since April. Now, stagflation seems to be a very real possibility. The European Central Bank is also ready to raise interest rates despite its refusal to do so a few months ago.
John Waldron is the President and Chief operating officer (COO) at Goldman Sachs, sharing Goldman’s plans to inorganically diversify its wealth and asset management businesses through M&A opportunities, cited the possibility of operating capital markets cycles being threatened by the current economic environment. He said: “this is among, if not the most complex, dynamic environment I’ve ever seen in my career. We’ve obviously been through lots of cycles, but the confluence of the number of shocks to the system, to me, is unprecedented.”

His remarks seemed to echo those of Jamie Dimon of JP Morgan who earlier stated that the U.S. economy is in trouble. “hurricane,” Just down the road “coming our way,” And that it was only a minor hurricane “Superstorm Sandy” It was not clear.

KEY DRIVERS & CALENDAR

TIP – This is a brief bullet-point summary. It’s a simple tool that provides investors and financial advisors with a list of important news and data.

• Ukraine Conflict (Ukraine running out of ammo, peace agreement possible?)
• Rising Inflation, Recession & Stagflation Fears
• Chinese Lockdowns ending
• Wednesday, June 15 – FOMC Meeting Rate Hike
• Wednesday, June 15 – Retail Sales (MoM) (May)
• Thursday, June 16 – Building Permits (May)

The high level of inflation makes it difficult to formulate central bank policies. The United States is in for a busy macroeconomic week. Tuesday will see producer prices released and Wednesday retail sales. The Fed will announce its monetary policies and rates on Wednesday evening. The Fed meeting could break or make markets in the short-term. On Thursday, midday the Bank of England joins the party.

Predictions for domestic and global economic health go downhill

Janet Yellen is the Treasury Secretary. She has warned of the possibility of an economy that will remain in a long-term spiral of increased inflation. The Treasury Secretary made this statement during a recent hearing of the Senate Finance Committee. White House will probably modify the 4.7% inflation forecast upwards once more.

In recent months, the World Bank reduced its forecast for global growth from 4.1% in January to a modest 2.9%. Its US forecast followed a similar trend, reducing its 3.7% GDP estimate from earlier this year to just 2.5%. In the coming two years, it is expected that the trends of suppressed rate growth will not change. 2.2% growth would be the most likely number. Although recessionary concerns are unlikely to be realized, the stagflation that could last for years is certainly a concern.

David Malpass, the President of the World Bank says “The danger of stagflation is considerable today. Subdued growth will likely persist throughout the decade because of weak investment in most of the world. With inflation now running at multi-decade highs in many countries and supply expected to grow slowly, there is a risk that inflation will remain higher for longer.”

Yellen is confident that the US economy will soon move from its current recovery stage to a more robust state. “stable and steady” growth.

As she stated in her recent testimony before the Senate Finance Committee it seems that she has started to assign blame for the economic condition to factors which the government cannot influence and that the US are not alone in experiencing inflationary forces. According to her prolonged supply disruptions were the primary cause of the inflation increase, not the “American Rescue Plan.” She also sought to calm fears that the government would not be able to service its obligations for the next 10 years and said, “completely manageable.”

Consumers think they’re in a recession

A recent survey by The Economist revealed that over 50% of Americans believed the country was experiencing active inflation. While almost half of Democrats think this, Republicans are the overwhelming majority.

The underperformance of the stock market, coupled with prolonged inflationary conditions are driving these views. This is resulting in a larger monthly budget gap for Joe Average.

According to the Joint Economic Committee, the cost of living has increased by $569 per month since January 2021. This was measured in April 2022. According to the JEC “Even if prices stop increasing altogether [implying an inflation rate of zero], the inflation that has already occurred will cost the average American household $6,829 over the next twelve months.”

Will home prices fall in line with lumber?

Lumber prices dropped from a peak of $1,544.50 in May 2021 to $1,329 by January 2022. The price has continued to drop and is now at $600 for a thousand board feet. That’s close to what it was in 2020.

Although lumber is still in short supply in the US, the price spikes are generally due to the large number of unfinished homes. The majority of US homes are constructed with wood. Moody’s Analytics believes that the number is in the region of 1.5 million.

If the National Association of Home Builders is to believed, then a slowdown in the housing market should be expected. That’s good news for anyone looking to buy. Prices of lumber on the US market will probably fall if Canadian lumber can be delivered.
The sharp rise in mortgage rates, despite the high prices of lumber, has made housing more affordable. In the first weeks of June, average mortgage rates for 30-year fixed rate mortgages, which are the most popular option for home buyers, were 5.09%. This is significantly higher than 3.11%, at the beginning of the year, and just slightly below the 5.3% peak reached last month.

Therefore, even if the price of lumber continues to fall, people who purchase homes using cash will still be winners. A sharp drop in home prices or a reduction in the mortgage rates would also help first-time buyers.

In response to inflationary worries, the ECB appears to be tightening up its stance. This has resulted in an increase in interest rates for sovereign debt. As expected, higher risk profiles have seen a faster rise.

TRUFLATION UPDATE

Decentralized Finance (DeFi), firm Truflation is based on the same calculation method as the CPI but is different in that it uses real “price data” Comparing survey data from the government. It uses real-market price data from Zillow and Penn State to report daily inflation changes.

BONDS

As the week began, US rates seemed to be declining, as investors expected Fed to relax its stance following worse economic data. They recovered quickly, and now the 10-year maturity pays around 2.98 per cent, up from 2.73 per cent at the end the previous week. Loretta Mester, Lael brainard and other central bankers have said that rates could need to be raised again in September. In Europe, interest rates also increased dramatically during the week.

CRUDE OIL

Oil prices were again on the rollercoaster last week. The European Union has finally decided to ban Russian oil. The ban is limited, and only covers marine imports. This compromise will allow Central European countries to continue using Russian oil while addressing their concerns. Parallel to that, OPEC+ chose to increase production a little more than expected in July and Augurary during a recent meeting (648 million barrels versus 432 millions more than the previous months). OPEC+’s output is unlikely to increase significantly in the next few months as most members are struggling to meet their production targets, particularly if Russian output drops. Brent currently trades at USD 118 a barrel while WTI is the US benchmark and is near USD117.

PRECIOUS METALS

China’s metals continue to fluctuate. Beijing announced a new scheme to support renewable energy, which has helped increase the price of metals such as nickel and Tin, that are especially susceptible to this problem. London trades the metals at USD 27710, and USD 35250 respectively. Copper’s price has also risen, to USD 9455 a metric ton. Silver and gold are struggling to recover on the precious metals’ market. They sell at USD 18.62 and USD 22.2.

CRYPTOCURRENCY

Bitcoin was on its way to stopping a nine-week losing streak, but then it crashed over the weekend like a bag full of rocks. The reason for this drop is unclear. Some speculate that it’s a victim investors selling off riskier investments due to high inflation Others have pointed out pending rules changes for crypto. We do know that the crypto market as a group is in a downward spiral. We have seen support levels of $30K in the past, but we don’t see any support at the moment.