USA Outlook, November 07 to November 11

Weekly newsletter November 07 to November 11

November 07, 2022

November 08, 2022

What midterm elections could mean for the US economy Tuesday’s midterm elections come at a time of economic vulnerability for the United States.

Recession predictions have largely turned to “when” not “if” and inflation remains stubbornly elevated. Americans are feeling the pain of rising interest rates and are facing a winter filled with geopolitical tension.

The results of Tuesday’s election will determine the makeup of a Congressional body that holds the potential to enact policies that will fundamentally change the fiscal landscape. Here’s a look at what policy issues investors will pay particular attention to as they digest election results.

The U.S. housing market to see second biggest correction of the post-WWII era—when to expect the home price bottom

Last week, President Joe Biden suggested he may impose a windfall tax on Big Oil companies after they recorded record profits on high gas prices.

Republicans would be less likely to approve that windfall tax on oil company profits.

Homebuilders and economists alike saw the 2000s housing bubble brewing—they just didn’t think it would burst. Their reasoning being, that at the time, home prices hadn’t really fallen since the Great Depression era.

In the second quarter of this year, credit card balances saw their largest year-over-year increases in more than two decades, according to separate data from the New York Federal Reserve.

Researchers at Goldman Sachs expect U.S. home prices to decline between 5% to 10% from peak-to-trough—with their official forecast model predicting a 7.6% drop. If it comes to fruition, it’d surpass the 2.2% decline between May 1990 and April 1991. That would make this ongoing correction the second biggest home price decline of the post-World War II era.

When it's all said and done, Moody's Analytics chief economist Mark Zandi thinks this ongoing housing correction will push national housing fundamentals back in line with historic norms.

"Before prices began to decline, we were overvalued [nationally] by around 25%. Now, this means prices will normalize. Affordability will be restored. The [housing] market won't be overvalued after this process is over," Zandi says.

Source:

https://fortune.com/2022/11/07/housing-market-to-see-second-biggest-correctioncrash/

Photo: CNN News Source: https://edition.cnn.com/2022/11/08/investing/premarket-stockstrading/index.html

November 09, 2022

November 10, 2022

Biden expected to bring up Chinese economic practices, Taiwan, and Russia’s war in Ukraine in first meeting with Xi as president President Joe Biden will discuss a range of geopolitical challenges next week in his first faceto-face meeting with Chinese President Xi Jinping since he ascended to the White House two years ago. “We expect this meeting to be an in-depth and substantive conversation between the leaders aimed at better understanding one another’s priorities and intentions,” a senior Biden administration official told reporters on a call.

Photo: CNBC News

Dow closes more than 600 points lower after indecisive midterms, crypto selloff Stocks were lower on Wednesday — following recent market gains — as results of the midterm elections provided no clear answers about who would control Congress yet. A crypto selloff also weighed on markets.

The Dow Jones Industrial Average fell 646.89 points, or about 1.95%, to 32,513.94. The decline was led by Disney, which fell 13.2% after the entertainment giant missed analysts’ estimates on the top and bottom lines. The S&P 500 shed 2.08% to 3,748.57, and the Nasdaq Composite slid 2.48% to 10,353.17.

The official said that Biden will raise concerns about harmful economic practices, Chinese activity that “threatens peace and stability across the Taiwan Strait, as well as our long-standing concerns about human rights violations.”

In retaliation for Pelosi’s visit, Beijing imposed sanctions against her and launched live-fire military drills around the island. Taiwanese defense officials called the exercises “highly provocative.” Tensions between Beijing and Washington, the world’s two largest economies, had already soared to new heights under the Trump administration.

Investors were also weary ahead of the October consumer price index report due out on Thursday morning at 8:30 a.m. ET. Economists polled by Dow Jones anticipate that headline CPI grew by 7.9% from the prior year, down slightly from September’s gain of 8.2%.

“Inflation is enemy number one for the Fed, and if you see the core CPI print creep up, I believe that the market would have a negative reaction to that,” Allianz Investment Management’s Johan Grahn said.

Source: https://www.cnbc.com/2022/11/08/stock-futures-are-little-changed-as-wall-streetawaits-results-of-midterm-elections.html

Photo: ABC News Source: https://www.cnbc.com/2022/11/10/biden-to-discuss-economic-practices-taiwanand-russia-with-xi-jinping.html

November 11, 2022

Photo: CBS

Inflation eased in October as prices rose 7.7% from a year ago Consumer prices across the U.S. slowed their upward march last month, raising hopes that the fiercest inflation in 40 years may be easing. The consumer price index increased 7.7% over the 12 months ending in October, the Labor Department said Thursday — the lowest rate of inflation since January and a smaller increase than economists had expected. Core prices, which exclude volatile food and energy costs, rose 6.3%.

Rising prices for shelter, vehicle insurance, new vehicles and personal care were offset by falling prices for airline fares, apparel, used cars and trucks, and medical care. A separate report released Thursday by Adobe Analytics showed that online prices fell in October for clothing, electronics, toys, and sporting goods, but continued to rise for groceries and other essentials. Like other countries, the U.S. is struggling to control inflation, which is pressuring millions of households and dimming the outlook for the economy as the Federal Reserve keeps raising borrowing costs for businesses and consumers.

So far this year, the central bank has raised its benchmark interest rate six times in an all-out bid to cool inflation. Although monetary tightening is expected to eventually bring prices to heel, the hikes raise the risk that sharply higher borrowing rates — for mortgages, auto purchases and other high-cost expenses will tip the world's largest economy into recession.

Source: https://www.cbsnews.com/news/inflation-cpi-consumer-price-index-fell-in-october77/