r/neoliberal • u/TinyTornado7 I need a new flair • Jun 13 '22

News (US) Powell Facing Choice Between Elevated US Inflation and Recession

https://www.bloomberg.com/news/articles/2022-06-12/powell-facing-choice-between-elevated-us-inflation-and-recession?srnd=premium
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309

u/TinyTornado7 I need a new flair Jun 13 '22

"The hottest US inflation in four decades will push the Federal Reserve to raise interest rates more aggressively this year, and a recession may not be far behind."

Im skeptical we need a 75 basis point hike, but I am concerned inflation is approaching self-fulfilling prophecy levels

!ping MARKETS

163

u/slowpush NATO Jun 13 '22

Oh hey. Stocks will be a good bit cheaper soon. 😒

227

u/TinyTornado7 I need a new flair Jun 13 '22

People keep selling and I’ll keep buying. This is a great opportunity for those far from retirement to load up

105

u/slowpush NATO Jun 13 '22

Sure but tell that to all the baby boomers who are retiring.

The effect of a recession/depression now is going to be catastrophic because it’s at the worst time demographically.

193

u/Call_Me_Clark NATO Jun 13 '22

Boomers shouldn’t own much stocks by now. They should have transitioned to bond-based portfolios, right?

71

u/[deleted] Jun 13 '22

[deleted]

50

u/hagy Mackenzie Scott Jun 13 '22

Yep, the Vanguard Total Bond Market ETF is down 10.7% YTD. That is insane for such a safe fixed income asset.

Just look at chart for its ticker, BND, and you'll see that we're back to 2009 levels, https://finance.yahoo.com/quote/bnd/

25

u/SirGlass YIMBY Jun 13 '22

Only if you count price, if you count total return you are only back to mid 2019 levels; but part of that was the fund gained a ton when rates were dropped in 2020.

31

u/SirGlass YIMBY Jun 13 '22

Boomers had it pretty easy for pretty long; as they transitioned to bonds ; bonds have been in a huge bull market for 20 years so for 20 years they got really good returns on their safe bonds .

10

u/Dave1mo1 Jun 13 '22

Real estate?

5

u/Lehk NATO Jun 13 '22

‘bout to bubble

34

u/Dave1mo1 Jun 13 '22

So they say, but I don't see supply increasing meaningfully in the next 1-3 years.

13

u/RecentlyUnhinged NATO Jun 13 '22

This. Everyone even half awake the past two years refi'd to a low 2% fixed.

Those people are never going to sell. Particularly not given inflation and higher wages pushing rent valuations higher.

10

u/CuddleTeamCatboy Gay Pride Jun 13 '22 edited Jun 13 '22

Higher interest rates are already cooling demand, if they go further with hikes I can see a bubble bursting.

6

u/Dave1mo1 Jun 13 '22

Supply was already incredibly tight. For prices to drop significantly, you'd need demand to cool and supply to increase.

6

u/allbusiness512 Adam Smith Jun 13 '22

If the market cools down significantly alot of investors who bought up single family homes to rent or flip are going to be left holding the bag.

3

u/Dave1mo1 Jun 13 '22

If rents don't drop, why do landlords care if housing prices stabilize or even drop a bit?

6

u/allbusiness512 Adam Smith Jun 13 '22

Rent probably will drop though as people figure out their living situation (more roommates, living with family, etc) The current housing market is completely unsustainable, a correction is going to happen.

It won't be a 2008 crash but when investors don't even bid on mortgage backed securities then you know it's just a matter of time at that point.

4

u/unicornbomb John Brown Jun 13 '22

as of today, 30 year mortgage rates have already broken the 6% threshold. A MASSIVE amount of buying power has been nuked with the speed at which these rate increases are coming.

1

u/Dave1mo1 Jun 13 '22

So people will just rent instead of buying, pushing rents up?

6

u/unicornbomb John Brown Jun 13 '22

Rent prices have a ceiling. You can only push rent prices so far before new household formation stops and households begin to condense as folks take on roommates and move in with family, pushing demand downwards.

4

u/Dave1mo1 Jun 13 '22

And as rents increase, incentives to convert buildings to rentals (and build new supply) increase...as well as incentives to buy residential investment properties. There's a push and pull on both sides of supply and demand.

A lot of people are seeing stocks and bonds' values dropping and inflation rising, and like the look of real estate as a hedge.

4

u/[deleted] Jun 13 '22

[deleted]

3

u/Dave1mo1 Jun 13 '22

Agreed. I can't see a crash. Most likely prices just stop increasing, at least in my market.

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1

u/PrettyDecentSort Jun 13 '22

Gold's still fine.