Last Week in Review: Celebrating Independence Day
The Fourth of July, Independence Day or July 4th was first recognized as a federal holiday in June of 1870, but the tradition of the 4th celebrations dates back to the 18th century and the American Revolution. On July 2nd, 1776, the Continental Congress voted in favor of independence, and two days later on the 4th of July, delegates from the 13 colonies adopted the Declaration of Independence, a historic document drafted by Thomas Jefferson. From 1776 to the present day, July 4th has been celebrated as the birth of American independence, with festivities ranging from fireworks, parades, and concerts to the good old-fashioned backyard barbecues.
This past week, some weak economic signals sparked increasing fears of a recession. Let’s walk through what happened and look ahead to next week.
“While the Present Situation Index was relatively unchanged, the Expectations Index continued its recent downward trajectory – falling to its lowest point in nearly a decade. Consumers’ grimmer outlook was driven by increasing concerns about inflation, in particular rising gas and food prices. Expectations have now fallen well below a reading of 80, suggesting weaker growth in the second half of 2022 as well as growing risk of recession by year end.” The Conference Board’s Consumer Confidence Report.
This reading is important because if pessimism begins to negatively affect consumer spending, the chance of a recession will rise sharply as consumer spending makes up two-thirds of our economic growth.
On Tuesday, the third and final reading of 1st Quarter GDP showed the economy shrank by 1.6%, worse than expectations of -1.5%. A recession is defined by two quarters of negative growth. The 2nd quarter is forecasted to barely grow, which means we will be in or close to a recession in the 1st half of 2022.
The silver lining about all this recession talk? It will put a limit to how high rates go. We are two weeks past the 3.49% peak in rates which ironically happened when the Fed raised the Fed Funds rate by .75%.
Bottom line: Long-term rates have stabilized but we should not expect much more improvement until inflation moderates further. With that said, if you are interested in purchasing a home, it remains a great time with rates beneath the rate of inflation.
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