The capital markets roller-coaster gave us an exciting ride-up for the week ending Thursday, June 23, 2022, after a harrowing drop the previous week. Not much seemed to change over the week which is why some commentators are calling this a dead cat bounce, a bear market rally. Better to judge by YTD results which show that we are still in a bear market territory with things like the NASDAQ down -28% and the S&P 500 down -20% (right at the brink of the definition of a bear market). Part of the roller-coaster fun is the hope that energy and food prices are actually falling back to normal, but without a valid reason to explain why supply is increasing or, why demand is shrinking (more likely). In any case, our friends at the Fed are talking about more rate hikes, and this translated into higher real estate prices (VNQ) for the week – go figure. Maybe we can attribute this backwardness to the Summer Solstice, as time shifts over the horizon to shorter days.
As if this brutal economic climate isn’t bad enough, it seems like there is a mental health crisis for men. Drug overdose numbers are skyrocketing, and male labor participation is dropping. To add to the depression, mortgage rates have doubled in a short amount of time. We can’t help but draw comparisons to 2008 and wonder how this will affect the huge mortgage-backed securities market. The Fed & administration say that spiking interest rates won’t necessarily cause a recession, but consumer spending is now dropping as covid savings seem to be drying up for many consumers who are struggling to keep their heads above the water. Finally, while everyone is focused on astronomical oil prices, not many know that coal prices are up nearly 3x over the past year, dwarfing oil’s price inflation.