Nevertheless, it is also clear that markets have been “heading towards a recession”—at least in the eyes of most economists from all sides of the spectrum—many times before, and everything ended up being alright. So, before you start liquifying your current assets, it will be important to take a closer look at some of the most important financial and economic stories in the news.

Let’s take a closer look at what has been going on over the course of the past week, and how these developments might directly affect your financial well-being.

Federal Reserve Formally Raises Rates

Bounded by its “dual mandate”—to simultaneously minimize unemployment and also minimize inflation—the Federal Reserve decided to raise interest rates by half a percentage point.

While many economists and financial analysts have been expecting this decision for quite some time, the official announcement which was made last week was immediately reflected in other components of the economy.

Whenever the Federal Reserve, currently headed by Chairman Jerome Powell, decides to raise rates, the cost of borrowing will increase, which affects consumers, lenders, homebuyers, and pretty much every other participant in the broader economy. The decision was, as the Fed helped explain in its most recent meeting, fairly logical and unsurprising—unemployment is currently very low and inflation is currently very high, which is usually the prime moment for raising rates. Nevertheless, the economic fallout that results from this decision will likely be felt by nearly all Americans.

NASDAQ Experiences a Terrible Run

The NASDAQ 100—a composite index that includes some of the largest tech stocks in the United States—just completed its worst three-day run since 2020, losing more than $1.5 trillion in value in less than 72 hours.

The most dramatic drop of the tech-dominated index—which includes several multi-trillion dollar companies, like Apple, Microsoft, Amazon, Tesla, and Alphabet (Google)—occurred on Monday, which included a stunning value drop of more than 4 percent. During the most recent downturn, these stocks have collectively lost about 10 percent of their total value.

In total, the NASDAQ 100 Index has lost about 25 percent of its value since the beginning of the year, which has created a sort of snowballing effect as many high-cap investors begin looking for more stable investment options.

It wasn’t just the NASDAQ 100 that saw a sharp drop following the Fed’s announcement last week. The S&P 500 also experienced a 3.2 percent drop, pushing it below the elusive (though arbitrary) 4,000-point cut-off. Keep in mind, markets are typically overreactive to developments in the news, so it is quite possible that some of these losses will be reversed within the week.

United States Commits More Resources to Ukraine

The ongoing war in Ukraine has exhibited a few signs of a possible peace deal but, at least in most cases, continues to escalate. As part of its commitment to helping Ukraine defend itself from the Russian invasion, the United States has committed an additional round of funding to the war effort, with more support expected in the near future (pending congressional approval).

As the war rages on, the United States is contributing an estimated $100 million per day in aid, which consists of a mixture of humanitarian aid (including food) as well as military weapons. Currently, nearly $40 billion in aid is waiting to pass the House and Senate. Supporters of the aid package claim it is necessary in order for Ukraine to defend itself against a much larger force. Opponents claim the package is wasteful and might inadvertently escalate the war. Regardless, it is clear that these financing efforts will have an impact on the global economy.

Gas Prices Back on the Rise

After what appeared to be a brief period of relief, gas prices have once again jumped to record highs. As of Tuesday, May 10, gas prices across the nation are averaging $4.37 per gallon, just a little bit higher than the previous highwater mark of $4.33 which occurred on March 11.

High gas prices affect not only people who are driving but also the cost of most goods and services dependent on transportation. In addition to the ongoing conflict in Ukraine, the current high prices are also likely a result of inflation and supply restrictions introduced by OPEC.

Mortgage Rates Reach Post-Recession High

During a period when the costs of most goods and services have been on the rise, mortgage prices are no exception. According to the Federal Reserve, the average price for a 30-year fixed-rate mortgage is now sitting at 5.27 percent—the highest it has been since 2009. This also represents a significant jump from the market’s all-time low point, less than 3 percent, which occurred in the fall of last year.

Increased mortgage rates have made it significantly more expensive for prospective homeowners to purchase a home—a two percent increase for a $300,000 home can increase monthly mortgage payments by more than $500. However, due to the existence of a genuine housing shortage (and other factors), it appears that the current market is in a very different position compared to the 2007-09 housing crisis.

While none of these trends seem to be present much of a reason for optimism, there is still a lot of time for things to change before anyone should declare we are experiencing a recession. Still, be sure to follow up next week and stay tuned to the most important economic developments.

The post Market Update: May 11, 2022. Gas, Inflation & Rates On The Rise, Market Down. appeared first on CitySignal.

Of course, there are also still a few positive bits of news, as well. Let’s dive into the most important financial and economic news stories from the past week.

Americans Concerned About Pending Recession

According to a recent poll conducted by AllianzLife and published by CBS News, about 3 in 5 Americans are concerned that a new recession is “right around the corner.”

Some of the most common reasons for this concern are inflation (estimated to be around 8 percent, year over year), stagnating wages, as well as global supply chain issues. Though economists, as a whole, are a bit less confident that a recession is truly eminent, dropping consumer confidence may exacerbate existing economic problems.

Putin Threatens Unfriendly Nations with Export Limitations

Russian President Vladimir Putin announced a new decree on Tuesday, suggesting he will issue new tariffs, export blocks, and other economic roadblocks to any state he considers to be “unfriendly.”

While the final details of this block are not yet apparent, it is very likely that Putin is referring to the United States and most countries in Western Europe. As a key exporter of many of the world’s most important raw materials, the export block will likely raise prices on a wide variety of global goods.

Housing Values Continue to Rally—Despite Drop in Sales

A recent National Mortgage report indicates that, despite a widespread drop-off in sales volume, home prices are on pace to increase in value by 20 percent before the end of the year. If this current pace holds, it will end up making 2022 the most powerful year for the housing market yet. Still, the fact that existing home sales have fallen by 2.7 percent last month and new home sales have fallen by 8.6 percent might create some long-term challenges.

Gas Prices Back on The Rise

After a few weeks of mild relief, gas prices are back on the rise, jumping from about $4.13 to $4.20 per gallon of regular gas over the course of the past week. Currently, gas prices are lowest in the south-central region of the country and highest on the west coast (with most other places being somewhere in between).

Perhaps what is even more concerning than the $0.08 weekly hike in regular gas prices is the remarkable $0.29 jump that has occurred for diesel fuel. Between April 26 and May 3, according to AAA, diesel increased from $5.08 per gallon to $5.37 per gallon. Diesel is the primary fuel source for the more than 2 million delivery trucks on the road in the US, meaning the costs of shipping and consumer goods will likely increase in response.

New Considerations for Student Loan Relief

After considerable amounts of pressure from various groups—as well as considerable opposition—the Biden Administration hinted at a renewed interest in student loan relief. Thus far, there is no clear sign if and when this relief will actually be issued, but the administration has resurged a dialogue on a topic that once seemed dead in the water.

According to White House Press Secretary Jen Psaki, the relief would likely be made available to all people who hold federal student loan debt and are making less than $125,000 per year. Furthermore, Biden hinted that he would exercise executive action in order to provide the relief if Congress fails to do so on its own, an option that had previously been ruled out. According to Bloomberg, administration officials estimate the cap for the first round of relief will be set at $10,000 per borrower, though this figure is subject to change.

Window for Using Expired Work Permits is Extended

In an effort to combat a clear labor shortage across the country, “hundreds of thousands of immigrant workers will be able to continue to use their existing work permits for nearly 18 months after they expired”, said the US Citizenship and Immigration Service, as reported by Politico.

Prior to this ruling, immigrants had about one-third of this time—six months—to renew their right to work in the United States. However, in addition to the shortage of workers (especially in industries that rely heavily on immigrant labor), a 1.5 million work-permit backlog has caused a need for the CIS to relax its previous rules.

Fed Rate Decision Expected on Wednesday

The Federal Reserve is planning an extremely important meeting for Wednesday, where the Central Bank will determine what future interest rates will be. Currently, it is expected that the Fed will almost certainly increase interest rates in an attempt to mitigate widespread inflation.

Some former Fed members, including former New York Fed President Bill Dudley, are pessimistic about the Bank’s ability to limit inflation while also avoiding a recession. In a recent statement to CNN, Dudley claimed, “The chances of pulling this off are very, very low because they’ll have to push up unemployment [which may cause a recession].”

Be sure to follow up with next week’s report, where we will discuss the major actions taken by the Federal Reserve, along with other changes in global asset markets.

The post Market Update: May 4th, 2022. Pending Recession and Increased Shortages in Labor and Supply. appeared first on CitySignal.

Here are some of the most important economic and financial stories that you need to be paying attention to.

Elon Musk Locks in $44 Billion Twitter Deal

After an extensive period of back-and-forth drama—which seemed excessive even for the world of Wall Street—Twitter and multi-billionaire Elon Musk finally reached a deal that will involve him buying the entire company for $44 billion. The deal represents one of the largest hostile takeovers in history, though numerous members of Twitter’s board (including founder Jack Dorsey) have spoken positively about the deal.

Ultimately, Musk ended up paying $54.20 per share, which is approximately a 38 percent premium on Twitter’s previous stock price. On Monday, Musk made a statement, indicating “Twitter has tremendous potential—I look forward to working with the company and the community of users to unlock it.” Thus far, Musk has broadly indicated that he hopes to promote “free speech” on the platform, as well as combat the large amount of bot and automated accounts, though it is not yet clear which steps will be taken in pursuit of these broader goals.

Russia Cuts Gas to Europe

On Tuesday, Russia—amidst its ongoing war with Ukraine—decided to cut gas deliveries to two key European countries, Poland and Bulgaria. Both Poland and Bulgaria are members of the European Union and NATO, which are two key forces combatting Russia’s ongoing efforts in Ukraine.

The recent move made by Russia highlights the country’s willingness to leverage its large energy supply in order to deter any sort of intervention from its neighbors. Russia has also indicated a commitment to expanding its wartime mission all the way to Ukraine’s borders with Moldova and Romania, suggesting the war will almost certainly continue on and affect the global economy.

Small Businesses Prepare for Price Hike

According to a recent report published by Bloomberg, 4 in 10 (40 percent) of American small businesses plan to increase their prices by ten percent or more within the next few months. These price changes come during an economic period marked by the highest inflation witnessed in decades, which currently hovers around 8 percent.

Due to the way that inflation is calculated—comparing the current month to the same month the year before—most economists expect that inflation is about to level off or even decrease. However, that doesn’t mean that costs, in general, should be expected to go down. According to Janet Yellen, chairwoman of the Federal Reserve, inflation will likely persist into the near future.

China Pulls Capital Out of Africa

After years of continuous development and investment, new data suggests that China appears to be backing off of its push into various markets across the African continent. In fact, during the height of the pandemic in 2020, Bloomberg suggests that China reduced its lending across Africa by 78 percent compared to the year before—far more than it had reduced lending in any other part of the world.

Whether this move is simply a pandemic-related pullback or is evidence of a much more significant long-term shift remains yet to be seen. However, it is clear that China’s banks and other institutions are hesitant to begin resuming cash outflows to other parts of the world. 

Oil Prices Drop Below $100 per Barrel

Despite the fact that many of the world’s leading economists projected a high price hike due to the War in Ukraine—with some claiming that prices could easily break the $200 mark—it appears that global oil prices are experiencing a continual decline. As of Monday, April 25, crude oil prices are once again below the critical triple-digit mark, currently hovering around $98.

It’s important to avoid jumping to any major conclusions about where the oil market might be headed—week by week data regarding the oil market, at the very least, should be taken with a huge grain of salt. Nevertheless, a drop in oil prices might indicate that the inflation rate might be on the verge of leveling out.

Treasury Yields Exhibit Dip

According to CNBC, the 10-year US Treasury note—generally considered a benchmark for the highly active bond market—fell 8.9 basis points on Tuesday, dropping down to a rate of just 2.74 percent. 30-year Treasury notes, another important benchmark, also experienced a decline in their yields, dropping down 5.1 basis points to 2.84 percent.

All things considered, these drops are relatively small. However, they do indicate a certain level of pessimism that likely exists within the Federal Reserve, along with the general expectation that the Fed is about to raise interest rates. We’ll pay close attention to any moves the Fed decides to make, along with any other variables that might affect Treasury Yields.

Next week Zillow, Redfin, and OpenDoor will all host their earning calls next week. Recently we’ve seen a hard hit to prop-tech companies and many layoffs as a result. This week, Redfin’s stock dropped to $12.14, the second-lowest price in the last year.

The post Market Update: April 27th, 2022. Gas, Twitter Buy Out, China Exodus and More appeared first on CitySignal.

Nevertheless, there are still quite a few ongoing developments that both consumers and investors will want to actively pay attention to. As usual, there are both positive and negative signs regarding the general state of the economy.

Millions of Americans File Taxes

Following two years of COVID-related extensions, Monday was the first time in the past two years that Tax Day had returned to its usual date in the middle of April. The “end of tax season” is often a significant event that involves many people either making or receiving large payments, which eventually trickle into the broader economy.

According to the IRS, an estimated 240.2 million people were required to file some sort of taxes this year. A recent Bankrate study reveals that about 40 percent of all filers (about 100 million people) can expect a tax refund, which typically takes about six weeks to process.

World Bank Lowers Forecast for Future Economic Growth

The International Monetary Fund (IMF), one of the most important financial institutions in the world, lowered its forecast for global economic growth expected to occur in 2023. The newest rate projected by the IMF is 3.6 percent, down by 0.8 percent compared to where it was in January.

The IMF cited several reasons for issuing this relatively pessimistic adjustment. The Russian-Ukrainian conflict remains a key point of concern—in fact, the IMF believes that Ukraine’s economy will contract by 35 percent by the end of next year. Other global conflicts, supply chain issues, and general energy challenges are all likely contributing to this slow rate of global growth.

Public Activity Indicates a “Return to Normal”

A continued rise in common American activities indicates that, despite some concerns related to a new wave of Omicron-related COVID, Americans are generally resuming their normal lives. Currently, attendance at Major League Baseball games is actually higher than it was pre-pandemic, while restaurant reservations are on par with their pre-pandemic numbers and air travel has reached about 90 percent.

Speaking of air travel, many of the US’s largest airline carriers—including Southwest, American, Delta, and United—announced that masks will no longer be required for anyone wishing to fly. Whether this policy increases, decreases or has no effect on air travel remains yet to be seen.

Twitter Stock Stabilized Amid Elon Musk Saga

Following the decision of Elon Musk—generally considered to be the world’s wealthiest individual—to purchase nearly 10 percent of Twitter (for about $43 billion), the social media company’s stock experienced a sharp and immediate 20 percent increase in value. However, following this upswing (as is often the case), there was a brief period of clashing between Twitter’s board and Mush and the stock experienced a few weeks of relatively high volatility as a result.

Gradually, the Musk news has begun to die down (it currently seems unlikely he will actually sit on the Board of Directors) and Twitter’s stock has started to stabilize. Over the course of the past week, the stock has stayed within a somewhat tight 10 percent range, only fluctuating between $44 and $48 per share.

Mortgage Rates Continue to Climb

As the real estate market enters into its busiest season—in fact, the third week in April has historically been the week in which the largest number of homes will sell—many aspiring homeowners are finding themselves facing considerably higher interest rates.

Last week, the average rate for a 30-year fixed-rate mortgage jumped 13 basis points, topping out at 5.27 percent. Other common national mortgages, including the 15-year mortgage and adjustable-rate mortgages, also experienced an increase in national rates. With the Federal Reserve hinting at the likelihood of raising interest rates up to six more times this year, these rates can be expected to increase even further.

Major Indexes Post Weekly Gains

Despite the wave of generally pessimistic financial news last week, the American stock market appears to still be humming along. Both the S&P 500 and the Dow Jones Industrial Average—the two most closely watched indexes in the stock market—posted net gains last week, with relatively limited volatility.

Of course, one week should never be considered a full snap chat of the stock market (especially when that week was tax week)—but even still, the recent positive movement of the stock market can give investors a least a little bit of room for hope.

Unemployment Remains Low—but So Do Wages

Right now, the federal unemployment rate sits at 3.6 percent, finally reaching the rate it was before the pandemic-related spike to 14.7 percent. However, despite low unemployment, inflation (about 8.5 percent) has been significantly outpacing average wage growth, which has averaged just below 3 percent over the past decade. This means that, though they are working, most American households are actively losing spending power.

Clearly, despite the somewhat stable week we just completed, there is a lot of economic and financial news you’ll want to be paying attention to. We’ll keep you updated with each of these important developments, along with the most important news stories that occur each week.

The post Market Update: April 20, 2022. Twitter, Taxes and More appeared first on CitySignal.

The good news is that unemployment is very low—in fact, last week experienced the lowest level of new unemployment filings of the past decade. However, global conflict, limited resources, and extremely high levels of inflation continue to weigh down the broader economy.

Whether you’re an investor, a consumer, or anyone else, here are the most relevant economic news stories from last week:

Inflation Hits Four-Decade High

Following the newest report from the United States Labor Department, inflation has now reached 8.5 percent—the highest it has been in the past four decades. This generally concerning figure means that, on average, something that costs $100 one year ago would currently cost about $108.50. With the average American household experiencing pay increases that are lower than the rate of inflation, this means the national spending power has decreased.

Not all components of the Consumer Price Index (a “basket of goods” used to roughly gauge consumer inflation) have changed equally. Electricity, gasoline, and both used and new cars have all increased at an even higher rate. Gas prices have dropped from their recent highwater mark of $4.32, though the current national average price of $4.09 is still creating financial challenges for many households. 

DOW Remains In 34,000 Point Range

One component of our economy that has remained (surprisingly) stable has been the stock market. Ever since the Dow Jones Industrial Average eclipsed the 34,000-point mark, which occurred on March 16th, the Index has remained within the 34,000-point range on all but two days.

This means that, over the course of the last month, the DOW has experienced only about 3 percent variation between its highest point and its lowest point. Usually, this level of index price stability only occurs when there is limited change in the broader economy—the status quo is, therefore, an anomaly. This has led some speculators to predict that a near-term price breakout is likely to occur, though it is unclear whether a bearish or bullish run will be more likely.

National Push for Unionization Continues

Amidst this wave of relatively high economic turmoil, the American Labor Movement is making a variety of unprecedented moves. Two of the nation’s large corporations that have recently experienced a push for the unionization of their workers include Amazon and Starbucks.

The National Labor Relations Board (NLRB) has reported the successful creation of several unions within Starbucks locations across the country, with many of the votes for unionizing being unanimously (or near-unanimously) in favor. Generally, those in favor of unionizing are asking for better pay, higher benefits, and increased transparency from the company’s corporate offices. The votes taking place at Amazon workplaces have typically been quite a bit closer than they were at Starbucks, though Chris Smalls—one of Amazon’s key organizers—describes the process as a “marathon, not a sprint.”

Europe Braces for Exceptionally High Prices

Inflation has recently been a global issue affecting nearly every national economy, not just the United States. In the European Union, inflation reached a recent annualized rate of 7.5 percent—the highest it has been since the introduction of the Euro as a continental currency.

Much of Europe’s economic woes are tied to the ongoing conflict between Russia and Ukraine, the two geographically largest countries in the continent that are also important resource providers. While most of Europe is unapologetically aligned with Ukraine in this conflict, the continuation of price hikes has caused quite a bit of unrest.

High prices in Europe are also beginning to be reflected at the polls, with both left-wing and right-wing populists faring better than usual in many countries. In France, the first round of presidential elections saw incumbent president Macron (center-left) narrowly outpace competitors Le Pen (right-wing) and Melenchon (left-wing). Because Macron did not secure a majority, he will face Le Pen in a runoff election at the end of the month.

New COVID Wave Stalls Production in China

With a new wave of COVID—one that has been dubbed “stealth omicron”—making its rounds in Asia, China has enacted some of the world’s strictest lockdowns to date. In Shanghai, the country’s financial capital and one of the largest cities in the world (25 million), residents have been forced to accept a near-total lockdown, with many being barred from leaving their apartments.

The lockdown in Shanghai, along with comparable lockdowns in other major Chinese cities, has stalled quite a bit of economic production. Apple is just one of many companies with significant operations in the city that has been forced to put its production on hold. This will likely cause delays in the delivery of Apple’s products, which may eventually be followed by further general price increases.

This week, we will pay close attention to how many key actors react to these developments, particularly the Federal Reserve. There will also be a new wave of mid-month economic reports released, which we can expect to be absorbed by and reflected in the stock market. We’ll be sure to keep you updated on how all of the world’s biggest economic stories continue to unfold.

The post Market Update April 12th: Economy Stuttering Amid Inflation Concerns appeared first on CitySignal.

Of course, there are still many relevant economic forces in play, including the geopolitical uncertainty we’ve witnessed in Eastern Europe, unstable energy markets, and more. The continued combination of both negative and positive breaking news stories has made it difficult for market speculators to position themselves accordingly.

Still, even keeping this in mind, it is clear that we have a lot to talk about in the world of economics. Let’s take a closer look at the biggest economic and market stories that have occurred over the past week.

New Jobs Report Shows Potential for Short-Term Rally

One of the most anticipated economic reports from last week was the jobs report, which is usually published during the first week of every month. Last week, the data released by the Federal Government revealed that 431,000 jobs were added in the month of March and the unemployment rate is currently just 3.6 percent.

The recent jobs report was slightly better than many economists had anticipated, which usually moves markets in a positive direction. However, the stock market (and other speculative markets, like real estate) has had a fairly mediocre start to the month of April. Between March 29 and April 4, the Dow Jones Industrial Average changed by less than one percent, dropping from about 35,100 points to 34,900 points.

Despite the lukewarm performance from the stock market, the jobs report still seems to have spurred some appreciation from economists, with Reuters noting that the current American labor market is “little different” from where it was prior to the pandemic. Additionally, the total population currently participating—or trying to participate—in the labor market continues to grow, suggesting that employers will likely have an easier time filling jobs and workers will likely be able to negotiate better working conditions.

Inverted Yield Curve Demonstrates Market-Wide Uncertainty

The bond market recently experienced another round of inverted yield curves, which occur every time longer-term bonds offer lower interest rates than shorter-term bonds. On Monday, the yield for a 2-year treasury bond shot up to a relatively high 2.42 percent while the yield for 10-year Treasury bonds was just 2.41 percent. This means that, for a brief period of time, investors could actually generate a marginally higher rate of return by buying 2-year bonds than they could by buying 10-year bonds.

Under normal market conditions, an inverted yield curve usually indicates that the economy might be heading towards a state of recession. However, an inverted yield curve can also simply mean that markets are adjusting, and that future uncertainty is relatively high. Given the combination of dramatic price swings and dramatic global events we’ve seen these past few years, it is more likely that uncertainty—not a market-wide recession—is the primary driver of the recent yield inversion.

Oil Prices Experience Gradual Decline

Once again, the global market for energy (particularly, oil) is at the center of the economic new cycle. Last week, oil prices experienced a sharp drop, going down an additional $0.13 nationwide compared to last week and reaching a new national average of $4.19.

There are likely several factors contributing to the most recent drop in oil prices, including several decisions made by the Biden Administration and other policymakers to increase the domestic supply of oil. A drop in oil prices will likely, at least partially, help combat the recent high levels of inflation, which are currently more than 7 percent year-over-year.

Unionizing at Amazon Could Lead to Big Changes

Last week, an Amazon warehouse in New York narrowly voted to create a union, representing the first Amazon union in the world. Several Amazon warehouses are currently exploring the possibility of unionizing, creating additional pressures for one of the world’s largest companies

The recent Amazon union was formed amidst intense competition from the corporate component of the company, which spent an estimated $4.3 million in anti-union campaigning. The union has already requested additional collective bargaining power and has also outlined future plans to increase compensation, benefits, and general rights for Amazon workers.

Elon Musk Becomes Largest Twitter Shareholder

Elon Musk, who is currently the CEO of Tesla and likely the wealthiest person in the world, shocked the investment community on Monday by electing to assume a 9.2 percent share of Twitter. Musk’s new ownership stake makes him the largest shareholder within the company, holding more than three times the current shares of the company’s founder and former CEO, Jack Dorsey.

Do you want an edit button?

— Elon Musk (@elonmusk) April 5, 2022

 The push for Twitter ownership occurred after Musk had mused over the possibility of creating his own social media company, a plan that—at least for the time being—currently appears to be scrapped. Following the Musk purchase, Twitter experienced its largest single-day rally in years, increasing in value by about 27 percent and rising from a price of about $39 to about $50.

Conclusion: Things Are Looking Up—But We’re Not Out of the Woods

Overall, it seems that the economy is moving in a positive direction and many of this year’s most notable economic woes—especially those related to oil prices and volatility—are coming to an end. When looking at things week-over-week, investors have plenty of reasons to be optimistic. However, there is likely still a lot of economic transformation that needs to occur, which will almost certainly result in at least a few future growing pains.

The post Market Update April 4th: Jobs Report Gives Investors Reason for Optimism, Gas Prices, Twitter and More appeared first on CitySignal.

And the emergence of a possible new wave of COVID—particularly noticeable in East Asia and Western Europe—has certainly not made things any more predictable. Nevertheless, there are at least a few indicators that certain parts of our economic world might be moving in a more positive direction, including a gradual decrease in gas prices and the potential for stabilization of the mortgage market.

Let’s take a closer look.

Increase in Bond Prices Hopes to Stabilize Mortgage Market

Since the beginning of 2022, in the United States, the average interest rate for a 30-year fixed-rate mortgage (the “bread and butter” of the mortgage industry) has considerably increased. According to Freddie Mac, rates have hiked upward from an average of 3.11 percent at the start of the calendar year to a current rate of 4.42 percent.

Over the life of a 30-year mortgage, a one percent jump can cost homeowners tens of thousands of dollars in interest payments. To combat increased mortgage interest rates, along with inflation and other increased costs, the Federal Reserve announced that they were considering a plan to gradually increase interest rates in the bond market.

Currently, 10-year US Treasury—one of the most important bond classes in the financial world—have had their yields climb up to 2.4 percent, which is the highest they have been since 2019. Due to the reverse correlation between interest rates for bonds and interest rates for mortgages, recent changes in the bond market are expected to soon be reflected in the mortgage market.

However, there is also usually a delay in when changes in one market will begin to be reflected in the other. Before mortgage prices begin to go back down, they will first need to stabilize. While the general increase in mortgage rates appears to be losing momentum, it will likely be several months before the mortgage market becomes easier to access. Other factors, including inflation, limited housing supply, commodity prices (including energy), and more, will also continue to remain influential.

We’ll keep a close eye on the developments in both the bond market and the mortgage market as they continue to unfold.

Investors Await the Release of Key Economic Data

With the end of the month and the first quarter of 2022 coming to a close (Q1 ends on March 31), investors and other essential market makers are patiently awaiting the release of a new round of economic data. Depending on whether these reports are above or below the market’s general expectations, stock and bond prices can be expected to change, and the reports might also spark action from essential financial institutions, including the Federal Reserve.

Among the many reports that markets are eagerly awaiting is the jobs report for the month of March. According to Bloomberg economists, the market is anticipating an additional 490,000 jobs to be added to payrolls this month. Any final figure significantly above this would likely move markets in a more positive direction, while any figure below this would likely have a negative economic impact.

Additionally, markets are eagerly anticipating personal consumption expenditure (PCE) data, which is scheduled to be released on Thursday. This metric is often among the most useful for gauging how the cost of living and the prices of a wide variety of goods are changing across the country. Bloomberg data suggests that economists are expecting a 0.6 percent rise. Both markets and monetary policy will likely be altered in response.

Gas Prices Finally Begin to Come Down

Between December 27, 2021—when gas prices averaged about $3.27 per gallon—and March 21, 2022, the average cost of a gallon of gas has increased every single week. According to data released from the US Energy Information Administration, the average cost of a regular gallon of gas reached a recent peak of $4.32 last week.

This week, the price of a gallon of gas is still relatively high–$4.23, on average—but the good news is this is the first time in months that the price of gas has gone down, week over week. Typically, decreases in commodity values take longer to unfold than increases in commodity values, but consumers can rejoice that the price of gas is at least starting to cool off.

Russia-Ukraine Conflict Remains Source of Global Uncertainty

The ongoing conflict between Russia and Ukraine—two geopolitically critical nations with crucial commodity markets—continues to be a key driver of global economic uncertainty and general price instability.

Over the course of the past weeks, there have been several seemingly competing conflicting developments, with some developments indicating a possible end to the conflict in the near future and others indicating the conflict might be escalating. Conflict ended in the key suburb of Irpin, with Ukraine retaking control. But elsewhere in the country, particularly in the East, Russia has continued escalating its attack on its neighbor.

Presidents of both countries have hinted at the possibility of negotiating a deal, but tensions remain high, and talks have stalled. Increased sanctions against Russia have caused the country’s currency to collapse and have created widespread economic problems. Blowback from these sanctions, particularly relating to energy, has undoubtedly been felt elsewhere around the world.

Changes in the conflict are being reflected around the world. We will keep you posted on all new developments and will discuss how these developments might affect your daily economic life.

The post Economic Update: Continued Uncertainty with Some Signs of Hope appeared first on CitySignal.

Some of the most important market makers in the world, including the Federal Reserve, are starting to take notice and adjust their policies accordingly. This week, we are taking a close look at how these events are influencing global capital markets and will discuss how these ever-evolving trends might affect the average American investor.

Fed Demonstrates Plan to Increase Interest Rates

The Federal Reserve of the United States—arguably the most powerful financial institution in the world—recently demonstrated an interest in increasing interest rates. The Fed, which is a private institution that is carefully regulated, monitored, and controlled by the Federal Government has a “dual mandate” to create a monetary policy that will both keep inflation levels low while also keeping employment high.

According to Fed Chairman Jerome Powell, “If we think it’s appropriate to raise [interest rates by half a point] at a meeting or meetings, we will do so”, the Wall Street Journal has reported. Since the beginning of the COVID-19 pandemic, interest rates have been near a historic low point. At the same, inflation rates have been relatively high (for a variety of reasons), two simultaneous trends that have inspired some people involved in the Federal Reserve to take action.

Over time, the Federal Reserve hopes to lower the inflation rate to its stated target of about 2 percent. However, in an effort to increase economic stability, the Central Bank typically acts rather slowly, usually only raising interest rates by a fraction of a percent at a time. When interest rates are higher, the cost of borrowing money (for consumers, banks, and other relevant borrowers) will increase. Changing interest rates is one of several tools the Fed uses in order to combat inflation.

DOW Turns Around After Slow Start to Month

The DOW Jones Industrial Average, one of the most useful metrics for gauging the state of the American economy, experienced a roughly one thousand point positive price swing, reaching 34,800 points by the end of the trading day on Monday. This is relatively good news for investors, who had previously witnessed the Industrial Average struggle for the first few weeks of March.

There are likely quite a few reasons the DOW—which is not at the highest point it has ever been but has reached a high point for the month—is beginning to experience a gradual turnaround. One of the most likely is that investors tend to be overly pessimistic when they are greeted with bad news (conflict in East Europe, supply chain challenges, high energy costs, etc.) meaning these events are likely already “baked in” to the broader economy. But additionally, the Federal Reserve’s decision to increase interest rates, thus limiting the amount of money in circulation, has likely clotted at least some of the bleeding that has occurred over the previous two weeks.

Gas Prices Begin to Stabilize—But Have Not Yet Returned to Previous Levels

It’s been a mixture of good and bad news for American drivers: the good news is that gas prices, which experienced a sharp uptick over the past month or so, have finally begun to stabilize. Across the United States, the nation’s average price for gasoline is sitting at about $4.24 per gallon, nearly the highest they’ve been over the past decade. The bad news is, despite this relative level of stabilization, most American households are not ready to take on the sudden financial burden, leading to about 7 in 10 households disapproving about the cost of gas, according to a recent Ipsos poll.

Furthermore, even many of the most optimistic economists expect gas prices to remain high, largely due to a tightened supply chain and typical seasonal changes in demand for the consumption of gasoline (prices almost always increase over the summer months). Uncertainty related to the conflict in Ukraine—Russia is one of the largest oil-producing countries in the world—will also likely cause strain on the wallets of American households.

Increased Sanctions on Russia

The conflict between Russia and Ukraine continues to increase in intensity, with Russia ramping up its bombing campaigns in several of Ukraine’s most important cities, including the very important city of Mariupol. The United Nations’ refugee agency currently estimates that about 3.5 million people, just under 10 percent of the national population are actively trying to flee, with a total of 12 million people (about 30 percent of the Ukrainian population) being directly affected by the war.

The United States and many of its closest allies in the region, including Italy, France, and the United Kingdom, have all announced plans to increase sanctions placed on Russia. Due to Russia’s important role in the global economy, sanctions will likely cause oil, wheat, mineral, and other commodity supply chains to experience additional strain. The United States and its allies have also been talking to China, strongly discouraging the country to limit any assistance to Russia.

We will keep a close eye on the conflict as it continues to unfold.

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Nevertheless, there are at least a few bright spots in the global economy, such as the fact that American homes have been able to maintain their values. But even keeping this in mind, there is no denying that the current economic situation is complex and rapidly changing.

Inflation Still Relatively High

Last week, a new report came out that revealed the annualized inflation rate has now topped 7.5 percent—this is the highest the annualized inflation rate has been since 1982. An inflation rate of 7.5 percent, as measured by the Consumer Price Index (CPI), means that a consumer good that cost $100 one year ago would currently cost about $107.50. Normally, the inflation rate hovers between 2 and 3 percent, suggesting that the change in the value of the dollar over the past year is something that has been far from normal.

Thus far, there have been a few clear drivers of this uptick in inflation, including global supply chain issues (it costs a lot more to send something around the world), the consequences of increased government spending amid the COVID-19 fallout (causing the money supply to significantly increase), increased cost of energy, and other global problems. The probability of increased inflation has been something that many economists have been forecasting since at least 2020, regardless of the world’s changing geopolitical landscape, but now it is clear that these outcomes are fully coming to fruition.

DOW Reaches Six Month Low

As of closing hours on Monday, the Dow Jones Industrial Average—often considered one of the most useful metrics for gauging the state of the economy as a whole—neared the lowest it has been in the last six months, closing at just 32,945 points (last week, March 8, was the actual all-time low). This represents a 5.37 percent from where the Average sat just six months ago, though the index is near exactly where it was one year ago when it ended up closing at 32,953 points.

Usually, the dropping of the Dow Jones Industrial Average is an indicator that the economy is not moving in a very positive direction. Furthermore, when you adjust for inflation, the index appears to be doing even worse than what its point value might suggest—due to the high inflation rate, the index is actually down about 2,000 points compared to where it stood at this same point last year.

Of course, there are many factors that affect the value of the DOW, which is why it is a good idea to take a broad overview of the economy before deciding to buy or sell. Still, even keeping this in mind, it is clear that the American economy is not necessarily thriving.

However, there are also a few ongoing trends indicating that the market might be turning in a somewhat positive direction. For example, though the inflation rate remains incredibly high, the unemployment rate is currently very low (an estimated 3.8 percent, among the lowest it has been in the last 20 years), indicating there is still at least a little bit of potential for long-term growth.

While the unemployment rate isn’t the only variable that investors should be taking a look at, it is certainly among the most useful. And if this rate continues to remain low—as most employment indicators suggest that it might—it might be a good time to invest in the broader market, as a whole. The Federal Reserve typically focuses on two main indicators: inflation and employment. And while inflation is high, unemployment is low, suggesting there is actually quite a bit of probability for long-term growth.

The Situation in Ukraine is Still Problematic

Perhaps the most notable economic event of the past few weeks has been the Russian invasion of Ukraine, its neighbor, which appears to still be very far from being fully resolved. Russia, in an apparent effort to claim some of Ukraine’s sovereign territory as its own, has been escalating its war efforts, which has thus far resulted in the deaths of hundreds of Ukrainians as well as the general destruction of many of Ukraine’s most important cities (including the capital, Kyiv).

In addition to the deaths that have proliferated in Ukraine—already a tragedy of their own—the events of recent weeks have created further global economic chaos. Gas prices, which were already near an all-time for a variety of reasons (including actions by OPEC, limited production in key regions, and others) have reached a current average of $4.33, up significantly from an average below $3.00 just one year ago. The production of other significant products, including wheat and rare earth minerals, has also experienced widespread issues.

Conclusion

It is not exactly easy to look at the current state of global economic affairs and walk away with very much optimism—the combination of global political instability, war, consequences of COVID-related stimulus, and other dramatic actions are all currently being reflected in both the price and available quantity of current goods. Nevertheless, the global economy is still at least a little bit more stable than it has been in years past, such as the financial crisis of 2008.

The post Markets Still Show Signs of Uncertainty But Is It a Good Time to Buy? appeared first on CitySignal.

It’s important to know that dependents come in many different forms—there are plenty of people who might qualify as a dependent other than your children. In fact, millions of American households will claim an “adult dependent” on their taxes every year. However, to correctly claim anyone as a dependent while filing your taxes, you will first need to make sure they actually qualify.

Whether you have personally filed your taxes before or not, you probably have a lot of questions. Below, we will discuss the most important things to know about claiming an adult dependent. We will also discuss how to claim a dependent, in general. By taking the time to understand this process, you can potentially minimize your tax obligations and avoid some common filing mistakes.

Who Can I Claim as a Dependent?

The Internal Revenue Service (IRS) has developed specific guidelines for who can legally qualify as a dependent, though most tax lawyers believe this definition is likely to change by 2025. Keeping this in mind, the IRS’s current definition of a dependent is someone “other than the taxpayer or spouse” who qualifies for a dependence exemption. In other words, the definition is currently pretty vague.

Generally speaking, a dependent is someone who depends on you for financial support. A dependent is not a roommate or someone you happen to be living with unless you are also the primary source of financial support for this person.

Of course, whether you are truly a source of financial support can often be up for interpretation (a teenager with a summer job can likely be claimed as a dependent, whereas someone you simply gave some money to probably doesn’t qualify as a dependent). For someone to be claimed as a dependent—regardless of age—you’ll need:

• To have a “qualifying relationship” with this person. The person can be a qualifying child or a qualifying relative as defined by the IRS.
• If you do not have a qualifying relationship, the person will need to live with you, whether you rent or own.
• To satisfy pre-defined income requirements (explained below)
• To satisfy the “51 percent rule” (explained below)
• To both have a valid social security number (SSN) or a valid taxpayer identification number (TIN)

If you are hoping to get dependent benefits at both the federal and state levels (and, for some cities, the municipal level), you’ll need to ensure that you follow all local laws. When in doubt, check with an accountant or lawyer to ensure you can claim an adult dependent—claiming someone who does not qualify can have future legal or financial consequences.

Laws Affecting Dependent Status

The Tax Cuts and Jobs Act (TCJA) dramatically changed tax laws in the United States. After the Act was passed in 2017, the previous personal exemption and dependent exemptions were eliminated, meaning that it is not as easy to claim an adult dependent as it was in years past. 

These exemptions are currently set to return in 2026. However, even with the TCJA, there are still a few ways you can claim a dependent. Dependents can still be claimed for the Child and Dependent Care Tax Credit, as long as they meet the basic requirements. Additionally, you can also file as head of your household and improve your tax position even further.

Claiming a Tax Credit for “Other Dependents”

The TCJA includes a tax credit for “other dependents,” which can be used for individuals above the age of 16 (for those who are under 16, you can use the child tax credit). As long as the people you are claiming as a dependent meet the standards outlined by the IRS (further described below), you will be able to reduce your household tax obligations by $500 per dependent. 

Making Sure You Qualify

To start with, both you and each person you are claiming as a dependent must be a U.S. citizen, a U.S. national, or a U.S. resident alien—they can also be citizens of Canada or Mexico. The person being claimed as a dependent will not be able to claim any dependents of their own, though they can still work and generate a limited amount of income.

For an adult (anyone 17 or older) to be claimed as a dependent, they must live with you or have a close relationship with you. “Close relationships” can include parents, grandparents, siblings, half- and step-siblings, aunts and uncles, nieces and nephews, in-laws, and some others.

For a person to be claimed as a dependent, their personal income must be less than $4,300 (tax year 2021). There is, however, an exception if the person is disabled and has income from a sheltered workshop. Additionally, you must be able to satisfy the “support rule,” meaning that you personally provide more than half of all financial support.

The tax code is complicated and is always changing. It is quite possible that dependency requirements will change again before the end of the fiscal year, so it will be essential to pay attention to these developments before making any credit or deduction claims on your taxes. However, as long as you can meet these basic conditions, you will be able to claim a person as a dependent on your taxes—in some cases, that can mean big savings on taxes. 

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