Inflationary Expectations of the United States after a Bankruptcy and the Silicon Valley Bank Collision: A Closer Look
The recent banking crisis and looming credit crunch appear to be worrying households in the United States. The Fed reported that “perceptions of credit access compared to a year ago deteriorated in March.” The share of households that said it is harder to get credit than a year ago was at an all time high.
In March, the collapse of Silicon Valley Bank roiled the banking sector, escalating fears of a credit crisis. The action taken by the Federal Reserve and the Treasury Department appears to have alleviated some of the fears of further collapses, but economists think that tighter credit standards may follow, making it difficult for businesses and consumers to borrow money and keep up with inflation.
Inflation expectations for the year ahead have increased by half a percentage point to 4.7%, the survey found. That marks the first increase since October 2022.
The inflation expectations of the Fed are closely monitored. If the expectations are higher, the concern is that more people will bargain for higher wages to counteract the losses in purchasing power, and businesses will pass along higher expenses in the form of price increases.
Premarket Stocks Trading: What It Means for Stock Markets, and How It Affects the Core Inflation and Corporate Earnings
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“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,” said McBride. We need a moderation in prices of goods and services across a broad range of categories that make up the majority of a household’s budget.
Last month’s reading showed an increase in prices between January and February, which doesn’t “inspire confidence that 2% is just around the corner,” said McBride.
The economists forecast a 0.4% monthly increase in the Consumer Price Index, which would keep up with the year-over-year averages.
Greg Bassuk, CEO at AXS Investments said that elevated prices have the potential to spark another Fed rate hike in May. Even the slow economy is being weighed down by the banking system debacle.
What it means for markets: Between inflation data and the start to the first-quarter corporate earnings season (three of the largest US banks, JPMorgan Chase, Wells Fargo and Citigroup report this Friday), this week is set up for heightened stock volatility, said Terry Sandven, chief equity strategist at US Bank Wealth Management.
“Persistent inflation, rising interest rates and uncertainty over the pace of earnings growth in 2023 remain headwinds to advancing equity prices. He said each will be focused this week.
Retail traders continued to be net buyers of equities in March. Main Street traders are buying the majority of new stock in the US.
The retail investor’s power has gone up since the beginning of the PAIN because of easier access to trading platforms, and more market education. Large companies have started to change their investor relations strategies to be more friendly to retail investors. Now even the ‘smart money’ traders are using Reddit for stock tips.
Where are they investing? The strongest buying interest is in the Financial sector. There were macroeconomic catalysts in March, such as the collapse of Silicon Valley Bank.
Source: https://www.cnn.com/2023/04/11/investing/premarket-stocks-trading/index.html
An Empirical Study of the US Labor Market and Implications for the Economic Recovery and the Rate of Unemployment in the Next Three Years
The survey found that respondents were less optimistic about the US labor market than they had been in the previous months. The New York Fed found that the chances that the US unemployment rate will go up in one year rose by 1.3 percentage points.