In his podcast addressing the markets today, Louis Navellier offered the following commentary.
Imminent Recession
The Conference Board on Thursday announced that its index of Leading Economic Indicators (LEI) declined 1.2% in March and is now at the lowest level since November 2020. In the past six months, the LEI has declined 4.5% and is accelerating its decline, since the previous six months the LEI declined 3.5%.
As a result, the Conference Board is now forecasting that “economic weakness will intensify and spread more widely throughout the U.S economy over the coming months, leading to a recession starting in mid-2023.”
Unaffordable Homes
The National Association of Realtors announced on Thursday that existing home sales declined 2.4% in March after surging 14.5% in February. Median home prices declined 0.9% in March to $370.300 compared to $375,700 in the same month a year ago.
Median home prices peaked at $413,800 in June and have declined 9.2% in the past 9 months. The inventory of existing homes for sale now stands at 980,000, up 1% from February and 5.4% compared to a year ago.
In March, the average home was on the market for 29 days, down from 34 days in February, so inventories remain tight. However, after mortgage rates declined for five weeks, the 30-year fixed mortgage rose to 6.39% in the latest week, up from 6.27% in the previous week, so home sales may continue to decline due to affordability issues.
I should add that approximately 27% of existing home sales are paid in cash with no mortgage financing.
Mixed Fed Signals
The Fed released its Beige Book survey this week in preparation for its next Federal Open Market Committee (FOMC) meeting in early May. The Beige Book survey implied that there was minimal fallout from recent bank failures.
However, the survey noted that many banks tightened their lending standards and experienced outflows after high-profile bank failures.
The San Francisco Fed, which is home to Silicon Valley Bank and First Republic Bank said “lending standards tightened notably” and added, “that existing and planned projects across sectors were delayed or canceled due to higher funding costs, heightened uncertainty, and more limited access to credit.” Ouch!
I think it is safe to say that the San Francisco Fed and some other Fed districts will call for not raising key interest rates, even though other influential Fed districts, such as New York, are apparently willing to raise key interest rates another 0.25%.
Specifically, New York Fed President, Christopher Waller recently said “I would welcome signs of moderating demand, but until they appear and I see inflation moving meaningfully and persistently down toward our 2% target, I believe there is still more work to do.”
New Chicago Fed President, Austan Goolsebee said at the Economic Club of Chicago that “At moments like this of financial stress, the right monetary approach calls for prudence and patience.”
Overall, 9 of the 12 Fed districts reported little or no change in economic activity in the Beige Book survey. Due to mixed signals coming from different Fed districts, I think a split vote might be forthcoming at the May FOMC meeting.
Coffee Beans: Rude Awakening
Thousands of cellphone users across Florida had a rude awakening at 4:45 a.m. Thursday when the state’s Emergency Alert System was accidentally triggered for a test. The alert was supposed to be on TV and not disturb anyone sleeping. State officials said that they had fired the company that provides the alerts. Source: UPI. See the full story here.
