💸💳 Are You Spending too Much?
Happy Sunday,
I just read this article this morning from NPR - the headline is “Despite high inflation, Americans are spending like crazy – and it's kind of puzzling”. This is something I’ve personally been experiencing in my network - it seems that not many are consciously cutting back on expenses. We all look at prices and go, “well THAT’s crazy”, but spend anyway. Is it the same for you and your friends? Let me know.
"We estimate households to still have about ten months of spending power if they continue to deplete excess savings at the pace they have over the past six months," Wells Fargo economists wrote in a research note Friday.
These things take a long time to play out, and with recent numbers of personal spending up 2.8% on goods and 1.3% on services in January, we may not see inflation decrease for quite some time. I think this is a good reminder to go against the grain - and NOT spend on things we don’t necessarily need, especially if it’s just to show off.
I’m a big proponent of spending more on quality for the things you need, but for the things you don’t need - try to not spend at all.
How do you know if you need something? That’s a good question. I’ll have to think about the criteria for that and I’ll probably write about it in a future edition.
For now, enjoy your Sunday and this week’s Sunday Primer :)
— Humphrey
Market Report
The Fed minutes from its January meeting suggest that the state of the US economy could lead to higher interest rates than previously anticipated to fight high inflation.
Although the Fed has slowed its rate increases, lifting the fed funds rate by a quarter-percentage point earlier this month, some Fed officials are concerned about stopping or slowing their inflation-fighting campaign too soon.
Although most officials thought that a slower pace of rate increases provided the best way to manage risks, the minutes revealed that some officials favored a half-point increase. Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard believed that a larger increase was warranted, moving the rate more quickly to their estimate of the necessary peak level.
However, Richmond Fed President Tom Barkin didn't favor a strategy of moving rapidly to an estimated peak rate before pausing rate increases because he isn't confident the central bank can gauge how much its past rate moves are slowing the economy.
Since the meeting, new data indicated stronger economic activity and slower progress on reducing inflation than forecast, which could keep the Fed raising rates longer than previously anticipated. Hiring and retail spending surged in January, with the unemployment rate falling to 3.4%, a 53-year low, surprising economists who have long anticipated that Fed rate increases would slow the economy soon.
The Mortgage Bankers Association's index of mortgage applications fell by more than 18% to 147.1, the lowest level since 1995. The slump came as the highest mortgage rates in three months hit a housing market struggling to find a bottom.
The report also revealed that the contract rate on a 30-year fixed mortgage rose to 6.62%, the highest since November. Meanwhile, sales of previously owned homes fell in January for a 12th straight month to the slowest pace since 2010.
Nvidia's stock rose by ~11% after it gave a bullish revenue outlook for the current quarter, with a forecast of sales of around $6.5bn. The company's investment in AI computing chips is helping to offset the sluggish demand for personal computer chips, with its expertise in graphics processors putting it in a strong position in the market for AI hardware.
CEO and co-founder Jensen Huang also announced Nvidia's new AI cloud service, allowing businesses to use Nvidia GTX machines for AI processing via simple browser access. Nvidia's interest in ChatGPT has highlighted the potential of AI, and the company plans to tailor AI to companies' specific needs to help them improve their products and services.
Forecast Ahead
Big Number
Even though existing home sales have declined for 12 months in a row, the most prolonged decline ever, the number of realtors in the U.S. has continued to grow. At the end of 2022, there were nearly 1.6 million National Association of Realtors members. In 2013, there were just 1.04 million members.
Realtors are now competing for a slice of far fewer transactions and we could see realtors returning to their previous jobs.