Hey Snackers,
Some quarters are smooth sailing, yet the past three months have been anything but. Mass shootings shocked Americans nationwide, and the Supreme Court’s controversial decision to overturn Roe v. Wade ended federal abortion rights. About half of US states have plans to ban or limit abortion immediately, and the landmark ruling could provide a framework for challenging other rights.
Reflecting on the economy: a grizzly bear market dawned along with recession jitters. Today, we’re zooming in on the trends that’ve shaped markets and the economy this past quarter — and helping you prep for what could come next.
FYI: US markets are closed for the Fourth of July, so we’ll be back in your inbox on the 5th.
Recession-omics… the word on everyone’s lips. The probability of a US recession soared this quarter as the Fed aggressively hiked interest rates to tame stubbornly rising inflation. But while #flation hurts the economy, so does fighting it: higher rates discourage borrowing/spending and encourage saving, which should cool consumer demand and prices. They also lower companies’ growth expectations, which have slumped stocks into a bear market. And historically most S&P 500 bear markets have been accompanied by recessions. All eyes are on whether the Fed can cool the economy without igniting a downturn — which seems increasingly tougher.
Crypto winter dawns... Move over, web3. "Contagion" became the quarterly buzzword as the crypto market continued to tumble along with stocks, losing $2T in market cap since its November high. Algorithmic stablecoin TerraUSD's crash wiped out $40B in market value seemingly overnight, while crypto lender Celsius froze billions in customer funds. The trouble spread to other crypto companies like Coinbase, Crypto.com, and Gemini, all of which laid off employees as investors jumped ship. Bipartisan crypto regulation proposed in the Senate could be a win for the struggling industry — though with contentious midterm elections approaching, no one's holding their breath.
A tale of two labor markets… is the quarter’s biggest paradox. While rebounding sectors like hospitality and travel couldn’t hire fast enough (see: travel-pocalypse), pandemic thrivers slowed hiring and cut positions. Unemployment is at record lows and wage growth has doubled from 2019. Still, companies like Meta, Twitter, Netflix, and Uber have had mass layoffs as slowing growth threatens the bottom line. The tech industry made 8X more job cuts last month than it did during the first four months of the year combined. But with two job openings for every unemployed person, job seekers should be better off than in previous downturns.
The housing cooldown… The days of obsessive Zillow-scrolling and cheap mortgages are likely over. Home-buying demand is finally cooling as mortgage rates spike to the highest levels since ’09. Last month, mortgage applications fell to a 22-year low, while brokers Redfin and Compass had mass layoffs. Average mortgage payments are now 31% higher than rent — which could speed the cooldown. As rates rise, fewer people will be eligible/willing to take out loans. Yet home prices won’t cool until supply improves, and that could take years. In May, the median existing-home price topped $400K for the first time as inventory remained brutally low.
Retail’s inventory glut… After years of struggling to get products on shelves, big retailers now have too much stuff. Walmart said nearly a quarter of its inventory is “unwanted” as shipments meant for stay-at-home szn (think: puzzles, throw pillows) arrive months too late. Ditto for teen faves like Abercrombie and American Eagle, which are sitting on 40%+ more inventory than a year ago. Now the Amazon and Target are having huge sales events to shed extra merch. The discounts could lure stimmy-less shoppers to stores and help cool inflation.
Knockoff economy… In Russia, CoolCola’s the new Coca-Cola. Imitation brands are sprouting up after Western big shots like Nike and Coke left because of #sanctions. Despite the corporate exodus, Russia’s economy has been surprisingly resilient: the ruble has rebounded to seven-year highs and shelves are still stocked thanks to more domestic production. Former McDonald’s locations in the country recently reopened as rebranded Russian versions, with 98% local ingredients (and the same ketchup packets).
Authors of this Snacks own: shares of Amazon, Apple, Moderna, Uber, Walmart, Netflix, and Twitter
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