"It's Time For Some Tough Love"

The Weekly Recap

The Fed met and paused rate hikes for June, inflation is deflating with a CPI at 4%, we’ve officially entered bull market territory, congestion pricing looks like its going to actually happen in NYC, egg prices are falling, a study showed that the NYC employee that works from home cost city’s business $4,600 in annual sales, Modelo beat out Bud Light as America’s top-selling beer and the Denver Nuggets won the NBA Championship.

Is Inflation Over?

That is a very pie in the sky dream to have but the short answer is no, not quite, but there are some really promising signs that the light at the end of the tunnel is rapidly approaching. Following the Fed’s two day meeting this week, the Federal Reserve has paused rate hikes for June with most expecting rates to be raised another 25bps in July. The curveball that came from the Fed Meeting was that CPI growth was at 4%, its lowest print in over two years. The Fed goal is to get inflation to around 2% which would normally occur with a recession, but its hard to have a recession with an incredibly strong May jobs report, low unemployment and rising earnings. The economy is chugging along.

Another positive indication that we’re heading in the right direction is the IPO or Initial Public Offering of the fast casual food chain Cava. Wall Street has experienced the longest IPO drought in history and with Cava being the first in 18 months, three crucial things were needed to get here. One, you need a moving stock market, the S&P is at a record high and the Nasdaq is up almost 30% YTD. Two, you need a stable rate environment, with the hawkish pause taken by the Fed and long view being that we *might* at most see two additional rate hikes the rest of the year creates stability. Finally, you need a high valuation, Cava was expected to open at $20-$22 per share but has a valuation of closer to $44 a share.

All of these things lead to a level of confidence that has been missing over the past 12 months as to the shape and resiliency of the US economy. Markets flail and fall with uncertainty and lack of faith. We’re seeing a return to confidence in stocks, crypto currency (bitcoin up almost 60% YTD) and employment (the great resignation has been deemed to have ended) all of which are highly volatile compared to Real Estate. Real Estate, an asset class I may remind you, that is responsible for 80% of global wealth.

Inflation may not be over, but we’re getting there.

Market Performance

Here are how some other indexes and asset classes have performed as of this mornings opening bell.

NYC Market Update

Here is a view of new inventory that has come onto the NYC market over the past week as well as newly signed contracts in Manhattan.

Mortgage Rate Update

Mortgage rates decreased slightly this week in anticipation of the pause in rate hikes by the Federal Reserve. As inflation continues to decelerate, economic growth is slowing and the tightening cycle of monetary policy is reaching its apex.

News You Can Use

• Fed Leaves Rates Unchanged, Sees Two Small Hikes By End of 2023 Reuters

• IPOs Show Signs of Life Axios

• US Producer Inflation Subsides as Energy, Food Prices Drop Reuters

• Big Banks are About to Get Safer Axios

• Is There Too Much Risk In Big Tech? CNBC

• Wall Street Firms Up Bets on US Consumers Wall Street Journal

• Andreessen Horowitz Believes That Crypto’s Future May Be in the UK Axios

• Goldman Sachs CEO Warns of Pain Ahead for Commercial Real Estate CNBC

• A Tale of Two Economies Wall Street Journal

• Does a Recession in Europe Hurt the US? CNN

• American Investment Banks Give Up Some China IPO Mandates Wall Street Journal

• The Job Market Enters A New Phase as the Great Resignation Ends CNN

• Treasury Yields Climb After CPI Report CNBC

• US House Republican Unveil Broad Package of Tax Cuts Reuters

• US Junk Loan Defaults Surge As Higher Interest Rates Start to Bite Financial Times

• Bud Light Loses Title as Top-Selling US Beer Wall Street Journal

The Deep Insight

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