What to watch in the week ahead 6/19

Key takeaways

  • The Federal Reserve (Fed) almost unanimously voted for a 75 basis point hike last Wednesday, two days after a supposedly well-sourced article by the Wall Street Journal had anticipated the potential hawkish tilt from the previous consensus 50 basis point hike.

  • May existing home sales on Tuesday, June PMIs on Thursday and University of Michigan inflation indicators on Friday are the highlights of the week ahead’s economic calendar.  

  • Last week, Yieldstreet launched a venture capital investment opportunity in Marc Lore’s Wonder food delivery company, and revamped a luxury car loan offering. 

Fed in control

Citing ongoing inflationary pressures, the Fed raised interest rates again on Wednesday, this time  by 75 basis points, its biggest move since 1994. Meanwhile, the target range for the federal funds was revised to 1.5% – 1.75%  on the same day, up from .5%–.75 % in March. The news was initially welcomed by investors, as it signaled policymakers’ determination to bring inflation under control. However, fears of a recession, which at this point appears more likely, dampened the mood, causing additional pain to equity investors towards the end of the week. 

Next week’s economic calendar is unlikely to add clarity, though investors are expected to keep an eye on existing home sales on Tuesday, June PMIs on Thursday and an additional inflation reading by the University of Michigan on Friday. 

More importantly, an increase in mortgage rates is causing a shift in housing price projections, Mortgage rates rose from 5.25% to 6% just last week, and more than doubled in the past few months. To put this into perspective, it is the third largest trough-to-peak increase in history. According to John Burns Real Estate Consulting, “the cost difference of owning a home versus renting a similar home now exceeds the prior all-time high set in 2005, which should steer more households towards renting.” 

US exceptionalism

Despite ECB rate hikes, the euro is expected to remain weak in line with the decrease in global growth, and with persistent geopolitical risk. European bonds are likely to suffer from further downward pressure – despite ECB reassurances – and investors are expected to be keeping a close eye on the next policy moves. Inflationary pressure via a softening in energy prices is also unlikely to come anytime soon, as relationships between the EU and Russia are expected to remain fraught for the foreseeable future.  

China’s labor market worsened in May, as unemployment in major cities increased to an all-time high. Industrial output rose 0.7% from a year ago, and the approximately 7% contraction in retail sales was an improvement compared to the previous month. However, the requirement of regular virus testing and other stringent controls are likely to continue to hinder consumer activity across the country. 

Diversify Your Portfolio Today

Europe’s and China’s woes continue to support “US exceptionalism”, which has been a major investment theme throughout the pandemic, amidst increasing conviction that America would stage an earlier and stronger recovery – the result of expansive fiscal policy, early access to vaccines and swift reopening – compared to Europe or China.

Yieldstreet’s launches

Yieldstreet partnered with successful entrepreneur & businessmen Marc Lore in his latest venture, Wonder, which brings high-quality meals — from world-renowned chefs — directly into customers’ homes with its mobile restaurants, while solving for some of the largest pain points including delivery service and quality. Wonder has the potential to achieve a $100B+ IPO in 2026, based on the company’s projections.

Yieldstreet also offered an additional $1 million in a luxury car leasing portfolio. The opportunity is a first priority loan, secured by all assets of a US-based luxury car leasing company. Since its initial launch in August 2021, the loan has performed in line with expectations. 

1 Mortgage rates have more than doubled since bottoming in January 2021, spiking from 2.65% to 6% (highest since November 2008). Source: John Burns Consulting
2 https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.pr220615~2aa3900e0a.en.html
3 Source: China’s National Bureau of Statistics

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