Currently mortgage rates are sitting at an all time high. We haven’t seen these rates since 2001 and everything else still flashing major recession vibes (even though the government doesn’t want to say we are in one we are in fact in a recession it’s just a rather odd one we never really have seen before) The fed today once again decided to pause interest rate hikes but also threw out a number of other key indicators for the economy. Let’s take a bit of a deeper look into the decision on rate hikes and what this could mean for the rest of the year.
One of the most pressing factors at the moment is inflation. While down from it’s all time high of 9% it’s still far out of control from the targeted 2% The last CPI report to come in showed us a 3.7% still nearly double what it should be on max. It also showed us that it increased by nearly 1% month over month.
Here’s the big kicker about inflation. It doesn’t go back down. That 9% + what you’re getting now are being injected into every day prices to skyrocketing levels to pay for food, shelter and fuel.
If we look year over year we can see food is at an all time high on the inflation list coming in at nearly 8% total.
Next on that list car insurance now up 17% year over year for every day payers. That means a $100 insurance plan before now costs you $117 a month.
Rent aka shelter is back up to nearly 8%
Gas up over 10% month over month.
Again I’m going to state this as I always do in these articles. The CPI report you see that comes out does not include Food, Housing or Fuel. Of which above we can see some of the highest inflation numbers around! These are not counted because they are deemed necessary to live. Tell me how that makes sense lol you gotta love politics, but lucky for us in today's world we have the ability to access more information and share more REAL data and information over news and government. So if you’re still sitting there watching the news and thinking the government has you in your best interest it’s time to wake up!
The core area we are currently seeing inflation happen and keep happening in housing. This housing inflation hits in a weird way. Housing and rent prices have slowed down however mortgage payments are up a whopping 19% year over year.
One big factor that we continue to hear on this is that inventory is low which is causing prices to continue to climb. But it also stems from high mortgage rates in which current home owners simply don’t want to sell just to take on a far more expensive mortgage and would rather sit still for the next few years until things cool off.
Another big indicator of inflation at the moment is the car market. Honestly me personally I’ll never get a new car until this one breaks down and falls apart into nothingness and I honestly don’t see that happening in my lifetime as crazy as that might sound. That work from home thing saves a boatload of money on gas and expensive cars.
Car inflation has shockingly been massive however that looks like it’s possibly about to shift or already has.
For example Tesla Model X prices started at $120,000 at the start of the year and now are under $80,000 a $40,000 price reduction in just 9 months.
Inventory on cars is also expected to rise over the next year finally beating out demand and to be fair I blame a lot of this on the cash injections and lock down of which we are feeling the pain of. The good thing is that lasted two years and we in 2024 will be coming out of that 2 year period of lock downs. I expect the tail end of 2024 and into 2025 to be a rather promising one minus total world war being thrown at us.
Based on all of that data above it seems like we are coming over the hill and that within the next few months inflation will start falling across the board. With higher inventory and lesser demand prices should start to fall and with that inflation to fall with it.
This puts the FED in a spot where rate hikes moving forward will be small or might not even happen. Granted nothing else crazy happens but with the 2024 election coming up we all know that just sparks crazy!
Also fed rates will remain up for a long period of time. In fact it’s currently speculated that we wont see a fed reduction rate until this time next year at the earliest.
Since the second world war inflation has been a tracked measure in the USA we have data on. In every case of a spike in inflation it came back down but only then reappeared at a sharp and drastic measure. So far we are only just now coming off what was the highest at 9% but if history should repeat itself it means people will start to feel ok about things rolling into next year start spending and then BAM inflation skyrockets to 9% again or worse ushering in that dreaded recession.
Another indicator is the inverted yield curve which is also used to predict hard times coming. With our current DEEP inversion that lasted for over 150 days and just coming back now it means a recession would likely happen in summer of 2024.
What further strengths this is the fact that many people are still over spending, increasing their debts. Overall that means less spending, more trying to pay off debts and less money flowing around which bingo triggers your hard recession.
Now all of this is really anyone's guess so honestly just prepare for the worst. Build income streams, investments that pay out and are safe and other assets and do your best to stay on top of the game. That’s now easier than ever with crypto, web3 and awesome tools at your disposal.
*This article is not financial advice and is for entertainment purposes only.
