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Impressive Economic Growth in the US Despite Challenges

Avatar photo Jeah Lorraine Adams on December 4, 2023

A Surprisingly Strong Quarter

In a testament to the resilience of the American economy, the United States experienced an unexpectedly robust expansion in the third quarter. This growth was particularly impressive considering that interest rates had reached their highest levels in 22 years. The Commerce Department’s report revealed that the Gross Domestic Product (GDP), which measures the total value of all goods and services produced within the country, surged at an annualized rate of 4.9%. This not only exceeded expectations but also outperformed the 2.1% growth seen in the preceding quarter.

Consumer Spending as the Driving Force

The driving force behind this extraordinary economic performance was the unwavering commitment of American consumers. During the July-through-September period, consumer spending soared, increasing at an annualized rate of 4%. This marked the most significant surge in spending since the conclusion of 2021 and encompassed expenditures on both goods and services.

Defying Recession Predictions

This outstanding growth narrative defied earlier predictions that the US economy would slip into a recession, particularly in the aftermath of the spring banking crisis. Not only did a recession not materialize, but the American economy displayed a remarkable capacity to adapt and grow. This serves as a clear testament to the resilience of American consumers and various sectors within the economy.

Housing Market Contributing to Growth

One noteworthy aspect of this economic resurgence was the role played by residential fixed investment. This component, which reflects the state of the housing market, advanced at a substantial 3.9% annualized rate in the third quarter. Significantly, this was the first time in more than two years that this particular segment contributed positively to the overall economic growth.

Economic Challenges on the Horizon

Despite the current impressive economic growth, there are several challenges looming on the horizon. These include the specter of soaring bond yields and the resumption of student loan repayments, both of which have the potential to impact economic growth in the coming quarters.

Implications for the Federal Reserve

The Federal Reserve has been actively raising interest rates to combat inflation, with 11 rate hikes initiated since March 2022. Although the possibility of a 12th rate hike, perhaps in December, remains on the table, the remarkable resilience of the US economy suggests that higher interest rates may persist for a longer duration. This could have significant implications for both financial markets and the broader economy.

Decline in Business Spending

It’s worth noting that, amidst the overall economic growth, business spending, commonly referred to as nonresidential fixed investment, experienced a slight decline of 0.1% in the third quarter. This contrasts with the robust consumer spending and the contribution of the housing market to economic expansion.

Navigating Market Sentiment: Speculation Surrounding Fed’s Potential Rate Cuts

Avatar photo Alice Blake on December 4, 2023

In the intricate web of financial markets, a pervasive sentiment has taken hold, suggesting that the Federal Reserve might embark on a trajectory of aggressive interest rate cuts. This speculative outlook has gained momentum, fueled by optimistic interpretations of the most recent positive economic data.

Assessing the Economic Landscape

Traders and investors alike have responded with enthusiasm to indications that both consumer and wholesale inflation rates have experienced significant easing from their mid-2022 peaks. Notably, the CME Group’s FedWatch gauge has become a focal point, hinting at a potential full percentage point of cuts by the end of 2024.

Analyzing Economic Data

Amidst this optimism, a prudent approach is warranted. Lou Crandall, Chief Economist at Wrightson ICAP, provides a sobering perspective, highlighting that the case for aggressive rate cuts is not conclusively made. Recent reports from the Labor Department, indicating unchanged consumer prices in October and a half-percent decline in wholesale prices, add complexity to the narrative.

Fed’s Perspective and Challenges

The Federal Reserve’s destination extends beyond a mere attainment of a 2% annual inflation goal. Fed Chair Jerome Powell has consistently emphasized the importance of data-driven decisions and the necessity for convincing evidence of sustained progress towards their objectives.

Divergence Between Market Expectations and Fed’s Approach

In a striking dichotomy, while market participants anticipate a series of rate cuts, Fed officials appear to exercise caution. Futures pricing suggests a more aggressive rate-cutting scenario than the projections laid out in September, prompting questions about the Federal Reserve’s strategy in the coming months.

Implications and Risks

The market’s prevailing enthusiasm revolves around the anticipation of rate cuts and the aspiration for a “soft landing” for the economy. However, historical patterns suggest that aggressive easing typically accompanies economic downturns, presenting a challenge in reconciling these two divergent expectations.

Fed’s Delicate Balancing Act

In the face of these complexities, Fed officials, acutely aware of the challenges ahead, are hesitant to express overconfidence. The recent drop in Treasury yields and the easing of financial conditions introduce additional layers of intricacy. Achieving equilibrium between the desire for higher rates and mitigating potential economic risks demands a delicate and nuanced calculus.

Market Reaction and Future Outlook

As markets eagerly await the Federal Reserve’s next policy meeting, the growing chasm between market sentiment and the Fed’s cautious approach becomes increasingly apparent. The reaction to the forthcoming meeting, coupled with the evolving economic landscape, will undoubtedly shape the trajectory of financial markets in the near future.

Surge in Mortgage Demand Indicates Growing Interest Amidst Lower Rates

Avatar photo Alice Blake on December 4, 2023

In a significant turn of events, the demand for mortgages has experienced a remarkable surge, reaching its zenith in a span of five weeks. This noteworthy development has been spurred by a pronounced dip in interest rates, prompting both current homeowners and potential homebuyers to make their strategic moves, albeit at a measured and calculated pace.

Mortgage Demand on the Rise:

According to the latest data from the Mortgage Bankers Association’s seasonally adjusted index, there has been a notable 2.8% uptick in mortgage demand over the past week, marking the second consecutive week of gains. This positive trajectory follows a sharp decline in the previous week, showcasing a resilient response to the evolving interest rate landscape.

Stable Interest Rates Fueling Momentum:

Despite a midweek dip in Treasury rates, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) remained steadfast at 7.61%. Notably, points decreased slightly to 0.67 from 0.69, inclusive of the origination fee, for loans with a 20% down payment. This stability in interest rates amid fluctuating market conditions underscores the robustness of the current mortgage landscape.

Refinancing Trends and Homebuying Activity:

Refinancing applications experienced a commendable 2% uptick for the week, signaling a 7% increase compared to the same week a year ago. However, the allure of refinancing is somewhat tempered by the fact that current mortgage rates do not significantly differ from those of November last year. The legacy of record low rates during the initial years of the Covid-19 pandemic continues to provide many borrowers with substantially lower interest rates, creating a nuanced landscape for financial decision-making.

On the other hand, applications for mortgages to purchase homes saw a noteworthy 3% increase from the previous week. Despite this positive momentum, they still lag by 12% compared to the same week last year. Lower rates offer some relief, yet the formidable challenges of escalating home prices and a persistent shortage of homes remain substantial obstacles for prospective buyers.

Expert Insights:

Joel Kan, MBA’s vice president and deputy chief economist, shed light on the situation, stating, “Both purchase and refinance applications increased to the highest weekly pace in five weeks but remain at very low levels. Despite the recent downward trend, mortgage rates at current levels are still posing challenges for many prospective homebuyers and current homeowners.” Kan’s nuanced perspective underscores the intricacies involved in navigating the current real estate landscape.

Market Influences:

The recent decline in mortgage rates is attributed to a significant bond market rally, sparked by a monthly inflation report that came in lower than analysts had predicted. This development highlights the interconnectedness of economic indicators and their profound impact on the mortgage landscape, showcasing the delicate balance that defines market dynamics.

Takeaway:

In conclusion, the recent surge in mortgage demand, fueled by a conducive interest rate environment, serves as a testament to the resilience of the real estate market. However, challenges persist, with affordability concerns and a constrained housing supply tempering the overall growth. As the market continues to navigate these dynamics, stakeholders remain attuned to the ever-shifting currents of mortgage trends, positioning themselves strategically in this dynamic and evolving landscape.

McDonald’s Strong Performance: Beating Expectations in a Challenging Market

Avatar photo Brandon Foster on December 4, 2023

In a constantly evolving marketplace, McDonald’s has demonstrated its capacity to not only weather challenges but to thrive. The fast-food giant has recently reported its quarterly earnings, and the results have not just met but exceeded analysts’ expectations. Despite facing headwinds like falling foot traffic in its U.S. restaurants and the steady rise in operating costs, McDonald’s has not only maintained its foothold but solidified its position. In this article, we will delve into the intricacies of McDonald’s recent performance, explore how the company achieved this exceptional feat, and contemplate the implications for the company’s future endeavors.

The Financial Report: A Closer Look

Remarkable Revenue Growth:

The standout performance of McDonald’s in the latest financial quarter was the substantial surge in revenue. The company recorded a jaw-dropping 14% increase in revenue, reaching an impressive $6.69 billion. This figure substantially exceeded the expected revenue of $6.58 billion. The scale of this revenue growth reflects McDonald’s adaptability and unwavering commitment to excellence in a competitive market.

Earnings per Share: An Impressive Figure

In terms of earnings per share, McDonald’s achieved $3.19, when adjusted, which surpassed the expected $3 per share. This substantial outperformance is a testament to the robust financial position of the company. It illustrates the company’s ability to not only meet but exceed market expectations.

Consumer Perception: A Valued Brand

While increased menu prices were a reality in certain regions, McDonald’s managed to maintain its reputation as a value-driven and affordable option in the eyes of consumers. This resilient consumer perception stands as a testament to the strength of the brand and its ability to navigate cost pressures without alienating its customer base.

Same-Store Sales Growth: Surpassing Expectations

Global same-store sales growth, a key indicator of a company’s health, skyrocketed by an astonishing 8.8% during the quarter. This not only outperformed but exceeded StreetAccount estimates, which predicted a growth rate of 7.8%. McDonald’s is proving its mettle in the global fast-food arena, solidifying its presence and reaffirming its status as a leading industry player.

U.S. Same-Store Sales: Strategic Pricing

Within the U.S., same-store sales surged by 8.1%, a result attributed to strategic price increases and the success of well-executed marketing campaigns. The company projects a further increase in pricing, to the tune of about 10% in 2023. This projection underscores McDonald’s confidence in its ability to sustain the impressive sales growth it has achieved.

Market Share Gain: A Significant Achievement

Although U.S. foot traffic experienced a decline, McDonald’s succeeded in gaining market share among middle- and high-income consumers. This points to a strategic pivot among these consumer segments, as they opt for McDonald’s over costlier dining alternatives, underscoring the brand’s appeal and value proposition.

Future Market Expansion: Capitalizing on Wage Hikes

McDonald’s anticipates further expansion in the lucrative California market as the minimum wage for fast-food workers is set to increase to $20 per hour. This anticipated wage hike positions McDonald’s advantageously in the region, indicating its potential to not only endure but to thrive in a challenging economic environment.

International Success: A Global Triumph

McDonald’s international markets division reported a remarkable same-store sales growth of 8.3%. This success is a testament to the strong demand in regions such as the United Kingdom, Germany, and Canada, reinforcing the brand’s global appeal and adaptability.

Global Expansion: Seizing Opportunities

Even in regions grappling with higher inflation, the international developmental licensed markets segment, which includes China and Japan, experienced an extraordinary same-store sales growth of 10.5%. McDonald’s achieved this accomplishment in China by strategically promoting its burger deals, demonstrating its ability to creatively boost sales, even in challenging economic climates.

Future Plans: Strategic Vision

The company is poised to offer an investor update on December 6 in Chicago. During this event, McDonald’s is set to unveil additional details about its accelerated development plans, providing insights into the company’s strategic vision for the future. This commitment to transparency and forward-thinking demonstrates McDonald’s focus on continuous innovation and long-term sustainability.

A Testimony to Resilience and Excellence

In a world of shifting markets and consumer preferences, McDonald’s has managed not only to endure but to excel. Its extraordinary ability to maintain a positive consumer perception, capture market share, and adapt to changing market dynamics underlines its resilience. As the company continues to innovate and expand its global footprint, it stands as a significant and enduring player in the fast-food industry, showcasing its dedication to excellence and a commitment to staying ahead of the curve.

Asian Stock Market Declines Ahead of Fed Chair Powell’s Speech: Impact on Global Economy

Avatar photo Scarlet Logan on September 5, 2023

Nikkei 225, S&P/ASX 200, Hang Seng, and More Experience Losses Amidst Wall Street Slump and Mixed Economic Signals”

In the realm of global financial markets, a prevailing sense of caution looms as Asian shares encountered a downtrend on the cusp of a significant address by U.S. Federal Reserve Chairman, Jerome Powell. The backdrop to this scenario is the aftermath of a notable Wall Street setback, propelled by Nvidia’s stellar profit report, and a medley of ambiguous indicators relating to the U.S. economy.

Read also: Female entrepreneurs are on the rise in 2023: 7 businesses you can delve into

The Situation in Asian Markets

Amidst this financial landscape, the benchmark Nikkei 225 of Japan grappled with a notable 1.8% descent, reaching 31,713.24 points in morning trading. Similarly, Australia’s S&P/ASX 200 experienced a dip of nearly 1.0%, positioning itself at 7,111.60. Meanwhile, South Korea’s Kospi bore a 0.6% loss at 2,522.09, and Hong Kong’s Hang Seng slipped by 1.0%, stabilizing at 18,035.97. In the realm of the Shanghai Composite, a marginal 0.3% retreat saw it at 3,073.25.

Zooming in on Japan, the trajectory of inflation in Tokyo exhibited a moderation to 2.9% in August, in contrast to the previous year. This transition is largely attributed to diminished energy costs, as revealed by government data. A closer inspection, excluding the volatility of fresh food prices, indicated a 2.8% rise from the preceding year. This marks a moderation in gains, a phenomenon observed for the first time in two months.

Although the intensity of inflationary pressures seems to be gradually subsiding in Japan, energy prices are finding stabilization. However, it’s noteworthy that the metric gauging prices still stands above the 2% target established by the Bank of Japan.

Powell and the Market’s Progress

Front and center on the minds of regional investors lies the impending discourse by Jerome Powell, the chairperson of the U.S. Federal Reserve. This dialogue, scheduled in Jackson Hole, Wyoming, carries the weight of historical policy proclamations. The outcome of this address holds the potential to shape the trajectory of global economic dynamics.

Reflecting on the transatlantic context, the S&P 500 registered a significant 1.3% downturn, marking its most substantial decline in three weeks. This setback substantially eroded the week’s gains, which had hitherto provided a glimmer of positivity amidst the turbulence characterizing the month of August. Notably, the Dow Jones Industrial Average receded by 373 points, approximating a 1.1% decline. A more substantial retreat was witnessed in the Nasdaq composite, which recorded a 1.9% tumble.

The underlying cause of this equity slump stems from the stabilization of Treasury yields, a phenomenon following a prior day’s descent. The surge in bond market yields has exerted pressure, reducing investor enthusiasm for equities and other high-risk assets. This situation poses a significant ‘wait-and-watch’ conundrum, contingent on Powell’s forthcoming discourse.

10-Year Treasury Yield

The yield on the 10-year Treasury stood at 4.23%, a marginal increase from the preceding 4.20%. Notably, this metric had edged down from 4.33% the previous day, hovering in proximity to levels last witnessed in 2007.

The dynamics of yields demonstrated a degree of traction, underpinned by mixed signals emerging from the U.S. economy. While one report indicated a reduction in applications for unemployment benefits, another painted a picture of subdued orders for durable manufactured goods in the prior month, an outcome diverging from economist predictions.

The current juncture sees a peculiar favoring of weaker-than-anticipated economic signals within financial markets. Despite steering clear of a long-predicted economic downturn, the apprehension lingers that the robustness of the economy might perpetuate inflationary pressures.

A pertinent dimension of this scenario pertains to the strategies of the U.S. Federal Reserve. In a bid to quell the flames of inflation, the central bank has already elevated its main interest rate to levels last witnessed in 2001. This approach aims to temper inflation by impeding economic momentum and casting a pall on investment prices.

Watered-Down Optimism

Initial hope had taken root that July’s interest rate escalation would represent the culmination of a cycle, especially considering the substantial cooling of inflation since its zenith above 9% in the previous summer. Additionally, traders had begun speculating about a prospective commencement of rate cuts in early 2024. However, this optimism has been tempered by a sequence of economic reports that exceeded expectations.

A case in point is the two-year Treasury yield, closely intertwined with expectations of Federal Reserve policy. This metric ascended to 5.01%, an ascension catalyzed by reports suggesting a cooling of U.S. business activity in August.

Within this intricate mosaic, John Vail, Chief Global Strategist at Nikko Asset Management, speculates that Powell’s discourse might lack the vigor associated with steadfast rate elevation. Vail’s reasoning emerges from the context of an unexpected economic slowdown.

Vail opines, “Powell is likely to express concerns about the lingering pace of inflation decline, and it would be judicious for the market to not anticipate rate cuts at least until the initial portion of 2024.”

Other Stocks

In the backdrop of Thursday’s equity vulnerability, it’s worth noting that Nvidia, a formidable player on Wall Street, reported profits that surpassed expectations by a significant margin. This robust performance has kindled optimism that the recent frenzy surrounding artificial intelligence technology could be grounded in substantial substance rather than mere speculation.

Nvidia had already stunned the market three months prior with its prediction of soaring revenues in a three-month span culminating in July, propelled by rapid AI adoption. The actual sales figures turned out even more impressive, at a staggering $12.51 billion. Furthermore, the company’s projection for the current quarter surpassed Wall Street estimates by a significant margin.

As the financial narrative unfolds, the S&P 500 navigated a decline of 59.70 points, setting its position at 4,376.31. The Dow Jones Industrial Average experienced a contraction of 373.56 points, culminating at 34,099.42. The Nasdaq, in a parallel trajectory, registered a plummet of 257.06 points, reaching 13,463.97.

Energy Trading

Switching to the realm of energy trading, the benchmark U.S. crude experienced an increment of 31 cents, ascending to $79.36 per barrel. Likewise, Brent crude, the international standard, notched an uptick of 30 cents, reaching $83.66 per barrel.

In currency markets, the U.S. dollar exhibited a modest appreciation, rising to 146 Japanese yen from 145.81 yen. Conversely, the euro witnessed a minor decrease, declining from $1.0819 to $1.0786.

In this intricate web of economic dynamics, the Asian stock market’s present course is poised to intersect with the insights Jerome Powell will unveil in his imminent discourse. The outcomes of this rendezvous have the potential to reverberate across global economies and financial markets, making it a moment of particular significance and anticipation.

6 Ways You Can Establish Your Business’s Presence On The Market

Avatar photo Brandon Foster on June 12, 2023

In a continually competitive business world, maintaining a strong market presence is critical for every company’s success and growth. Building a strong brand identity and increasing awareness among your target audience may have a major influence on your company’s bottom line. But, with so many global companies competing for attention, how can you effectively develop your company’s market presence? Read on as we explore six proven tactics for elevating your brand, increasing market share, and distinguishing yourself from the competition.

1. Craft a Compelling Brand Story

A captivating brand story is the foundation of your business’s presence in the market. It conveys your unique values, mission, and vision, establishing an emotional connection with your audience. Take the time to define your brand’s essence, and articulate it through engaging storytelling across your website, social media platforms, and marketing materials. This also means tracking logo design trends to create your own unique branding that will stand out from the crowd. A well-crafted brand story can differentiate you from competitors and foster loyalty among customers who resonate with your message.

2. Develop an Effective Online Presence

In today’s digital era, having a robust online presence is paramount. Start by creating a professional website that reflects your brand’s identity and provides relevant information to visitors. Enhance your website’s visibility in search engine results by implementing search engine optimization (SEO) techniques. Furthermore, create and consistently manage dynamic social media profiles on platforms that resonate with your target audience. Regularly engage with your followers by sharing valuable content, responding to comments, and participating in relevant conversations. 

Quality content should come in all forms, including images, videos, and most importantly, text across all platforms that are optimized and carefully planned.

3. Implement Effective Customer Relationship Management

Building strong relationships with your customers is essential for establishing your business’s presence in the market. Implement a robust CRM system to streamline customer interactions and ensure personalized communication. Use the CRM to gather customer data and insights, allowing you to tailor your marketing efforts and provide exceptional customer experiences. Leverage automation tools to send targeted emails, nurture leads, and track customer interactions. Prioritizing customer satisfaction and maintaining open lines of communication will help your business foster loyalty and brand advocacy.

  • Implement a CRM system to centralize customer data and interactions.
  • Utilize automation tools for targeted cmmunication and lead nurturing.
  • Personalize marketing efforts based on customer insights.
  • Focus on exceptional customer experiences to build loyalty.
  • Regularly engage with customers through personalized emails and follow-ups.

4. Leverage Content Marketing

Content marketing is a powerful tool for establishing credibility and thought leadership in your industry. Create and distribute high-quality content that addresses the pain points and interests of your target audience. This could include blog posts, videos, infographics, and podcasts. By consistently delivering valuable information and insights, you can position your business as a trusted resource and attract potential customers to your brand.

5. Leverage Influencer Marketing

Influencer marketing has become a powerful strategy for establishing your business’s presence on the market. Identify influencers in your industry who have a strong following and align with your brand values. Collaborate with them to promote your products or services through sponsored content, reviews, or endorsements. Influencers have built trust with their audience, and their recommendations can significantly impact purchasing decisions. By leveraging their reach and credibility, you can increase brand visibility and attract new customers.

  • Identify influencers in your industry who align with your brand.
  • Collaborate with influencers to create sponsored content or endorsements.
  • Leverage their reach and credibility to increase brand visibility.
  • Utilize influencer-generated content for social proof.
  • Monitor and analyze the impact of influencer campaigns to optimize results.

6. Cultivate Strategic Partnerships

Collaborating with complementary businesses can provide a significant boost to your market presence. Identify potential partners that share a similar target audience or offer products/services that align with yours. Seek opportunities to co-create content, host joint events or promotions, or even cross-promote each other’s offerings. Strategic partnerships can help you tap into new markets, expand your reach, and enhance your credibility by association.

Business Market

Establishing your business’s presence on the market is an ongoing process that requires a strategic and multifaceted approach. By crafting a compelling brand story, developing an effective online presence, leveraging content marketing, cultivating strategic partnerships, implementing effective CRM, and leveraging influencer marketing, you can elevate your brand, increase visibility, and stand out from the competition. Remember, consistency, authenticity, and a deep understanding of your target audience are key to building a strong market presence that resonates with customers and drives long-term success.

 

Inflation remains a thorn, but other problems loom

Avatar photo Jerry Cooper on April 13, 2023

Inflation — More than a year later, persistent inflation continues to be a thorn in the Federal Reserve’s shoes.

Even with the banking sector’s current predicament and investors on edge after two prominent banks failing in March, inflation remains the Fed’s top concern.

However, this week’s Consumer Price Index (CPI) could determine if the central bank will need to raise rates again in May.

The CPI is set to be announced on Wednesday at 8:30 in the morning.

The upcoming index could also affect markets as Wall Street has shifted its focus from the financial system to the economy.

Greg McBride, the chief analyst at Bankrate noted, “Inflation is no less relevant than it has been for the past two years.”

“The Consumer Price remains the most-watched monthly economic report.”

What’s happening?

According to CPI readings, inflation levels have cooled down for five consecutive months.

However, they are still close to historic highs at 6%, which is above the Federal Reserve’s goal of 2%.

The March reading showed prices increasing between January and February.

Greg McBride said the increase didn’t spur any confidence of the 2% target being around.

For March, economists projected a 0.4% monthly increase in the CPI, aligning with the September – February average, keeping year-over-year averages high.

But it has presented the question of how to make the Federal Reserve and investors happy.

McBride offer some insight, saying:

“To feel good about where inflation is headed, we need to see more than just moderation in the rate of both headline and core inflation.”

“We also need to see moderation in price pressures across a wide range of categories that are staples of the household budget: shelter, food, electricity, motor vehicle insurance, apparel, and household furnishings and operations.”

However, Greg Bassuk, the CEO of AXS Investments, noted that resiliently elevated prices could potentially lead to another Fed rate hike in May.

“That’s notwithstanding the slowing economy that has been weighed down even more heavily by the banking system debacle,” added Bassuk.

Effect on the market

According to US Bank Wealth Management chief equity strategist Terry Sandven, the week is set up for increased stock volatility, stuck between inflation data and the start of the first-quarter corporate earnings season.

Three prominent US banks are set to report this Friday, including:

  • JPMorgan Chase
  • Wells Fargo
  • Citigroup

“Persistent inflation, rising interest rates and uncertainty over the pace of earnings growth in 2023 remain headwinds to advancing equity prices,” said Sandven.

“Each will be in focus this week.”

Read also: Business Intelligence—Importance to Business’s Growth

Bank stocks

On Monday, TD Ameritrade released its March Investor Movement Index, which tracks retail investor activities.

According to the report, retail traders continued to be equities net buyers in March, which means Main Street traders are buying most of the new stock in the United States, not larger financial institutions.

The increasing power of the retail investor has been a continued trend since the onset of the pandemic, fueled by several factors like:

  • Stimulus cash
  • Easier access to trading platforms
  • Further market education

Recently, larger companies have started changing their investor relations strategies to accommodate retail investors.

Even ‘smart money’ traders have turned to Reddit for stock tips.

TD Ameritrade found  that the strongest buying interest is focused on the Financial sector, which comes despite macroeconomic catalysts in March like the collapse of Silicon Valley Bank and Credit Suisse’s emergency sale.

Lorraine Gavican-Kerr, TD Ameritrade’s managing director, said:

“March was full of surprises, but the overall impact among TD Ameritrade retail clients when it came to exposure to the markets was neutral.”

“For the second month in a row, our clients were net buyers of equities, seemingly eyeing an opportunity to buy into the Financial sector’s lows and to sell off the highs in Information Technology.”

TD Ameritrade noted that the five most popular stocks purchased were:

  • Amazon
  • Ford Motors
  • First Republic Bank
  • Rivian
  • Tesla

Meanwhile, retail investors were net sellers of:

  • Advanced Micro Devises
  • Apple
  • Intel
  • Meta
  • NVIDIA

Increased short-term inflation expectations

The Federal Reserve Bank of New York’s March Survey of Consumer Expectations was released on Monday.

It said that inflation expectations have increased at the short-term and medium-term horizons.

According to the survey, inflation expectations for 2023 have increased by half a percentage point to 4.7%, the first increase since October 2022.

The survey questions around 1,300 household heads in the United States each month.

It found that respondents were more pessimistic about the US labor market’s outlook compared to previous months.

Meanwhile, the New York Fed found that unemployment expectations increased by 1.3 percentage points, going up to 40.7%.

The recent banking crisis and looming credit crunch have raised concerns in US households.

The Federal Reserve reported that perception of credit access compared to 2022 fell in March.

The share of households saying it’s harder to obtain credit than in 2022 hit an all-time high.

IPO slowdown continues to spread in 2023

Avatar photo Jeah Lorraine Adams on April 3, 2023

…

IPO — 2022 has been a disappointing year for the economy as a whole due to unforeseen elements like inflation.

As a result, there has been a slowdown in global initial public offerings.

While there were forecasts of an economic rebound for 2023, the Federal Reserve’s continued hike rate indicates that inflation remains a problem.

Furthermore, the IPO slowdown has continued into the first quarter of the year, and it is expected to endure in the coming months.

The news

According to reports, one reason behind the IPO slowdown is that companies are waiting out the effects of the following:

  • The volatile stock markets
  • Higher interest rates
  • Inflation
  • Uncertainty around the banking crisis

On Thursday, an EY report found that 299 companies worldwide went public in the past three months, which is down 8% compared to the same period last year.

Additionally, funds raised from the listing fell by 61% year-on-year to $21.5 billion.

EY reports that the slump follows a 45% drop in IPOs in 2022.

“Through just one quarter of 2023, it was more of the same for the stuttering global IPO market,” the firm said in a released statement.

“Any initial euphoria at the start of the year was quickly dampened by the unexpected inflation and interest rate outlook, with the mood further stifled by the latest turmoil in the global banking system.”

Fears

For the past couple of months, investors have been struggling with a higher cost for living and higher interest rates.

Recently, their concerns have grown following a historic upheaval in the banking industry that led to emergency interventions for some prominent financial institutions including:

  • Credit Suisse
  • First Republic Bank
  • Signature Bank
  • Silicon Valley Bank

According to the EY report, the signs indicate that companies are holding out for the stock markets to stabilize and rebound before they list.

Read also: China is spending billions to bail out loans

The banking crisis

In early march, the United States witnessed the second largest US bank failure since the 2008 financial crisis.

Silicon Valley Bank customers quickly pulled their money out before US regulators took over.

However, the collapse created a domino effect that panicked markets and mounted up weight on weaker financial institutions that had already been struggling with the increasing interest rates.

Signature Bank followed a week later before First Republic Bank hit another crisis.

Before a major financial crisis could erupt, central banks and several major players in the industry stepped in with emergency cash to keep the banks afloat.

Regardless, markets have remained on edge.

2022 market

In late 2022, IPO research firm Renaissance Capital reported the slowest period for the IPO market last seen in 2011.

The slowdown, while disappointing, still sparked some hope and optimism that the traditional IPO market would turn around.

However, IPOs for some of the most prospective startups seemed unlikely.

For example, TikTok parent company ByteDance has a significant value, but due to the economic tensions between the US and China, a stock listing isn’t anticipated to happen soon.

Furthermore, Chinese firms could opt to go public in Asia, namely Hong Kong or Shanghai, instead of New York.

US regulators also scrutinized publicly traded Chinese companies in 2022.

For example, the SEC investigated the IPO of Didi, China’s ride hailing app.

2023 Asia market

Asia Pacific EY IPO leader Ringo Choi revealed there was a backlog of firms interested in going public.

According to Choi, there are over 800 companies in the pipeline in mainland China.

However, he also noted that firms worldwide are biding their time after getting discouraged by a lack of returns for companies that went public in the last few months.

“Most of them report a loss,” Choi said. “People start to worry [and say], ‘Well, what’s the meaning for getting an IPO?’ Why don’t they wait?”

He expects the decline to carry into the summer, but things could also turn around with several factors helping investors regain confidence, including:

  • Peaking inflation
  • Softening energy prices
  • The rebound in mainland China’s economy

Optimism

Ringo Choi believes the global market would recover in the second half of 2023 after already hitting bottom.

“We’re lying on the floor,” he said. “It’s very easy for us to have a rebound.”

He also noted that governments worldwide are trying to promote IPOs in their respective jurisdictions, which could help spark a revival.

John Lee, Hong Kong’s Chief Executive, recently traveled to Saudi Arabia, urging companies to consider listings.

“Once there is evidence of a more stable market with higher certainty, investor confidence should return,” EY wrote in its statement.

 

Apartments in Manhattan saw a drop in sales

Avatar photo Alice Blake on February 27, 2023

…

Apartment: People were alarmed by the sharp 29% decline in apartment sales in Manhattan over the fourth quarter.

Fears that the market will stall due to buyers’ and sellers’ anxiety owing to the status of the economy and interest rates have been raised by the decline.

The news

2,546 sales were made altogether in the fourth quarter, per analysis by Douglas Elliman and Miller Samuel.

Even though the numbers were good, they were 3,560 less than the year before.

The pandemic’s peak has also been the largest since its apex in the third quarter of 2020.

However, the median price did drop by 5.5%, marking the first price drop since the beginning of 2020.

Market

The real estate market in Manhattan has finally recovered from the devastating effects of the pandemic, but the drop in sales and prices raises some concerns about potential new problems in 2023.

The following factors have had a significant impact on the Manhattan real estate market and are probably going to play a role this year:

  • Rising interest rates
  • A weaker economy
  • A declining stock market

Concerns

Analysts believe a prolonged stalemate between buyers and sellers is the most significant concern.

There won’t be buyers until prices fall since sellers won’t offer while costs decline.

The CEO of Miller Samuel, an appraisal company that offers market research, is Jonathan Miller, who commented on the issue.

“I could see the market moving sideways, with some modest declines in some sectors,” said Miller.

“And it could weaken further if there is the backdrop of recession and job loss.”

Inventory

Despite declining sales and prices, inventory is still low because some sellers are stalling their listings.

After the fourth quarter, there were 6,523 units still available, according to the report.

Although there was a 5% increase, the numbers are still below the historical average of close to 8,000.

Analysts predict prices won’t decrease enough to entice buyers waiting for reductions because inventory hasn’t significantly increased.

In contrast to the third quarter’s 4.1%, according to Serhant, there was a 6.5% difference between the initial list price and the sales price.

According to Jonathan Miller, as borrowing costs increased, more Manhattan buyers chose to make all-cash acquisitions.

The deals represent the highest proportion of sales ever: 55% for the fourth quarter.

Read also: Apple and Tesla stocks drop in 4th quarter

Luxury units

Still making up the vast bulk of the market are luxury and high-end apartments.

They comprise the top 10% of the New York real estate market.

Despite a dip in the general Manhattan market, the median sales price for luxury apartments rose by 4% in the fourth quarter.

Additionally, since 2019, the median price for high-end and luxury apartments has climbed by 21%, which is twice as much as the whole market.

2023 outlook

The network of freshly formed and ongoing alliances predicts a sluggish first quarter.

According to Brown Harris Stevens, only 2,312 contracts were signed in the fourth quarter, a decrease of more than 43% from 2022.

Meanwhile, Serhant says that this quarter was the worst for signing new contracts in the last ten years.

“Contracts signed are a timelier indicator of demand and registered one of the slowest finishes to any year since 2008,” said Brown Harris Stevens.

Brokers are nonetheless optimistic, as many believe this year will deliver a pleasant surprise.

They cited the rates’ recent stabilization and shoppers’ ability to get deals in a market that is currently softening.

Deals

Due to the frequency of year-end deals, John Gomes, the Eklund Gomes team co-founder at Douglas Elliman, said December was “on fire.”

“It really caught us off guard,” said Gomes.

“Things really turned around in December.”

John Gomes claims that a shopper paid $20 million for a townhouse in Greenwich Village even though it wasn’t for sale.

Additionally, he said that a real estate investor submitted offers for particular flats in the development, which appeared to be accepted today.

Foreign influence

Gomes attributed the growth in sales in December to the influx of overseas clients, many of whom began returning to New York in December.

Travel restrictions worldwide are gradually easing, and the dollar value is somewhat starting to fall.

Brokers claim buyers returned in December, mostly from China and the Middle East.

Brokers claim that purchasers are paying cash and taking advantage of lower costs to avoid rising interest rates.

To sell any remaining apartments, developers of new apartment buildings are likewise decreasing prices.

“Developers are being realistic, they’re making concessions on price and closing costs,” said John Gomes.

“I feel optimistic about the coming year.”

Reference:

Manhattan apartment sales plunge in fourth quarter as brokers fear a frozen market

Job cuts and hiring creates headache for US market

Avatar photo Jerry Cooper on February 23, 2023

…

Job cuts – In the American market, some businesses are having trouble filling vacancies, while others are letting people go.

Many businesses have lately announced significant job cuts, including:

  • Amazon
  • Disney
  • Meta
  • Microsoft
  • Zoom

As a result, nearly 103,000 jobs were eliminated in US-based companies in January.

It is the largest employment layoffs, per a poll by the outplacement company Challenger, Gray & Christmas, to have taken place since September 2020.

However, businesses also added 517,000 new positions in January, which is more than nearly three times what analysts had predicted.

The rise in employment shows how fiercely competitive the job market is, particularly in fields like the service industry that were severely hurt by the outbreak.

The Covid legacy

Given the situation right now, it is more difficult for specialists to predict the US economy’s future course.

The strong consumer spending surprised experts, especially in light of the ongoing inflation and rising interest rates.

The most recent consumer spending is a part of the “legacy of strangeness” left by the Covid pandemic, said David Kelly, a well-known worldwide strategist.

The next nonfarm payroll will be released by the Department of Labor Statistics on March 3.

Wages

Researchers and economists warn that if wages don’t keep up with inflation, a number of factors might lead to more job cuts in other fields, including:

  • Strains on household budgets
  • High-interest rates
  • A savings drawdown

The Department of Labor Statistics recently released statistics showing that earnings for those employed in the hospitality and leisure industries rose in January.

The pay grew from $19.42 to $20.78 from the previous year.

“There’s a difference between saying the labor market is tight and the labor market is strong,” said Kelly.

Employers still have trouble attracting and keeping talent.

They face difficulties as a result of things like the requirement for staff childcare and possible rivalry from improved working conditions and salary.

Consumer impact

Consumer spending may decline if interest rates rise and inflation stays high, which might result in additional job cuts or less employment overall.

“When you lose a job, you don’t just lose a job,” said Aneta Marowska, a Jefferies chief economist. “There’s a multiplier effect.”

As a result, even if there are issues with tech corporations, less money may be spent on business trips.

If job cuts persist, consumers could be forced to rethink their spending on services and other things.

Read also: Subscription services coming to Meta, Twitter 2FA given change

A reset

Companies who hired more people during the outbreak, when remote work and e-commerce had a bigger impact on consumer and corporate spending, have since made a significant number of job cuts.

Amazon reported the loss of 18,000 jobs in late 2022, when it had 1.54 million employees, roughly twice as many as it did in 2019.

Microsoft used similar strategies and lost 10,000 jobs, or 5% of its workforce.

At the end of June the previous year, the company had 221,000 employees, a huge increase from the 144,000 prior to the virus.

The tech sector is changing from a “grow-at-all-costs” industry, according to Michael Gapen, head of US economic research at Bank of America Global Research.

Airlines

While this is happening, other businesses are growing their workforces.

In 2023, Boeing intends to add 10,000 new employees, mostly in engineering and production.

Also, the company eliminated about 2,000 corporate positions, mostly in finance and human resources.

In anticipation of an increase in orders from customers like United and Air India, Boeing is expanding to strengthen the company’s ability to construct new aircraft.

Airlines and aerospace firms suffered early in the epidemic when traffic dried up; however, they are presently working to recover.

The capacity of airlines is now limited by the number of pilots available.

Demand for food and travel increased when pandemic restrictions were removed.

A shared struggle

Businesses of all sizes would need to increase wages in order to recruit and retain personnel.

Industries that experienced customer and other corporate backlash following job losses are now working to increase employee hiring.

To entice additional workers, Walmart is increasing its minimum salary to $14 per hour.

The Miner’s Hotel in Butte, Montana raised the hourly pay for housekeepers by $1.50 as a result of the high turnover rate.

Also, as tourism rises, concessionaires and airports are recruiting more staff members.

The Phoenix Sky Harbor International Airport organizes job fairs each month and provides employees with childcare assistance.

In the same period of 2019, Austin-Bergstrom International Airport expanded by 48%.

Furthermore, it leads to better incentives like:

  • $1,000 referral bonuses
  • Signing incentives
  • Retention incentives for referred staff

Similarly, the airport facilities representatives at Austin-Bergstrom International Airport currently make $20.68 per hour, up from $16.47 in 2022.

According to Kevin Russell, the airport’s deputy talent chief, Austin has a high cost of living.

Also, Russell saw a surge in staff retention.

Nonetheless, it has proven challenging to keep some roles open since employees might be able to find higher-paying jobs elsewhere that aren’t available 24/7, such as:

  • Electricians
  • Heating-and-air conditioning technicians
  • Plumbers

Businesses must invest time in training new hires before they can ramp back up, despite how easy it is to find new personnel.

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