Inflation and the Fed
Data released in March showed inflation’s continuation upward, with 60% of its growth due to shelter (rent/housing prices) and energy (gasoline) costs (source). Inflation is currently up 3.2% from the past 12 months, well above the 2% level that the Federal Reserve has been targeting. A week after this data was released, Chair Jerome Powell discussed that those at the Fed are not too concerned with the recent prints, citing seasonal variations. Regarding policy, the median forecast anticipates three interest rate cuts in 2024, most likely during the second half of the year. Rent prices and energy costs will remain a key focal point in determining when and if the Federal Reserve will take action on interest rates.
Japan’s Central Bank’s About Face
Japan made headlines this month by raising its central bank’s interest rates for the first time in 17 years. The country was the last central bank to have a negative interest rate policy (yes negative), which was an attempt to stimulate their economy. As noted in last month’s email, Japan recently went into a recession. The standard playbook for a central bank is to lower interest rates to encourage economic activity. However, Japan cannot lower already zero or negative interest rates and have any meaningful impact. Furthermore, having the lowest interest rates in the world has led investors to other countries (like the US) for higher-yielding bonds. This has resulted in less demand for the Japanese currency (Yen). A weaker Yen increases the costs of imports for this import-reliant nation, a major cause of their recession. The Japanese central bank’s move this month is significant, as Japan is the third largest sovereign debt market after the US and China (source). Japan is now in uncharted territory as they essentially abandoned their long-term monetary policy strategy.
Real Estate Commissions
March marked a change in the way real estate commissions are handled in the US. The National Association of Realtors (NAR) agreed to modify its rules regarding commission, advertising, and payments. Previously, NAR guidelines influenced how commissions were set between agents and brokers. This meant commissions were typically around 5-6% of the sale price, split between the buyer's and seller's agents. The new rules essentially state there is no longer a set commission protocol. This allows for more negotiation between buyers, sellers, and agents regarding commission fees. Notably, under the new system, the seller is no longer obligated to cover the buyer's agent's commission. Unsurprisingly, this comes at a time when transaction volumes are at historic lows, and may help kickstart the market. The increased flexibility is a welcome change for buyers and sellers alike.
RFK Polling
Robert F. Kennedy Jr. is throwing another twist into this year’s upcoming election. Historically, the independent/third-party candidate has had a poor showing, generally earning less than 1% of the popular vote. In the last 100 years, only 4 presidential elections saw a popular vote of more than 2% for a third party, with the highest being 3.2%. RFK has been polling at roughly 10% for the last few months. Current reporting shows his campaign is converting 2 former Biden voters for every 1 former Trump voter. This is largely due to his previous ties to the democratic party, as well as the Kennedy name recognition. If this ratio does not change, it will push the odds toward Trump winning. Normally third-party candidates drop in popularity as November approaches. If the Kennedy campaign can continue to build momentum, we will likely have the highest 3rd party showing in several generations.
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Any opinions are those of Citrus Wealth Management and not necessarily those of Raymond James. The information contained in this email does not purport to be a complete description of the securities, markets, or developments referred to in this material nor is it a recommendation. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results.
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