Money in a Minute for the Week Ending March 23

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Freeman / Money Talks News

Every weekend, I recap “news you can use” from the week — a handful of quotes from major (and often expensive) news sources — so you can stay up to date on the news that affects your money without spending a dime and in less than a minute.

Here’s an overview of what happened this week.

The great central bank policy reversal kicks off (March 22, Reuters):

The world’s biggest central banks are on the starting line of reversing a record string of interest rate hikes but the way down for borrowing costs will look very different from the way up.

There will be no floodgates or fireworks. Instead, banks on opposite sides of the Atlantic are likely to move in the smallest increments with periodic pauses, fearing that ultra-low unemployment could rekindle inflation rates still above their targets.

What Would it Take for Houses to Be Affordable in the U.S. Again? (March 21, Investopedia):

To make houses as affordable as they were on typical incomes back in February 2020, home prices would have to fall 40%, the average mortgage rate would have to plummet to an unheard-of 2.45% from its December 2023 average of 6.80%, or median household income would have to skyrocket to $129,096 from its December level of $77,730.

Jobless claims dip to 210,000. Layoffs show no sign of rising. (March 21, MarketWatch):

The U.S. labor market shows little sign of stress despite sharply higher interest rates.

Hiring has slowed since last year, to be sure, but layoffs are still near record lows and the unemployment rate is just 3.9%. That’s why the economy has avoided a recession.

Top U.S. asset manager Vanguard doesn’t believe the Fed will cut interest rates this year (March 21, CNBC):

Traders are currently pricing in a roughly 68% chance of a first Fed rate cut in June, according to the CME FedWatch Tool.

Top U.S. asset manager Vanguard, however, isn’t convinced. Its base case is no rate cuts by the Federal Reserve in 2024, and Shaan Raithatha, senior economist at Vanguard…

Policy uncertainty drives investors into US medium-term bond funds (March 20, Reuters):

The U.S. central bank is likely to keep borrowing costs unchanged at its Wednesday meeting, while new projections may hint at a slower and delayed approach to future rate cuts.

Analysts say medium-term bonds offer the best of both scenarios, helping investors tie up current high yields for a reasonably long period of four to 10 years while mitigating the risk of big price losses on longer tenor bonds should yields keep rising.

The Era of No-Brainer 5% Returns on Cash Is Ending (March 20, Wall Street Journal):

CDs show the shift under way. Last year, it was easy to lock in a 5% rate for 12 months or longer.

Now, the top rates are shorter-term offers. Three-month CDs pay as much as 5.5% annually. CDs that stretch out two years, however, offer under 5%, down from about 5.5% late last year, according to Bankrate data that tracks the highest rates financial institutions are offering.

Fed raises GDP and inflation outlook, while keeping rate cut forecast (March 20, CNBC):

The Federal Open Market Committee’s March projections for rate cuts, or “dot plot,” shows a median Federal funds rate of 4.6% in 2024. With the current Fed funds rate in a range 5.25% to 5.50%, the dot plot implies three cuts of 0.25 percentage points.

Housing starts rebound in February by largest amount in nine months (March 19, MarketWatch):

Construction of new U.S. homes rebounded 10.7% in February to an annual pace of 1.52 million units, the Commerce Department said Tuesday. That is the biggest gain in nine months. Despite the increase, starts are still below December’s level.

BOJ’s Small Rate Hike May Have Big Ripple Effect Around the World (March 19, Bloomberg):

The Bank of Japan finally ended an eight-year experiment with negative interest rates that has left more than $4 trillion in funds hunting for higher returns abroad. What comes next threatens to shake up money flows in Japan and across the world.

One of the biggest questions is what happens to that big ball of money stashed overseas in assets including US government bonds, European power stations and Singapore equities.

China’s upbeat industrial output, retail sales tempered by frail property (March 18, Reuters):

Industrial output rose 7.0% in the first two months of the year, data released by the National Bureau of Statistics (NBS) showed on Monday, above expectations for a 5.0% increase in a Reuters poll of analysts and faster than the 6.8% growth seen in December. It also marked the quickest growth in almost two years.

A protracted crisis in the property sector, a key pillar of the economy, remains a major concern for policymakers, consumers and investors.

U.S. stocks have beaten European equities but won’t for much longer, says JPMorgan (March 18, MarketWatch):

The eurozone is trading on 13.3 times forward earnings compared to the U.S. on 21 times. Indeed, as the chart below shows, the eurozone’s price to earnings discount to the U.S. is at its cheapest versus any time before the COVID pandemic.

Importantly, JPMorgan says it is not switching to overweight eurozone versus the U.S. because it believes “the risk of a broader market drawdown is elevated.”

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I founded Money Talks News in 1991. I’m a CPA, and I have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

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