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Fact of the Week FEWER FUTURE TAXPAYERS – The US had 7.27 million births in the back-to-back years 2020-2021, i.e., the pandemic years. That’s the fewest number of American births in back-to-back years in 40 years. The US had 7.24 million births in 1980-1981. 30 years ago (1990-1991), the US had 8.27 million births in back-to-back years.(SOURCE: National Vital Statistics System) |
Inflation numbers are in for April with the first month over month decrease since August in 2021. Annual inflation slowed to 8.3% in April from the 41-year high 8.5% in March. The rate of inflation is a backward looking statistic showing the year over year rate of increase in prices. The largest contributor to this figure is energy, specifically gasoline soared 80.5% year over year, with new cars jumping 13.2%, and food prices increasing 9.2%. Federal Reserve Chair Jerome Powell was confirmed for his second term in the senate 80 for and 19 against. Following his confirmation Powell spoke about whether he believed the Fed could reach a soft landing, meaning that they get inflation under control without putting us into a recession or devastating the labor markets. Fed chair Powell stated, “So it will be challenging, it won’t be easy. No one here thinks that it will be easy …Nonetheless, we think there are pathways …for us to get there.”Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves CFA® – (630) 801-2217 smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Mike Cava CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Yamilet Suarez – (630) 844-8633 ysuarez@oldsecond.com
Amy Lynch – (630) 906-5478 alynch@oldsecond.com
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This week the Federal Reserve concluded its meeting that took place on Tuesday and Wednesday with the announcement of a much expected 50 Basis Point hike for the Federal Funds Rate. This rate marks the first time in over two decades that the Federal Reserve has done a 50 Basis point rate hike. In addition to the 50 Basis Point rate hike the Fed said that beginning June 1st they would start to reduce the balance sheet, which includes holdings of US Treasuries and mortgage backed securities. This would start at $47.5 Billion per month, eventually raising the cap to $95 Billion per month. During his conference Federal Reserve Chair Jerome Powell addressed inflation directly by saying, “I would like to take this opportunity to speak directly to the American people. Inflation is much too high. We understand the hardship it is causing, and we are moving expeditiously to bring it back down.”
In the News this week Twitter, a well-known public company received a bid to go private. Tesla and SpaceX CEO, Elon Musk made a bid for Twitter to take it private at $54.20 totaling a $44 billion offer price. This offer represented a 38 percent price premium over the active trading price of Twitter before Elon Musk’s 9.2% stake was announced. Musk, a harsh critic of Twitter’s censorship, stated his acquisition was because, “Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated.” There was much controversy over whether Musk could provide funding to back up his $44 billion bid, but on Monday, April 25 Twitter accepted Elon Musk’s offer.
Markets this week declined sharply following signals from Federal Reserve chair Jerome Powell of a more hawkish stance than anticipated on both Fed Funds rate hikes as well as balance sheet tightening. In an interview yesterday Fed Chair Powell in reference to a greater than 25 basis point rate hike said, “…will be on the table for the May meeting…It is appropriate, in my view, to be moving a little more quickly.” Currently the Federal Funds rate sits at 37.5 basis points (0.375%) and the balance sheets holds around $9 Trillion in assets. The balance sheet reduction is set to be $95 billion per month, $60 billion from treasuries and $35 billion from mortgage back securities. The Federal Reserve members have ranges for the Federal Funds rate ending the year between 1.5% at the lowest to 3.125% at the highest, following the projection of 6 interest rate hikes one of which has already happened at 25 basis points this would imply a nearly 50 BP increase in all but one of the remaining Fed meetings set to take place this year.
With tax deadline approaching on Monday, all 50 states ended last year running budget surpluses of at least millions of dollars. In 29 states, the surpluses surpassed $1 billion. Many states have plans to return some of that surplus to their residents through either direct payments or suspension of certain taxes. Oregon is reportedly returning as much as $850 per resident, with Georgia and Kansas planning on returning between $250-500 per resident. Minnesota has proposed giving eligible households up to $350 back and an additional $1500 for frontline workers. Wisconsin, Idaho, and Maryland also have measures to return the surplus to residents.
The Russian invasion of Ukraine continues as Russia retreats and remobilizes into more separatist controlled regions of Ukraine. Peace talks between Russian and Ukrainian representatives were expected to be conducted today via video. Refugees continue to pour out of Ukraine with little faith in the peace talks. Efforts being made by the international committee of the Red Cross are being halted. Russia denied passage to a convoy to help civilians evacuate the besieged southern city of Mariupol.
Economic Sanctions continue to be levied against Russia for its invasion of Ukraine. President Biden today announced that he will work with Congress on legislation to revoke Russia’s permanent normal trade relations. This follows the ban of Russia last week from the SWIFT payment system and serves as further sanctions to limit Russia’s ability to trade on the global economy.
Tensions continue to rise in Ukraine as Russia’s invasion continues. In a recent and drastic action Russia captured Europe’s largest nuclear power plant.
Russia now expects support from India at the UN Security council when it takes up the Russian military operation in Ukraine. Ukrainian president Zelenskyy said that sanctions imposed on Moscow are not enough and they are defending their country alone. Announced on Friday, Ukraine’s army said it was fighting invading Russian forces northwest of the capital Kyiv.
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