Are We Out Of The Woods Yet?
The FED left their FOMC meeting last week without announcing a rate hike and pointed toward rate decreases in 2024. As a result, the stock market jumped… Are we out of the woods yet? This month we dive into the latest economic news from Wall Street along with a number of other indicators as we surmise where the economy will most likely to be in the next 12-24 months.
2023 began with a strong economy, however inflation was running rampant. The FED promised to tame inflation with a hawkish stance of raising interest rates to cool the economy and inflationary pressures. In March we then had a regional banking crisis which threatened to spread through the banking system like a contagion, further complicating the FED’s projected course. To the government's credit, they seemingly mitigated that crisis; most notably, they stepped in to insure personal deposits. This calmed markets and staved off a full out run on banks, by protecting the individual consumer against small and regional bank exposures.
Fast forward to December 13,2023. The FED held their monthly FOMC meeting to discuss the health of the economy, inflation and of course, interest rates. The FED decided to keep interest rates static, causing the stock market to roar to record closes WSJ - FED Outlook. In even better news for real estate investors, FED economists began to signal 2-3 rate cuts in the coming months.
The Jobs print was also strong for November. Unemployment for November was surprisingly strong at 199,000 jobs created and unemployment fell to a historically low 3.7%. So can we now let the good times roll?
Unfortunately, its just not that simple. Following the end of quantitative tightening, the economy is beginning to show fissures particularly at an individual consumer level.
After a long pause on federal student loan repayments from the pandemic, required payments resumed in October for 22 million borrowers. By mid-November however, over 40% of borrowers had not made those payments Student Loan Payments Resume.
Credit card debt has reached an all time high with Americans’ total credit card balance reaching $1.079 trillion in the third quarter of 2023. Credit card delinquency has also grown, reaching it’s highest level since 2012.
Auto loans are also showing signs of distress. From the latest data available sub-prime borrowers were defaulting at over 6%, the highest rate of default in the last 30 years Auto Loan Defaults Hit America.
