- The experts and JP Morgan both warned about the fallout in real estate and that interest rates might get high.
- It later raised the gas price and also hit the consumer’s beliefs, leading to a real estate fallout.
- FEDs don’t control the year’s interest rates, but it does control overnight rates.
The Expertise Talks About the Fallout
Before JP Morgan, economic experts have already warned about a looming downturn. They talked about the recession that is about to reach in the middle half of 2023, and the time begins now.
Whereas the billionaire investor stan Drukenmiller stated that it’s just naive not to be open-minded and that something is happening.
Although inflation hit 40 years peak, the gas price was elevated, and even the consumer’s beliefs were hurt, leading down the market price by 20%.
JP Morgan has stated that ‘the easiest way for the bank to retain capital is to avoid making the next loan. He mentioned everyone should be prepared for the higher rates from here.
5 % is not enough; instead, banks should design it for six and seven percent and should be prepared for ten years of bonds.
He later mentioned people believing that FED controlled the rates of the last five-ten years. But FED doesn’t control the five or ten years rate; it can only control the overnight rates.
So when the rates are being raised overnight because there is too much liquidity in the system. It is why stock are high and Bonds spreads will be high. He stated that users could be prepared for the higher rates.
The Three Ways
The Ukraine-Russia war has made a consumer spending boom in the Fed’s attempt to hide its balance sheet, which can create an unprecedented situation. The land war of Europe has created uncertainties in the supplies of the world.
Because of the war, many unwanted things are happening and affecting the commodities of the market. Such as wheat, rice, etc.
The problem of grain shipment from Ukraine and Russia, one thyroid part of the world’s wheat. And because of it, the food price in Africa and Asia, where international groups are warning that in summer, many people might starve.
And to maintain a normal life, Americans were inspired to save up to 2 trillion. The US central bank has expanded its balance sheet to an unpreceded degree as it bought bonds to keep the interest rates low. As of it can stabilize the economy.
Where the job in the market are affecting marketing, and the jobs are tough. Even it is affecting the stock market.
It has created an economic alert, whereas the FEds officials have slowed their data hile of the last month, raising borrowing costs by 50 basis points after four months of consecutive 75 basis points have increased. The target benchmark rate is about 4.25 % to $ 4.5%.
