There appears to be some reprieve in sight as the Federal Reserve decides to pump the brakes on interest rates. However, analysts still believe the US economy will still go into a recession later this year.
Inflation has hit the lowest level in two years, driven by lower gas prices, but it is still way above the Fed’s 2% mark. But this has had little effect on home prices as more middle-class owners are finding it difficult to buy homes.
Here’s a rundown of some of the topics that made headlines this week in financial markets.
Fed decides to skip rate hikes
The Fed’s tightening campaign appears to be coming to an end. For the first time since January of last year, the policymakers at the central bank decided to maintain interest rates at a range of 5% to 5.25% on Wednesday.
However, Fed officials hinted that they anticipate raising rates by another half percentage point by the end of the year, which is more than most people had anticipated. Even that would be in question if the following inflation data reveals further cooling trends.
However, officials do not anticipate lowering rates any time soon.
According to their current predictions, the range of rates at the end of next year is expected to remain 4.5% to 4.75%.
US inflation at lowest level in 2 years
US inflation last month slowed to its lowest level in more than two years. But, continuing price increases will continue to put pressure on the Federal Reserve to consider raising interest rates.
The consumer price index increased by 4% in May, as compared to a year earlier. This is much less than the annual growth of 4.9% that was recorded in April and the weakest increase since March 2021. From a peak of 9.1% in June of last year, inflation has also decreased significantly.
According to figures released on Tuesday by the Bureau of Labor Statistics, consumer prices increased by just 0.1% on a monthly basis in May.
Gas prices lower this summer
Following last year’s rise in oil prices, which caused significant pain at the pump, gas costs for this summer’s driving season appear to be lower.
According to AAA, the average price of ordinary gas on Friday was roughly $3.58 per gallon, down from a record high of $5 set a year ago when the conflict in Ukraine plunged energy markets into meltdown and stoked worldwide inflation.
Global oil prices have been pushed down to about $75 per barrel, from more than $120 last summer, due to:
- recession fears
- a sluggish Chinese economic recovery
- an unabated flow of Russian crude into markets
As many Americans prepare to get out on the road, the waning demand for oil and customers’ cautious return to the pumps since the outbreak has kept gas prices in check.
Michael Jordan agrees to sell stake in Charlotte Hornets
Basketball legend Michael Jordan has agreed to a deal to sell his majority stake in the Charlotte Hornets basketball team to hedge fund billionaire Gabe Plotkin and private equity titan Rick Schnall.
As a six-time NBA champion with the Chicago Bulls, Michael Jordan is regarded as one of the all-time greats. He acquired the Hornets in 2010 for an estimated $275 million, and he will continue to own a small stake in the basketball team even after the sale.
The transaction is the most recent illustration of how professional sports teams are becoming more valuable as a result of expensive television rights deals and an increase in private capital investment at the level of minority shareholders.
However, given criticism of the lack of diversity in sports ownership, this will leave the NBA without a black owner.
Cathie Wood sells Tesla Stock
ARK Invest’s ARK Innovation exchange-traded fund sold about 450,000 shares of Tesla stock – worth about $110 million.
The asset management company founded by Cathie Wood, a staunch Tesla bull, sold 62,415 shares of the electric vehicle company on Friday. This came on the heels of a previous sale of 393,000 shares from the Innovation ETF (ARKK) and two other funds managed by the asset management company on Monday.
It’s unlikely that Wood is taking profits or that she believes Tesla shares are fully valued.
Middle-class homebuyers finding it difficult to buy homes
The housing shortage is hitting middle-income homebuyers hardest, according to a report published by Yahoo Finance.
While 51% of earners in the nation make $75,000 or less, only 23% of available home listings are affordable for these households.
In locations like San Jose, California, and New York, where only 5% and 13% of current listings are affordable for these families, the situation is significantly worse.
However, those with greater incomes have more choices within their income range. Only 7% of households have an income of $250,000 or more, but they can afford 85% of the listings displayed.
According to data released by the National Association of Realtors, nearly 50% of homes listed in 2018 were within reach of families earning up to $75,000. With the exception of the 2020 pandemic, this number gradually decreased, reaching 23% in April 2023, when it was more than halved.
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