US Consumers are Feeling the Pain.
Recession talks, hardship withdrawals, and Oil price conundrum.
GM friends and investors.
Jack Dorsey, founder, and ex-CEO of Twitter, just backed a bitcoin mining company called Gridless with his company Block (formerly Square).
His goal is to bring $0.25 electricity to rural Africa using the natural resources available in the area.
It’s nice to see some positive use cases for cryptocurrency in the midst of all the muck.
Highlights:
Good news = Bad news
Jamie Dimon’s Prediction
Down on Hard Times
S&P 500
Stocks took a dive this week after some good news.
Why?
Good news = Bad news
Positive economic data has investors worried that the fed might keep raising interest rates longer than we expect.
After a better-than-expected jobs report, the fed can clearly see that the economy is not cooling down as it had hoped.
The bottom line:
More jobs → Higher wages → More spending → Higher inflation.
This is exactly what the fed is trying to avoid with its one tool: The federal funds rate.
Economic Unrest
Jamie Dimon, CEO of JPMorgan Chase, says that the US will plunge into a recession in 2023.
According to JPMorgan Chase, Americans are spending 10% more this year and have 1.5T left over from the stimulus package.
By next year, he predicts that all this excess money will dry up and become eroded by inflation.
He’s not alone in his feelings, either.
Banks give what we call “leading indicators.”
How?
Millions across the country use their cards, accounts, and services
Giving us the inside scoop on the economy.
Wells Fargo CEO - “There is a slow down happening. There’s no question about it. We are expecting a fairly week economy through the entire year.”
Bank of America CEO - “ The rate of growth is slowing.”
Bottom Line:
Big banks can see trends before the general public.
These trends suggest that American consumers are cutting back on spending as the fed boosts rates.
Global Impacts
The world’s most powerful group of oil producers is sticking to their plans of slashing production.
The OPEC+ (Organisation of Petroleum Exporting Countries) agreed to move forward with reducing oil production this week.
The group will reduce production by 2M barrels per day or about 2% of the world’s demand.
The Cuts will happen despite pleas from the US to pump more oil and help lower fuel costs.
China is not looking so hot.
Us manufacturing orders in China are down 40%.
Why?
A bad mix of covid lockdowns in China and economic troubles and trade tensions between the west and China.
Chinese factories are being forced to shut down two weeks earlier than usual for the Chinese lunar new year.
The situation is being called an “unrepenting demand collapse.”
Down on Hard Times
The US hardship withdrawals hit a record high.
What does that mean?
A hardship withdrawal is an elective decision made by an account holder due to an immediate financial need.
Inflation has led to prices of everything rising at historic rates, and US consumers are feeling the pain.
Withdrawing retirement savings is typically seen as a last resort for households that are really hurting.
Roughly 25,000 workers took one of these payments.
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