Saudi Arabia's sports take over 

This article presented very interesting information on how Saudi Arabia has collected a large amount of sporting industries. The article explains that the main reason that they are attempting to do this is because they are trying to prepare for a world where oil (their main source of income) is less important. Some of the fields that they have expanded to include but are not limited to soccer, formula, golf, horse racing, and boxing. These are all huge sporting fields with tons of money, and now they have some control of all of these markets. This does not come without controversy though, as many people see the human rights issues that are going on and are not in support of these new leagues because of it. It goes as far as the athletes themselves being criticized because of these issues. I believe this is fair to do, but I also see the athletes' side as the Saudi Arabian leagues can throw more money at these athletes than they will see anywhere else. It will be very interesting to see where this country goes in the future and if they will be able to figure out the civil issues in their country. 

https://theathletic.com/5237849/2024/02/02/saudi-arabia-sport-investments/

Meta Shares Jump More Than 16% After Quarterly Report

 Meta posted much better than expected earning on February 2nd. It lead to a massive stock jump of over 16% to start the day. In their earnings statement they reported an EPS of $5.33 and revenue of $40.11 billion. Both were significantly higher than analysts projected. This was an 8 billion dollar jump in revenue from this time last year witch was at $32.2 billion. Meta also paid out a quarterly dividend of $0.50 and were authorized to buy back $50 billion in stock. However it is not all good at Meta as the "Meta Reality Labs" division continues to lose money for the company. This quarter the division lost $4.65 billion. With Apple also releasing their Vision Pro headset, Meta could face some competition but also we could see an increase in consumer interest in AR/VR headsets. It will be interesting to see how Meta stock continues to react to this report in the coming future. 

https://finance.yahoo.com/news/meta-shares-jump-more-than-16-on-solid-earnings-stock-buyback-and-dividend-plan-143622709.html

Fed's Primary Inflation Gauge Rose in December

The core personal consumption expenditures price index, one of the feds favorites indexes to track inflation, has seen a increase from the previous month and an overall increase from year-to-date. The PCE is a metric that tracks how much earned income of households in the US spend on current consumption of various goods and services. There are two measurements of the PCE, one including volatile food and energy cost and one the does not include those prices. When you include the volatile prices of food and energy, the PCE rose 0.2% from the previous month and saw a 2.9% increase from year-to-date. Without the volatile prices, PCE still rose by 0.2% on the month but saw an increase of 2.6% from year-to-date. This grew in tandem with consumer spending increasing 0.7%, which is more than the estimated 0.5%. With the release of these numbers, the futures market is still expecting the Fed to make the first rate cuts in March, with future traders saying there is about a 53% chance it will happen.  

Link: https://www.cnbc.com/2024/01/26/pce-inflation-december-2023-.html

Powell Navigates 'Toxic' Politics of Rate Cuts as Election Nears

    Federal Reserve Chair Jerome Powell finds himself in a challenging position. The Fed is due to cut interest rates in 2024, but given that it's an election year there are many in Washington concerned about the timeline of these cuts.  When asked on the subject of election-year politics, Powell stated, "The minute we start thinking about those things - we just can't do that."

    Allies of former President Trump have accused that the Fed is seeking to help President Biden by signaling that cuts are soon coming. On the other side, the Democrats are concerned that Biden's election chances could be hurt if the central bank waits too long to lower rates.

    Generally, administrations have avoided publicly calling out the Fed. President Trump broke this precedent when he criticized Powell and called for lower rates during his trade war. The Biden administration has mostly avoided speaking on Fed policy.

    Historically, the Fed has changed interest rates during election years. In 2004 during George W. Bush's re-election campaign, the Fed started to raise rates from historical lows. In 2012, the bank executed a bond-buying campaign during President Obama's re-election. Whatever the Fed decides "They'd have to be very clear about why that's the right thing to do in order to be very clear that this is not a political judgement", as stated by former Fed economist William English. 

https://www.wsj.com/economy/central-banking/fed-interest-rate-cuts-election-2024-843cc25a?mod=hp_lead_pos1

The inevitable food system change

     It's no secret that the way we grow food and raise livestock around the world isn't sustainable. There are 3 main categories that this breaks into. The effect on climate change, the lack of food to support everyone on Earth, and the economic opportunity.

    In regards to climate change, food systems alone contribute to 1/3 of global greenhouse emissions and are expected to contribute 2.7 degrees of temperature change by the end of the century. Not to mention as climate conditions grow worse over the years, the overall food yield from farmers will decrease. Switching to better food systems is estimated to turn a net carbon loss by 2040 and a decrease in global temperature by 1.5 degrees. In addition, 1.4 billion hectares will be saved from nitrogen surplus.

    Moving on to starvation, the current path we're on will leave 640 million people underweight by 2050 while global obesity will increase by 70%. Experts are estimating that by 2050 switching to better food systems will save 174 million people from dying a premature death. 

    Economically speaking, making the switch to better food systems is a no-brainer. To start, the estimated cost to switch to a new system across the globe would be 0.2 - 0.4% of global GDP per year. This is nothing compared to the expected gain of $5-10 trillion per year. This would allow farm workers across the world to earn a sufficient income. 

https://phys.org/news/2024-01-food-trillions-dollars-economic-benefits.html

Venezuela Considers Rejecting Deportees from U.S.

    In response to the Maduro regime's decision to ban Maria Corina Machado from participating in presidential elections, the Biden administration has threatened to reimpose sanctions on Venezuela's oil-and-gas industry. According to the U.S. State Department, unless there is progress in allowing opposition candidates to participate in the elections, the license removing sanctions on Venezuela's oil and gas industry will not be renewed.

    The Biden administration had tried to get a deal with Maduro to accept Venezuelans deported from the United States, in order to mitigate the flow of Venezuelans seeking political asylum in the U.S. southern border. Over 200,000 Venezuelans were detained by the U.S. Border Patrol until September, making them the third biggest group of migrants. With the establishment of the deportations agreement in October, Venezuelan oil and gold mining were no longer subject to economic sanctions. And for his part, Maduro had committed to restoring democratic order, freeing political prisoners, and holding free and fair elections in the coming year.

    However, Venezuelan opposition leaders and human rights groups have criticized the regime for becoming more repressive rather than democratic. Maria Corina Machado, the opposition candidate, was barred from holding office for 15 years by the Supreme Court, and the government continues to hold over 250 political prisoners. The Biden administration's response, including threats of sanctions and refusal to acknowledge Maduro's actions as inconsistent with the agreements, signals a potential breakdown in the agreement established in October.  

    Such sanctions, especially against the energy sector, present a substantial challenge to Venezuela's government, heavily dependent on oil revenue. The country, which claims to have the world's largest oil reserves, expects billions in extra income in 2024, the majority of which is intended to be used for election expenses.

Global Trade

    Global trade had a solid entry coming into 2024, and it has shown signs of increasing strength. However, it faces so challenges with political risks all over the world. Bloomberg's trade tracker has finally shown marked improvement in January led by the U.S., which is due to a surge in Los Angeles. Which is the busiest container port in North America. Improving indicators have been adding optimism that the global economy has put the worst of it behind us. Trade in South Korea and Taiwan has been able to sustain export gains as energy demand is up. Especially with the expected drop in interest rates allowing firms and factories to bring down working capital costs. 

    However, politics may interrupt this growth in the global economy. The recent attacks in the Red Sea have shown us how vulnerable supply chains can be. There is also an upcoming vote on Taiwan could lead to another potential conflict that could upend the global economy. If TSMC has trouble getting out their microchips to the market it would create a major shortage for tech companies and they supply chips to most of the top tech companies. It is also an election year in the U.S., Mexico, India, and Indonesia which could lead to new policies that could disrupt economies as well. We will have to see how it all plays out in the coming months. 

https://www.bloomberg.com/graphics/global-trade-indicators/?srnd=economics-v2

Turkey’s Aggressive Approach to Combat Inflation

    Over the past few years, Turkey has battled with an economic challenge as it faces rising inflation, due to the loose monetary policy of the Ankara government. To counteract inflation, the central bank recently implemented a bold move by increasing interest rates again by 250 basis points, bringing rates to 45% as inflation reaches 65%. Since the May 2023 elections, interest rates have witnessed eight consecutive hikes. This is the result of a new economic team added to the central bank which has increased interest rates from 8.5% to 45% to try and curve inflation pressures. Furthermore, the Turkish Lira has experienced a substantial drop as it is down 38% against the American dollar. The Central Bank of the Republic of Turkey has signaled that this might be the end of the tightening cycle. Analysts speculate that this decision may be influenced by the upcoming local elections in March, as a potential turning point for the country’s economic stance. 

    Despite the aggressive tightening cycle, skepticism remains strong amongst many analysts. Bartosz Sawicki a market analyst at Conotoxia Fintech believes that the 3650 basis point increase is not enough to curb the effect of inflation due to the combination of a loose monetary policy, negative real interest rates, and the depreciation of the Lira. Bartosz Sawicki and his colleagues at Contoxia Fintech believe that inflation will rise to 75% by May and new measures will be needed to combat Turkey’s inflation crisis. 

https://www.cnbc.com/2024/01/25/turkey-hikes-interest-rate-again-to-45percent-as-inflation-remains-stubbornly-high.html

Oil prices fall as China property crisis overshadows Middle East violence

 Oil prices fall as China property crisis overshadows Middle East violence

After militants supported by Iran fired rockets that killed American soldiers in Jordan, oil prices initially increased by more than 1%. But later on, worries about China's economy contributed to a decline in prices, which was made worse by the bankruptcy of China Evergrande, a significant real estate developer. Concerns about China's declining demand for crude oil were aroused by the court judgment requiring Evergrande to dissolve. The Middle East issue is also being watched by the market, as tensions have increased following the drone strike on American soldiers in Jordan. The incident was attributed to the Islamic Resistance in Iraq. The Middle East's unpredictability, China's economic woes, and the backdrop of global events all had an impact on the price of oil.

source:

https://www.cnbc.com/2024/01/29/oil-prices-higher-after-iran-linked-drone-strikes-kill-us-troops.html

China is tightening the screws on short selling to prop up its ailing stock market

     China has had rampant issues with its economy, since the large toll covid had in early 2020, and it is still teetering heavily as of now. China's newest ploy to fix its economic situation is to limit big investors' abilities to lend different stocks for short-selling. Which has been adding to its ever-increasing issues with its stock stock market. 

    This measure will ban strategic investors from lending out shares during times been it was agreed to avoid doing so. With this, they hope to promote fairness. Curb advantages in the market, and allow market information time to travel fairly. 

    This has lifted Chinese stocks from a five-year low, and they're attempting to do more. But according to experts the move won't be enough to bring investors back to the country's financial markets. Other factors helped with their current economic situation including a distressed real estate market, mounting debt, unprecedented youth unemployment, and the flight of foreign capital.

https://markets.businessinsider.com/news/stocks/china-stock-market-economic-outlook-short-selling-economy-2024-1

Guyana’s 2015 Oil Discovery Brings Economic Prosperity, and Armed Conflict.

 Article Summary:

Guyana is a small country in South America with a population of 800,000. A 2015 oil discovery helped launch economic activity, with the country claiming the world's highest GDP growth rate in consecutive years (2022-2023). However, the fast economic growth has shaken the country's government. Its weak democratic institutions, sharp political divides, and deep ethnic issues have been the cause for alarm among international energy investors. Many speculate Guyana will have to fix these problems, or its economy will fail despite the large oil supply. South Africa is used as an example of a country rich in resources plagued by internal problems, coining the phrase "Energy Curse". 

However, energy curses aren't the only thing on Guyana's public official's minds. As the discovery of oil brought prosperity, it also brought attention from jealous neighbors. Venezuela shares a border with Guyana, declared in 2023 with the support of its people that they plan to annex Essequibo, a region making up nearly 2/3rds of Guyana's region. And most importantly, the region that conveniently holds the oil deposits was discovered in 2015. This is unlikely to actually occur, as national boundaries were set by a world tribunal in 1899, and Venezuela has no backing on the world stage, not to mention the United States is allied with Guyana; giving it protection from one of the world's largest militaries. 

My Thoughts:

Why Venezuela thinks they need more oil, when they have the world's largest oilfield within its own borders, is beyond me. Their economy has been collapsing since 2013, maybe the issue is not the oil capacity or the physical land of the nation. But instead economic policy and sector efficiency. Fortunately for Guyana, its borders have been rigorously defined for over 100 years, and they have the backing of the entire global community; I don't expect Venezuela to press its claims. However, it will be interesting to see how their political landscape develops, and if they will be looked at as another South African and fall victim to the "energy curse", or if it will take advantage of its natural resources and bring economic prosperity to it's people.

The article: https://www.cnbc.com/2024/01/27/how-guyanas-big-oil-boom-turned-it-into-the-worlds-fastest-growing-economy.html

When will the Bank of England start to cut interest rates?

When will the Bank of England start to cut interest rates?

The Bank of England is facing the decision of when to start cutting interest rates amid a backdrop of economic complexities. While savers were pleased with increased interest rates, the central bank is now considering potential rate cuts. The primary concern lies in the rapid decline of headline inflation, projected to go below the 2% target, contrasting with the slower expected decrease in interest rates.

The Bank is cautious, particularly about underlying inflation indicators, and the sustainability of wage and price increases. Despite external pressures for rate cuts, the Bank will likely resist if inflation falls significantly below 2%. Challenges and political influences, especially in an election year, add further complexity. 

The Bank's upcoming quarterly assessment will shed light on its economic outlook, and the decision-makers must carefully navigate the situation. While a rate cut is not expected in the imminent decision, a shift in expectations regarding future rate movements may occur.

https://www.bbc.com/news/business-68106731

Sports Illustrated Thrown Into Chaos With Mass Layoffs

 

    Sports Illustrated considered to be the "bible" of sports journalism has been in steady decline for years, but this past Friday the magazine received its toughest blow yet. The magazine laid off many employees, which was a effect of the publisher Arena Group had their license to operate the publication revoked.

    Sports Illustrated has been a titan for a while, but has been on a steady downward spiral for years. In 2017 Meredith purchased Time inc, which included Sports Illustrated, for $3 billion. Two years later, Sports Illustrated alone was sold to Authentic Brands Group for $110 million, the reasoning of the buy was because of the name and image, not so much the magazine. Almost right after the purchase, Arena group struck a 10 year deal with Authentic Brands to run the magazine, paying at least $45 million for the right.

    The first round of layoffs came in 2015, when many of the staff members contributing to the illustrated part of Sports Illustrated were let go. The reasoning behind it was the magazine trying to have a stronger digital presence, and trying to attract new users online. 

    The magazine finally hit rock bottom in August when Manoh Bhargava, the creator behind 5 hour energy, took a massive stake in the group in hopes of rising. Unfortunately this did not happen and the final push came earlier this month when Arena Group failed to make a payment of $3.75 million to Authentic brands, breaching their contract.  This led to Authentic Brands sending a terminating letter to Arena Group terminating the license of Sports Illustrated, killing a titan of sports magazines. Arena group were able to immediately pay $45 million to Authentic group, with a third of the workforce being laid off.

    

Remote Works Harmful Impact on Commercial Real Estate

The rise in hybrid / remote work is negatively affecting the office sector of commercial real estate. Since the pandemic and the rise of hybrid work, office occupancy rates have reached all time lows while interest rates have soared to all time highs. In addition to the high interest rates, $1.5 trillion in commercial real estate loans are set to expire in the next 2 years. 

It is evident that our society is not going to change our working style of a hybrid / remote system. The post covid higher interest rates are changing how companies operate, with some reporting up to 18% office vacancy rates. In todays society there is no motive to go in to the office with Friday's and Mondays having an immense production slowdown. 

More than 95 million square feet of office space is currently unoccupied - the equivalent to 30 empire state buildings. Tenants already have and will continue to shrink their office footprint and landlords are coming to the realization that their buildings are plummeting in value. 

The price of office buildings has decreased by up to 40% in some conditions and a lot of commercial real estate (CRE) professionals fear that this only marks the start of the trend. I will be looking forward to how the apartment sector will perform because most of these office spaces will most likely be converted in the near future. 

Source: https://www.cbsnews.com/news/real-estate-owners-saddled-with-half-empty-offices-as-hybrid-work-continues-60-minutes-transcript/

How America’s economy keeps defying expectations when the rest of the world is struggling

     Analysts have been predicting a bleak economic outlook in the US for the past few months or so now but Americans shouldn’t fret. After a prediction of about 1.5% growth for the last quarter of 2023 and a forecast of recession for the first quarter of 2024 with 0.2% growth, they couldn’t have been more wrong. The economy boasted a staggering 4.9% annualized growth rate in the final quarter of 2023. This occurred in large part thanks to massive consumer spending even in the face of the biggest interest rates in 23 years. Singapore is the only other industrialized country that spent more on Covid stimulus from 2020 to 2021 and it’s showing in consumer habits. People didn’t have the opportunity to spend and now that they’re back out with more money, they’re sending it every which way. 

The annualized GDP actually slowed to a growth rate of 3.3% for the final quarter of 2023, but this proves us abreast of the rest when realizing that the combined GDP of the 20 countries that use the euro grew at just an annualized rate of 0.1% in the third quarter last year. Just as well, the UK is growing at an annualized rate of just 0.2% while Japan’s economy shrank by 2.1% from the year prior. Whenever there’s a boom like this, there’s an impending leveling out. However, as always with the US economy, who really knows?

https://apple.news/A81qMyYeqTtGniK_y5WsTsQ

Cooper Meek

Ravens playoff success brings economic boom to Baltimore

    With the recent success of the Baltimore Ravens, the city is gearing up to host the AFC Championship game this weekend, with all the tickets, hotel reservations, and memorabilia that are being bought, the economy is seeing quite the boost right now. Hotel Revival at Mount Vernon is seeing an unusual and rare sellout in January. Ramond Sneed, General Manager of Hotel Revival, had this to say, "Business has been booming, the Ravens have been a huge impact for us," he also went on to say, "There's something about the NFL and your team being successful, it's a talking point with the staff - it's a talking point with the customers - it's a conversation, with good banter that gets everyone excited."

    Apparel stores are also getting the love, with all the fans crowding in from all over the country, it is customary for them to go into these stores and get the freshest and newest Ravens gear ahead of the big game. Michael Tyson, Owner of Poor Boys Sports, met the economic boost with a lot of joy, ""It's been crazy, I mean packed - the parking lot is packed - having trouble getting cars in the lot, to be honest with you." Whether it is expected MVP Lamar Jackson or the Superbowl being within arm's reach for the Ravens, these fans have a lot to be happy about, and so does the economy.

Ravens playoff success brings economic boom to Baltimore - CBS Baltimore (cbsnews.com)

Middle Eastern Economic Chaos

It has been over 100 days since Hamas's horrifying attacks on Israel started a war in Gaza, yet the conflict has just begun. On January 11th, American and British forces bombed Yemen, after months of Houthu missile strikes on ships in the Red Sea. Five days later Israel fired its biggest targeted bombardment yet on Lebanon. Although a regional war has yet to officially start as neither Israel nor America are wanting that to happen, there are serious issues economically in the Middle East beyond the areas of battle.

The neighboring countries of Egypt, Jordan, and Lebanon are dealing with economic downturn. Many potential visitors have cancelled their travel plans as there are concerns regarding escalation and attacks in these areas. These countries have a very heavy reliance on tourism in their economies as it typically makes up 35-50% of their economy.

There is also elevated uncertainty about the conflict which is causing a reduction in consumer and firm confidence, which could continue to drive down spending and investment. Due to the significance not only in the Middle East, but also the global implications this conflict has, it will definitely continue to influence global markets as well as their own domestic economies.

First Republic fails, and is snapped up by JPMorgan Chase

 Yet another bank has bit the dust as First Republic has recently been acquired by investment banking powerhouse JP Morgan Chase. Starting May 1st, all First Republic branches will operate as JP Morgan Chase branches. JP Morgan acquired First Republic with the assistance of the Federal Deposit Insurance Corporation (FDIC). The FDIC is also assisting with the acquisition by partially paying for losses on the bank's residential and commercial loans.

Most believed that it would be a matter of time before the small California-based lender collapsed, especially following the recent increases to interest rates and the collapse of Silicon Valley Bank (SVB). Both banks faced issues associated with the lack of depositors not covered by federal deposit insurance. As a result, we saw significant decline in deposit base in the first quarter of 2023 by $72 billion.

Investors had low expectations for First Republic in 2023 especially after the collapse of SVB. In the March, First Republics stock price decline 89 percent. There is some hope for the rest of the banking industry as it appears that no other banks are being significantly impacted by the recent news. It is also beneficial for the industry to see a large bank like JP Morgan step in during time of need. It is still a very concerning time in the market as American regional-bank shares have declined nearly 30 percent. It will be interesting to see future conditions and how the government and large banks will respond. 

Source: First Republic Fails

Oil Stock prices drop due to Growth Concerns

Oil stock prices fell this week due to growing economic concerns from the U.S. and China. The U.S. is thought to be raising interest rates to balance out their somewhat volatile economy post covid, this along with lower-than-expected Chinese manufacturing data has caused concern in the oil field. The FED will make the official oil stock price change as they will be the ones to more than likely increase the United States interest rates. 

The oil industry is actually the third massive U.S. institution to fail in the past couple of months which isn't a great look for our economy worldwide and is starting to show potential weakness. This weakness is also scaring investors as the continuous failure of big institutions and the threat of increasing interest rates are very worrying to many. 

China is experiencing economic problems as well as its manufacturing sector is doing worse than expected. They went from expansionary to contractionary over the past month with a decrease in their PMI or purchasing managers' index. This decrease is also worrying to many and is directly affecting the U.S. as most of our goods are produced by this sector. All of these factors are negatively affecting the U.S. economy and are the reasons for the Oil stock prices decrease.

Article: https://www.msn.com/en-us/money/markets/oil-drops-as-economic-growth-concerns-offset-opec-cuts/ar-AA1aAmZs

How the development of AI can impact our economic system.

With the rise of technology over recent decades, companies and businesses have learned and adjusted with the new information and ways of growth that have been occurring around the world. The newest progression of technology, Artificial Intelligence, is the next wave of technology both in the United States and across the world that can help consumers, businesses, and corporations. AI is so important in the acceleration of the economy because it can help increase the speed at which we are making technological advancements, and are developing entrepreneurial businesses, and the value of corporations. Businesses need to be open to adjustments and advancements within their industry in order to stay up to date on the latest technological updates, in order to stay on top of the needs of the clients, their employees, and their markets. If an organization falls behind and fails to make advancements alongside other competitors within the market, then they are going to be out valued, and absorbed because they now lack efficiency and performance. These companies need to keep in mind that AI can help them reach their goals more effectively, and achieve the growth that they desire, and that it is not there to take over their jobs. This is a growing and developing industry that is going to be very important in the future economy that many businesses and organizations have already started planning for and developing in order to make their organization ass effective and efficient as possible over the coming years.

 https://www.cnbc.com/advertorial/2023/04/25/generative-ai-is-poised-to-change-everything-is-your-company-ready.html?utm_campaign=NativeTout22&utm_source=Polar&mvt=i&mvn=e30a537bfb0740b29fb43fd759cc3159&mvp=NA-CNBC-11239420&mvl=%20%5BNativeThreeUpStackv2%5D

U.S. GDP rose at a 1.1% pace in the first quarter as signs build that the economy is slowing

Overall economic growth has slowed at a large rate within the first 3 months of 2023. This is largely due to covid, but also because of the continuing effects that inflation and high-interest rates have on the economy. On top of that, Gross domestic product (GDP) has risen at a 1.1 percent annualized pace within the first economic quarter - the expected growth was 2 percent. The U.S. Bureau of Economic Analysis also measured the personal consumption expenditures price index, which saw an increase of 4.2 percent, which is half a percent above the estimate of 3.7 percent. If you exclude things like food and energy within the PCE, then it saw an increase of 4.9 percent which is .5 percent more than the previous increase of 4.4 percent. 

Following this report, it was stated that a Citigroup economist named Veronica Clark said “Overall, I think it’s a relatively inflationary report, even though the headline GDP number is a bit softer. All of those signs that demand is still strong and prices are still rising were very much present today.” Although Veronica sees optimism in overall inflation, her expectation is that the U.S. economy will sooner or later tip into a recession. Given the recent Q1 data for 2023, Veronica believes that we will not slip into this recession just yet but is something we should expect and prepare for. 

The recession scare is coming from data that reports slow growth. For example, the economy has seen a decline in private inventory investment, a deceleration in nonresidential fixed investment, and a Gross private domestic investment that fell 12.5 percent. However, things that counteract this recession scare come from an increase in personal consumption expenditures by 3.7 percent and an increase in exports by 4.8 percent. 

Overall, the economy is likely to see itself in a recession within a year and a half to two years. This is simply based on slow growth and the rate of joblessness (3.5% unemployment rate - 230,000 jobless claims).

https://www.cnbc.com/2023/04/27/gdp-q1-2023-.html

Eurozone economy ekes out 0.1% growth in Q1, misses expectations as Germany stagnates

The Euro zone economy grew by a marginal 0.1% in Q1 of 2023, as Germany's GDP remained stagnant over the period. Growth came in below expectations, with a Reuters poll of economists previously forecasting a Q1 growth rate of 0.2%. The annual economic growth was also at 1.3%, a hair under the projected 1.4%. 

The low growth figures come in light of high inflation in Europe, with rising energy prices due to the war in Ukraine being a key driver of inflation, with Carsten Brzeski, global head of macro at ING stating that a bloc-wide recession being averted by a warmer than expected winter along with fiscal stimulus. He further went on to state that there exist significant disparities between individual countries, and that future growth relies heavily on a positive momentum in industry and wage growth, and the possibility of a US recession and a tightening of the monetary policy by the European central bank. 

Germany's economy stagnated in the first quarter of 2023, avoiding a technical recession by a narrow margin, while France's GDP increased by 0.2% despite widespread strikes. Irish GDP declined by 2.7% on the previous quarter, while Portugal's economy grew by 1.6%. The European Central Bank (ECB) meeting on May 4th will closely scrutinize these figures as they seek to tackle headline inflation of 6.9% and core inflation at a record high of 5.7%. Some ECB policymakers have suggested a further interest rate rise may be necessary, but concerns remain about banking sector turmoil and deposit outflows.

Source: Euro zone economy ekes out 0.1% growth in first quarter (cnbc.com)

Regulators Prepare to Seize and Sell First Republic Bank

     This weekend federal regulators led by the FDIC have worked to seize First Republic Bank to stop its collapse and to hopefully finally put a cork in the recent banking crisis. Since First Republic announced that over half of their customers had withdrawn half of their deposits, the bank's stock price has fallen tremendously. However, since the government has seized First Republic Bank, banks like PNC, JPMorgan Chase and the Bank of America have shown interest in buying First Republic and taking on their deposits. This is a very important time when it comes to addressing this banking crisis that is plaguing the country. The government must act in order to save bigger banks from failing and must restore consumers confidence in the country's banking system. Perhaps the government has learned things from the 2008 banking crisis that will benefit us in this new crisis. Hopefully the government will able to get financial institutions to band together with one another as well as the government to ease consumer fears and rid the country of this crisis.

Source: https://www.nytimes.com/2023/04/29/business/first-republic-seizure-fdic.html

Economic growth hit the brakes in the first quarter

    With the new Q1 reports for GDP released, many economists are aware of whats to come for the US economy. With a GDP growth of 1.1% in Q1, the Feds attempt to slow economic growth and decrease inflation by raising interest rates is finally being felt. The original prediction for Q1 GDP was 1.9%, so the Feds actions are working much quicker than expected. 

    The goal of raising the interest rates was to create a soft landing for the American economy, but some economists are skeptical of this actually working. They predict that in the second half of 2023, there will be a mild recession for the economy. There was a business group included in the article that "puts the probability of a U.S. recession over the next year at 99%." This is a worrying fact, as the whole point of the soft landing was to avoid the risk of a recession.

The only reason we haven't reached lower GDP growth rates is because there is a strong consumer in America right now. All economic indications are pointing towards a struggling economy; imports are greater that exports, inflation is high, and interest rates are being risen. Soon, the strong consumer will pull back on their spending and will push the economy ever so closer to a recession.

https://www.cbsnews.com/news/u-s-economy-gdp-first-quarter-2023/

"Mild" Recession in the Forecast

 Fed is predicting a mild recession will hit the US economy. Unwavering inflation as well as emerging bank failures are leading to this prediction.  In an aim to fight inflation, the Fed has increased interest rates 9 times in 2022. This increase is the highest it's been in 17 years. With high interest rates, it becomes more expensive to borrow, so it discourages people from borrowing money. On top of this, banks were limiting credit, so that they remain safe if danger is in the horizon. The limitation of credit also makes it harder for people to borrow. This tightening is usually a response to a recession which means banks are preparing now, so they aren't affected as deeply. If people can't borrow money, this will result in a decline in the growth of the economy. The article brings up a good point that the economy heading into a recession might solve high inflation. 

https://www.usnews.com/news/us/articles/2023-04-27/how-will-we-know-if-the-us-economy-is-in-a-recession

Calls to move away from the U.S. dollar are growing — but the greenback is still king

    Calls to move away from the U.S. dollar are growing — but the greenback is still king

    Countries such as Brazil and others in the Southeast Asia region are trying to find currencies other than the US dollar to carry out trade. With the Fed steeply hiking up interest rates, other central banks around the world have to follow in order to stem outflows and as a result are depreciating their own currencies. 

    The main player in trying to move away from reliance on the US dollar for trade is China, and they have some leverage as being the biggest exporting country in the world. China is also selling off US Treasury's, and has been doing so for years. 

    Moving away from the dollar can really benefit local economies in other countries. It can help simplify importing/exporting businesses and allow them to better mitigate risks and help in their hedging strategies. A reason why moving away from the dollar is being accelerated can be due to the US freezing Russian reserves of US dollars, showing other countries that the US dollar may not be a safe haven to park money.

    A global economy moved on from the US dollar could be highly detrimental to the US economy, and its geopolitical power. We should do what we can to make sure the US dollar remains the global reserve currency.

The banking crisis is having a slow-burn impact on the economy

 https://www.cnbc.com/2023/04/25/the-banking-crisis-is-having-a-slow-burn-impact-on-the-economy.html 

The banking crisis that began just two months ago is being watched closely. Economists have determined that it will most likely lead to a recession through a slow burn. This crisis had already led to smaller banks being more stingy about loaning out money, which impacts economic growth negatively. Bank earnings largely have been decent for the first quarter, but the sector’s future is uncertain. Stocks have been under pressure, with the SPDR S&P Bank ETF (KBE) off more than 3% in Tuesday afternoon trading. In the immediate future, the reading on first-quarter economic growth is expected to be largely positive despite the banking problems. That growth, though, isn’t expected to last, due primarily to two interconnected factors: the Federal Reserve interest rate hikes aimed purposely at cooling the economy and bringing down inflation, and the constraints on small-bank lending. First Republic, for one, reported that it suffered a more than 40% decline in deposits, part of a $563 billion drawdown this year among U.S. banks that will make it tougher to lend. Consumer spending has seemed to hold up fairly well in the face of the banking crisis, with Citigroup estimating excess savings of about $1 trillion still available. However, delinquency rates and balances are both rising: Moody’s reported Tuesday that credit card charge-offs were 2.6% in the first quarter, rising by 0.57% from the fourth quarter of 2022, while balances soared 20.1% on an annual basis. Where the economy and possible recession lead to is all up to the consumer. Consumer demand is currently approaching pre-pandemic levels, but if consumers cannot get those lending services from banks, it will quickly tarnish the progress made.

Russia’s economy can withstand a long war, but not a more intense one

 Since the beginning of the war between Russia and Ukraine last year Russia has been in financial trouble ever since. The value of the ruble has decreased rapidly, the Russian stock market has closed, interest rates have more than doubled, and their credit rating has been labeled terrible. The hope with all these issues that Russia has been facing throughout this war will impede the progress of Russia during this war. Russia's government deficit last fiscal year was at about 37 billion dollars in value before the start of the war which is 2% of GDP. Economists believe that there is a chance this deficit will more than triple, being almost 5% of GDP.

Unfortunately wealth will not be a huge obstacle for the military as Russia's Sovereign wealth fund is at about 150 billion dollars and if they chose not to dip into that they can increase borrowing from the energy companies.

https://www.economist.com/briefing/2023/04/23/russias-economy-can-withstand-a-long-war-but-not-a-more-intense-one

Why America will soon see a wave of bank mergers

 This article stresses how the United States is on the verge of experiencing a wave of bank mergers. The pandemic brought significant change in consumer behavior, which has made a shift in banking practices necessary to remain relevant. The rise of digital banking services such as mobile and online banking has become the new norm, making it important for banks to make large investments in technology to keep up with their competition. This will be costly, and the only way for smaller banks to survive is to merge with large banks. The article suggests that merging will be easy under Biden’s administration.Large banks like JP Morgan and Bank of America will merge to reduce costs and expand market share, while small banks will merge with larger ones to remain in business. Banks that do not adapt to changing consumer habits and invest in new technology are likely to face significant challenges in the future and go bankrupt.

https://www.economist.com/leaders/2023/04/20/why-america-will-soon-see-a-wave-of-bank-mergers

Oil and Gas Prices

An article that I found talks about the price rises in the last two years for oil and gas and how this could mean greater impacts due to the recession that is coming into view. Since the recession is coming into view many oil and gas prices are lowering which is greatly impacting the economy. It was stated that, “S&P 500 energy sector is down about 1.4% so far this year…Oil prices, meanwhile, fell by $2 per barrel as fears of a recession rise.” (CNN). This overall is very concerning for the economy and the oil and gas companies. There are five large companies that are already gearing to combat these fluctuations in prices. All in all, this article describes how these price fluctuations are affecting the economy and what is being planned for combating these changes. 

Article: https://www.cnn.com/2023/04/21/investing/premarket-stocks-trading/index.html 

China is concerned about much more than India outgrowing its population

    China has reacted defensively to the news that India is on track to overtake it as the world's most populous country, accusing Western media of focusing only on population size rather than other factors such as education, industrial output, and economic clout. While the two countries are geopolitical rivals, with a border dispute and ongoing clashes between troops, China says that population size doesn't equate to national power, and instead emphasizes the importance of consumer and investor confidence. Both China and India face their own challenges, with China's aging population raising serious questions about the country's ability to maintain its economic status, while India has struggled to create enough jobs to support its growing population.



https://www.nbcnews.com/news/world/china-reacts-india-overtake-worlds-most-populous-country-economy-rcna80581

Recent CNBC All-America Survey Shows Americans Continue to Have a Negative Outlook On Economy

 The most recent CNBC All-America Economic survey (an indicator of American perceptions of the economy and economic indicators) found that almost seven out of every ten adults currently have a negative outlook on the U.S. economy, the highest level in the poll's 17-year history. Two thirds of individuals polled believe their wages are falling behind the level of inflation, while another two thirds of people believe the economy is either headed for a recession or already in one. This data comes after the Fed raised interest rates for the ninth consecutive time last month in its attempt to tame inflation, which appears to be cooling according to the latest data, showing a decline from 9.1% in June of 2022 to 5.0% last month. Despite the decline in inflation over the last year or so, Americans are still modifying their spending habits. According to the poll, individuals are now spending less on entertainment and travel, and are less likely to buy a car or home due to higher interest rates. While the Fed's efforts to lower inflation come at a cost, the U.S. economy is showing its resilience, as unemployment dropped from 3.6% in February to 3.5% in March, adding 236,000 new jobs. 

https://thehill.com/business/economy/3956526-record-69-percent-holds-negative-views-of-us-economy-survey/

Drop in Transportation Stocks Foreshadows Weakening Economy

 According to a recent article in the Wall Street Journal, a drop in transportation stocks could foreshadow a weakening economy. Transportation stocks are often viewed as an indicator of economic health because they are closely tied to the movement of goods and people. If these stocks begin to falter, it could suggest that demand is slowing down and the economy is weakening.

    The Dow Jones Transportation Average, which tracks the performance of 20 transportation-related companies, has declined by -7.7% since February. This is a significant drop and is especially concerning given that transportation stocks typically perform well when the economy is strong.

    The drop in transportation stocks can be attributed to several factors. For one, rising fuel prices have increased the cost of transportation, which has led to a decrease in demand for goods and services that rely on transportation. Additionally, supply chain disruptions and labor shortages have slowed shipping and transportation operations, further hurting the transportation sector.

    The transportation industry is vital to the economy's overall health, as it is responsible for moving goods and people across the country and worldwide. A slowdown in transportation could lead to decreased consumer spending and a decline in business activity. This could ultimately lead to a recession if the trend continues.

https://www.wsj.com/articles/drop-in-transportation-stocks-foreshadows-weakening-economy-fcf83650?mod=economy_lead_pos3 

De-Dollarization Is Happening at a ‘Stunning’ Pace, Jen Says

    The greenback's share in global reserves slid last year at 10 times the average rate of the past two decades as numerous countries looked for alternative reserve currencies after the U.S. government decided to impose sanctions on Russia for their invasion of Ukraine. The dollar has lost 11% of it's market share since 2016 and 22% since 2008

    Some of the reason for the U.S. seeing a decrease in the market share their dollar has comes from the BRICS (China, India, Russia, etc.) nations trying to internationalize their currency for trading settlements due to the U.S. and Europe cutting Russia off of SWIFT. The U.S. dollar has become politicized in the past year as the Biden administration has used it to pressure smaller countries to enforce sanctions they may not agree with. The controversy is that these small developing countries are not able to ditch the greenback due to the strong financial markets that come with using the greenback.

    The U.S. dollar today represents about 58% of the world's global reserves. Given this, it can be claimed that the U.S. dollar's massive role as a leading global currency will not be taken away any time soon. Because smaller countries cannot switch reserve currencies, the U.S. is still able to be a hegemonic power in the global political economy. 

    Now this is not a guarantee due to more countries trending towards losing faith in the U.S. dollar. for example, the BRICS nations and even some Eastern European countries have admitted that they are not confident in the strength of the dollar. Overall, this situation can either improve or worsen, the main indicators to look for are how much inflation rises or falls, and the emergence and adoption of the new BRICS currency in new countries. 

Link: https://finance.yahoo.com/news/dollarization-happening-stunning-pace-jen-082144378.html

    

UK economy flat in February as strikes and inflation bite

According to an article from CNBC, the UK economy stagnated in February 2023 as a result of strikes and inflation. The article cites data from the Office for National Statistics (ONS), which showed that gross domestic product (GDP) remained unchanged in February after growing 0.5% in January. The UK was hit by several strikes in February, which disrupted economic activity in various sectors, including public transportation, healthcare, and education. The strikes were organized by various unions to protest against the government's proposed changes to pension schemes, working hours, and pay. In addition to the strikes, inflation continued to rise in February, putting pressure on consumer spending and business investment. The ONS reported that the Consumer Prices Index (CPI) increased by 3.1% in February, the highest level since 2012. The rise in inflation was mainly driven by higher fuel and energy prices, as well as the impact of supply chain disruptions caused by the pandemic. The article also notes that the UK's economic growth was weaker than expected in the first quarter of 2023, with some analysts predicting that GDP growth may be revised downwards in the coming months. The ongoing strikes, combined with rising inflation and uncertainty over Brexit, are seen as potential headwinds for the UK economy in the near term.

https://www.cnbc.com/2023/04/13/uk-economy-stagnates-in-february-as-strikes-and-inflation-bite.html

Can the West win?

    The Economist article, "Can the West win?" argues the importance and growing relevance of neutral or non-aligned countries in the greater conflict between Russia and Ukraine (or the West).  The article mentions that over 4 billion people spread amongst more than 100 countries are remaining neutral in the war and continuing to trade with both the US and Russia in many instances.  The US has encouraged countries to join the fight against Russia by limiting trade and giving up their neutral position.  The article, however, acknowledges the economic strength and growth of these countries since the Cold War as being greater than growth in Europe.  This, however, is not surprising given out previous discussions on growth rates being much higher in the first years of industrialization and production than consequential years showing that Europe industrialized before the 100+ neutral countries.  Nonetheless, these countries are also becoming unexpected champions for free trade by not letting the political decision Russia made to invade Ukraine to interfere with trade.  Although morally it may not be supported, these countries are in fact doing well economically because of their decision to stay neutral and the article begs the question that if the West's decision to stop trade and tear down relationship with neutral countries really to their benefit?

Today’s homebuyers have their mortgage rate tipping point, and it’s artificially low

Link to the article: https://www.cnbc.com/2023/04/14/homebuyers-mortgage-rate-tipping-point-is-artificially-low.html

For most homebuyers, price is not as nearly as important as the monthly payment and what determines it is the mortgage rate.

According to a new survey by John Burns Research and Consulting, 71% of potential homebuyers say that they will not accept a 30-year fixed mortgage rate over 5.5%. Interestingly, the average mortgage rate since 1977 is 7.75% with the lowest of 2.65% during 2021, the height of the pandemic but 62% of buyers said that the historically normal rate was below 5.5%. Therefore, without true statistics, consumers' perception might be a bit skewed towards the lower end.

In addition, 63% of homeowners and 83% of renters believed that homes are overpriced, which is quite understandable as mortgage rates have gone up dramatically since the low in 2021. As homebuyers are waiting for the mortgage rates to come lower below 5.5%, unfortunately, it might take a bit more time than expected as rates have been over 6% and do not show any sign of coming down yet. While the Fed's decision to cut rates might in some way influence the mortgage rates to come down, it is still not confirmed yet as inflation is still quite far from the 2% target. 

Jamie Dimon issues warning on rates: ‘It will undress problems in the economy’

 Link to the article: https://www.cnbc.com/2023/04/14/jamie-dimon-warning-on-rates-it-will-undress-problems-in-the-economy.html

According to JP Morgan (Ticker: JPM) CEO, Jamie Dimon, investors and businesses should plan for interest rates to remain higher for longer than expected by the market.

During his conference call with the analysts, he warned that higher rates would undress problems for those who are exposed to floating rates and to refinancing risks, referring to loans that reset the market rates.

He also said that a benchmark rate closer to 6% would impact the economy. As the federal funds rates are ranging from 4.75% to 5% and the Fed is expected to have a quarter-point rate hike, would the target rates reach close to 6%? Inflation would be expected to come down then, but would it reach the 2% target rate and also at what cost of the economy?

A.I. Software Could Potentially Close Tax Loopholes

No-one likes paying taxes, and according to the IRS the Federal tax gap was $496 billion (2014-2016). Tax loopholes are primarily to blame for this large disparity. Johns Hopkins Associate Professor Benjamin Van Durme and University of Maryland Law Professor Andrew Blair-Stanek are currently developing an AI program that aims to close tax loopholes. However, a common misconception is that tax loopholes are all illegal. This is not necessarily the case, Congress specifically includes some tax loopholes to incentivize certain activities such as investing. Such contemporaneous tax loopholes are not the target of this software. Rather, the software seeks tax loopholes fabricated by lawyers and accountants that provide overly generous tax breaks not originally intended. Furthermore, the goal is to have the AI software identify loopholes before lawyers and accountants can take advantage of them. The biggest question regarding this software is what are the implication for average tax payers? There will likely be no effect on everyday taxpayers, because individuals abusing these loopholes are at the upper level of the income distribution. Put simply, the majority of taxpayers will never know about these creative tax loopholes. While the software is intriguing, I personally believe it may not have as big of an impact as expected. There’s an underlying principal-agent problem that could hinder the effectiveness of this software. Specifically, the same individuals we elect to hold positions of power, are also the same individuals who benefit from these creative tax loopholes (irrespective of political party). Therefore, it will be interesting to see what impact this software has in the future. 

Article: https://finance.yahoo.com/video/ai-almost-game-changing-potential-205004615.html

The world’s peak population may be smaller than expected

 Big families are not hard to find in Nigeria. With the growing discussion of “overpopulation” as an environmental economic problem, African countries are often looked upon as a place where there are too many people being born, and there are not enough resources to allow for everyone to live a fair life with food, water, education, housing, employment, etc. The UN predicts that the current 1.2 billion population in Africa will grow to 3.4 billion by 2100. Some predict that Africa will undergo the same fertility changes that happened in China in the early 2000’s when the one-child policy was introduced. For Nigeria, which has Africa’s biggest population numbering about 213m people, the UN has reduced its forecast for 2060 by more than 100m people (down to around 429m). By 2100 it expects the country to have about 550m people, more than 350m fewer than it was reckoned a decade ago.

The topic of overpopulation, for me, correlates with the topics that we have been learning in class about socialism. In socialism, there are resources in the economy that are not always efficiently allocated, and shortages happen often due to there not being enough resources allocated. In terms of overpopulation we have the same thing going on. Some places on Earth are too populated and those places probably don't have enough resources to hold more and more people which will cause shortages and a lower quality of life in those places. In my opinion, overpopulation can be solved by limiting birth rates in some parts of the world, and encouraging it in others. The world can handle a larger population. Africa might not be able to do this.

https://www.economist.com/middle-east-and-africa/2023/04/05/the-worlds-peak-population-may-be-smaller-than-expected