{"id":15608,"date":"2023-10-05T19:36:19","date_gmt":"2023-10-05T16:36:19","guid":{"rendered":"https:\/\/www.liberalglobe.com\/?p=15608"},"modified":"2023-10-05T19:36:22","modified_gmt":"2023-10-05T16:36:22","slug":"the-five-shocks-that-will-hit-or-were-already-hitting-the-markets","status":"publish","type":"post","link":"https:\/\/www.liberalglobe.com\/?p=15608","title":{"rendered":"The Five Shocks that will hit or were already hitting the Markets"},"content":{"rendered":"\n

Asked after the policy meeting in September whether the soft landing scenario for economic activity is the main narrative, Federal Reserve Chairman Jerome Powell said no.
Indeed, a deep realist, Powell is well aware that runaway inflation will be very difficult to tame without job losses and recession. Indeed, the Fed has “isolated” a number of economic shocks that could cause significant headwinds in the coming months.
There is a long list of long-anticipated risks, such as: <\/p>\n\n\n\n

    \n
  1. the resumption of student loan payments<\/li>\n\n\n\n
  2. the highest interest rates,<\/li>\n\n\n\n
  3. the UAW strike;<\/li>\n\n\n\n
  4. a potential lockout on the US government and<\/li>\n\n\n\n
  5. the recent rise in oil prices.<\/li>\n<\/ol>\n\n\n\n
      \n
    1. The US debt is over $33 trillion and the government is about to shut down (again)<\/strong><\/li>\n<\/ol>\n\n\n\n

      In January, the federal government crossed the rubicon of debt, surpassing the $31.4 trillion ceiling. Lawmakers clashed over the budget deficit and spending levels, but eventually reached a bipartisan deal to keep the U.S. state from defaulting on its debt.<\/p>\n\n\n\n

      Now, however, some of the House’s most conservative Republicans are arguing that spending should be cut further than agreed to less than a year ago. As they note, the US national debt jumped above $33.1 trillion in September, and the cumulative national deficit between 2024-2033 is now projected to exceed $20.2 trillion due to increased spending.<\/p>\n\n\n\n

      And with the US economy facing rising interest rates, high oil prices and strikes, things could turn out to be very serious.<\/p>\n\n\n\n

        \n
      1. Oil is racing towards $100 a barrel<\/strong><\/li>\n<\/ol>\n\n\n\n

        Throughout U.S. history, oil price crises have typically helped trigger recessions.
        As usual, oil price crises are followed by\u2026recession. High black gold prices increase costs for a wide range of companies and strain consumer budgets, leading to higher inflation and lower consumer spending.<\/p>\n\n\n\n

        It is a recipe for economic disaster that the world is being asked to face once again. It is recalled that oil prices have soared since June due to production cuts by the world’s largest crude producers (OPEC+, which includes Russia and Saudi Arabia).<\/p>\n\n\n\n

        International benchmark Brent crude oil prices rose 28%: from their June 11 low of $74 a barrel to over $95 a barrel.
        <\/p>\n\n\n\n

        In addition, commodity experts at a number of investment banks, including Goldman Sachs and Wells Fargo, argue that rising oil prices are just the beginning of a “supercycle” for commodities that could keep inflation high. In the long run, then, consumers will need to get used to higher oil and gasoline prices.<\/p>\n\n\n

        \n
        \"\"<\/figure>\n<\/div>\n\n\n

        <\/p>\n\n\n\n

          \n
        1. Auto industry strike could crush auto market<\/strong><\/li>\n<\/ol>\n\n\n\n

          Since September 15, the United Auto Workers union has been engaged in a historic strike against Detroit’s three major automakers: Ford, GM and Stellantis, which, according to a study by the Anderson Group, in just one week has cost the economy of the US over $1.6 billion.<\/p>\n\n\n\n

          And although the strike right now initially involved fewer than 15,000 union members, it is slowly expanding, making it a key risk in the Fed’s fight against inflation.
          About 7,000 more union members walked off the job at a Ford plant in Chicago and a General Motors assembly plant near Lansing, Michigan on Friday. The UAW is calling for significant wage increases for its members, which could influence other workers across the country to do the same, driving up inflation and forcing the Fed to raise interest rates even more.<\/p>\n\n\n\n

            \n
          1. Nearly 44 million student loan borrowers will have to start paying<\/strong><\/li>\n<\/ol>\n\n\n\n

            Economists and analysts are calling the impending reactivation of federal student loans a potential shock to the economy. Nearly 44 million borrowers will start paying an average of $393.<\/p>\n\n\n\n

            Inevitably, this will mean less spending elsewhere, at least for some households. Estimates of the potential economic impact vary.
            According to a July report by Trust Economics, U.S. consumer spending could be cut by as much as $9 billion each month, cutting GDP by 0.1% in 2023 and 0.3% in 2024.<\/p>\n\n\n\n

            Further, this situation will affect retail\u2026
            In fact, he calls the reactivation of student payments a “key pain point” for consumer stocks through the end of the year. We believe US consumers are likely to curtail their future spending, with apparel and footwear the most likely areas to retreat.<\/p>\n\n\n\n

              \n
            1. Mortgage rates nearing 8% threaten to restart housing freeze<\/strong><\/li>\n<\/ol>\n\n\n\n

              The Fed has raised interest rates to help contain inflation by slowing the economy. This raises many challenges for investors, businesses and consumers \u2013 and especially for home buyers, who are facing the highest interest rates in more than two decades, with the 30-year rate approaching 7.5%, a far cry from sub-3 % days of the early pandemic.<\/p>\n\n\n\n

              Higher prices make buying a home even more unaffordable after years of rising prices. The average monthly principal and interest payment for borrowers hit $2,306 in July, the highest on record.
              This is up 60% from two years ago.<\/p>\n","protected":false},"excerpt":{"rendered":"

              Asked after the policy meeting in September whether the soft landing scenario for economic activity is the main narrative, Federal Reserve Chairman Jerome Powell…<\/p>\n","protected":false},"author":1,"featured_media":15609,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[859,5],"tags":[1983,243,3918,1180,4743,4744,215,70],"class_list":["post-15608","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","category-economic","tag-economy","tag-inflation","tag-markets","tag-oil","tag-shocks","tag-student-loans","tag-us","tag-usa"],"_links":{"self":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/15608","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=15608"}],"version-history":[{"count":1,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/15608\/revisions"}],"predecessor-version":[{"id":15611,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/15608\/revisions\/15611"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/media\/15609"}],"wp:attachment":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15608"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15608"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15608"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}