From turmoil to stability
The FED's quick action and clear communication restores hope in the market 🧵
The past week showed signs of market stabilization after weeks of turmoil, but tighter credit conditions and stubbornly high inflation could add to the case for 25 bps hike in May.
1️⃣ US Economic Sentiment
2️⃣ Economic Figures
3️⃣ Credit Market Outlook
1️⃣ US Economic Sentiment
With the recent market instability, there've been some signs of stabilization; but, stricter lending conditions may soon cause growth to stall.
Consumers don't appear to be impacted by this circumstance, but inflation is still rising quickly, which might result in a 25 bps rise in May. Although everything may appear to be quiet at the moment, difficulties may lie ahead.
Tighter credit conditions are expected to remain for some time notwithstanding effective attempts to control financial crises. Credit spreads have improved somewhat, but they are still higher than they were prior to the banking sector displaying signals of fragility.
In the upcoming months, businesses looking to expand or invest may encounter more stringent lending requirements, which may hurt economic development. Expectations of a recession later this year are being raised as a result.
2️⃣ Economic Figures
There are still certain challenges to overcome before we see sustainable development, despite the fact that we have made headway in resolving the current banking concerns.
🟢 Consumer Confidence Index
Contributed from the positive job market. Labour disparity remained large. And the expectations index indicates a strong possibility of a recession within a year, yet consumers are still wary about the future.
🟢 Home Sales
Shows that the lower mortgage rates are having a good effect on home sales
🔴 GDP profitability
Sluggish consumer spending and high labor expenses caused a decline in overall economic profitability. Corporate earning declining could cause a reduction in future capital expenditures.
🔴 Interest rate hike
Last reference for Fed before next FOMC in May and attention will be on nonfarm payrolls. 4.9% of core PCE deflator is considered high. Expecting the Fed to stick to its intentions and raise rates by 25 bps, despite the economic momentum in Q1.
3️⃣ Credit Market Outlook 🔴
Credit conditions have tightened and is difficult to get, which has led to a decrease in the demand for consumer credit. Consumers' surplus savings have decreased.
The average APR on credit cards reached a high, increasing the cost of obtaining credit. The forecast for consumer spending will be more reliant on actual income growth.
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