“When the demand for goods increases relative to the supply, there can be “demand-pull” inflation. When inputs to production such as labor and raw materials increase in price, there can be “cost-push” inflation. Finally, when the value of an importing country’s currency declines relative to that of an exporting country, the cost of the exporter’s goods can rise in the importing country.” ― Howard Marks

1. Fed Chair Jerome Powell Says Higher Interest Rates Could Cause a Recession — Federal Reserve Chairman Jerome Powell said the central bank’s battle against inflation could lead it to raise interest rates high enough to cause an economic downturn. His remarks underscore the challenge facing the central bank as it raises interest rates at the most rapid clip since the 1980s to slow the economy and cool inflation. Mr. Powell said the Fed plans to continue raising interest rates until it sees clear proof that inflation is slowing to the central bank’s 2% target. Officials raised interest rates by 0.75 percentage point last week, the largest increase since 1994, and Mr. Powell and several colleagues have signaled that another such increase could be warranted at their next meeting, July 26-27.
2. FDA to Order Juul E-Cigarettes Off U.S. Market — the Food and Drug Administration is preparing to order Juul Labs Inc. to take its e-cigarettes off the U.S. market, according to people familiar with the matter. Uncertainty has clouded Juul since it landed in the FDA’s sights four years ago, when its fruity flavors and hip marketing were blamed for fueling a surge of underage vaping. The company since then has been trying to regain the trust of regulators and the public. It limited its marketing and in 2019 stopped selling sweet and fruity flavors. Juul’s sales have tumbled in recent years.
3. U.S., European Economies Slow Sharply as Recession Risks Grow — the U.S. and European economies slowed sharply in June as surging prices of energy and food weakened demand for other goods and services, business surveys showed, increasing the risk of recessions around the world. Data firm S&P Global said on Thursday that its U.S. composite purchasing managers index—which measures activity in both the manufacturing and services sectors—fell to 51.2 in June from 53.6 the previous month to reach a five-month low. In the eurozone, the index fell to 51.9 in June from 54.8 in May, a 16-month low. A reading above 50.0 points to an expansion in activity, while a figure below that threshold points to a contraction.
4. Supreme Court Overturns Roe v. Wade, Eliminates Constitutional Right to Abortion — a deeply divided Supreme Court eliminated the constitutional right to an abortion, overruling the 1973 Roe v. Wade decision and leaving the question of abortion’s legality to the states.
The court’s decision in Dobbs v. Jackson Women’s Health Organization upheld a law from Mississippi that bans abortion after 15 weeks of pregnancy, roughly two months earlier than what has been allowed under Supreme Court precedent dating back to Roe. In siding with Mississippi, the court’s conservative majority said the Roe decision was egregiously wrong in recognizing a constitutional right to an abortion, an error the court perpetuated in the decades since. “The Constitution makes no reference to abortion, and no such right is implicitly protected by any constitutional provision,” Justice Samuel Alito wrote for the court.
5. CDC Recommends Moderna’s Covid-19 Vaccine for Kids 6 to 17 Years — the Centers for Disease Control and Prevention recommended use of Moderna Inc.’s Covid-19 vaccine in children ages 6 to 17 years. The CDC’s move on Friday means the youths, who have been able to get the Covid-19 vaccine made by Pfizer Inc. and its partner BioNTech SE, will also have the choice of Moderna’s shot. Uptake of Moderna’s shot in the age group might be limited, however, since many eligible children have gotten the Pfizer-BioNTech shot. About 60% of 12- to 17-year-olds and 30% of children ages 5 to 11 are fully vaccinated against Covid-19, according to the American Academy of Pediatrics.

The week ahead — Economic data from Econoday.com:

“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” — Warren Buffett

1. Fed Hikes 75 Basis Points, Powell Says 75 or 50 Likely in July — the Federal Reserve raised interest rates by 75 basis points — the biggest increase since 1994 — and Chair Jerome Powell signaled another big move next month, intensifying a fight to contain rampant inflation. He said another 75 basis-point hike, or a 50 basis-point move, was likely at the next meeting of policy makers. They forecast interest rates would rise even further this year, to 3.4% by December and 3.8% by the end of 2023.
2. Bitcoin Price Falls Toward $20,000 as Cryptocurrency Rout Deepens — Cryptocurrencies extended their slide, with bitcoin on the verge of falling below $20,000 for the first time since December 2020. The rout in cryptocurrencies has wiped out roughly 1½ years of gains for bitcoin, which started to soar at the end of 2020 as speculative fervor washed over financial markets. Two high-profile incidents in recent weeks have accelerated cryptocurrencies’ fall. In May, the collapse of stablecoin TerraUSD and its sister token Luna prompted a selloff across cryptocurrencies.
3. Celsius Is Crashing, and Crypto Investors Are Spooked — late last week, Celsius said it was no longer allowing customers to withdraw cash from their accounts. Last Tuesday night, The Wall Street Journal reported that Celsius hired restructuring attorneys to help handle its mounting financial problems. Prices for bitcoin and other cryptocurrencies have been plummeting as interest rates rise and risky assets turn unpopular. The difficult market is forcing once-highflying digital-currency companies to slash jobs, halt mergers and bar clients from withdrawing digital investments, shocking investors. Individual investors might not have realized when they put money in Celsius that they were giving the company an unsecured loan with little legal protection. Crypto companies such as Celsius look like banks in some ways, but they lack the investor oversight and legal protections built into banks and brokerages.

The week ahead — Economic data from Econoday.com:

“Patient opportunism, buttressed by a contrarian attitude and a strong balance sheet, can yield amazing profits during meltdowns.” ― Howard Marks

1. World Bank Warns of Stagflation Risk, Cuts Global Growth Forecast to 2.9% — the World Bank sharply lowered its growth forecast for the global economy for this year, warning of several years of high inflation and tepid growth reminiscent of the stagflation of the 1970s.
Citing the damage from the war in Ukraine and the Covid-19 pandemic, the bank said global growth is expected to slump to 2.9% in 2022 from 5.7% in 2021, significantly lower than its January forecast for 4.1% growth. Furthermore, growth is expected to hover around the reduced pace over 2023 and 2024 as the war disrupts human activity, investment and trade while governments withdraw fiscal and monetary support.
2. Moderna Booster Targeting Omicron Shows Stronger Immune Response Than Original Vaccine — Moderna modified Covid-19 booster shot that targets the Omicron coronavirus variant showed a stronger immune response than the original vaccine. The modified “bivalent” booster shot—mRNA-1273.214—targets both Omicron and the original variant, and was well-tolerated in a study with 437 participants, according to preliminary data. The company’s updated vaccine had side effects comparable to the original booster dose but produced eight times more antibodies, the press release stated. Moderna (ticker: MRNA) will submit the analysis to U.S. regulators in the coming weeks, with the hope that the booster dose will be available in the late summer.
3. U.S. Considering Reducing Tariffs on China to Ease Inflation — treasury Secretary Janet Yellen said the Biden administration is considering ways to reconfigure tariffs on imports from China as a means of helping to ease decades-high inflation. The Biden administration has been split on whether to pare back tariffs on imports from China in an effort to cut consumer costs and reduce inflation. The administration has been engaged in a legally required review of the Trump-era tariffs. Easing the tariffs could take the form of expanding the list of items excluded from the duties.
4. ECB Plans July Rate Increase as Inflation Problem Deepens — in an unusually detailed statement, the ECB said it intends to raise its key rate by a quarter percentage point at its next policy meeting in July to minus 0.25%, and increase it again in September, possibly by more than 0.25 percentage point. It said it would end its large-scale bond-buying program on July 1. After September, the ECB said it expects a “gradual but sustained path of further increases in interest rates.” Unusually, the bank published its new staff inflation forecasts in its policy statement. They show eurozone inflation of 3.5% in 2023 and 2.1% in 2024, both above the ECB’s target rate.
5. U.S. Inflation Hit 8.6% in May — the Labor Department on Friday said that the consumer-price index increased 8.6% in May from the same month a year ago, marking its fastest pace since December 1981. That was also up from April’s CPI reading, which was slightly below the previous 40-year high reached in March. The CPI measures what consumers pay for goods and services. May’s increase was driven in part by sharp rises in the prices for energy, which rose 34.6% from a year earlier, and groceries, which jumped 11.9% on the year, the biggest increase since 1979. But inflation pressures were distinctly broad-based in May, said Sarah House, senior economist at Wells Fargo Securities.

The week ahead — Economic data from Econoday.com:

THERE WILL NOT BE ANY POSTING FOR THE WEEK OF JUNE 3RD 2022 — WE ARE AWAY FOR SOME NEEDED R&R

The week ahead — Economic data from Econoday.com:

1. Fed Sees Half-Point Rate Hikes at the ‘Next Couple of Meetings. — minutes from the Fed’s May 3-4 meeting, at which the central bank raised interest rates by a half point to a range of 0.75%-1% and unveiled plans to begin reducing the size of its balance sheet, echoed an urgency to tackle inflation that Fed Chairman Jerome Powell said was a priority in his postmeeting press conference. But they also show that the Fed hopes to become more “data dependent” at future meetings amid an uncertain economic outlook. The Fed’s policy-making arm, the Federal Open Market Committee, meets next on June 14-15 and then July 26-27.
2. ECB Signals Delayed Bond Runoff, Diverging From Fed — the European Central Bank is likely to hold on to its mammoth portfolio of sovereign debt as it starts to raise interest rates, ECB officials said, underlining the fine line it is walking as it tightens monetary policy to battle inflation while trying not to weaken the bloc’s most fragile economies. The Fed, the ECB and other major central banks sucked up trillions of dollars of government and private debt during the pandemic to support financial markets and the economy. Now, investors are focusing on whether and how central banks unload those assets, which will have big repercussions for asset prices and bond yields.
3. US Home Sellers Cutting Prices Hits Highest Level Since 2019 — nearly one in five sellers dropped prices during the four week period ended May 22, Redfin Corp. said in a report Thursday. Other measures of how hot the market is, including a house’s time on market and the percentage of homes selling above listing price, have also plateaued. Consumers are contending with some of the highest mortgage rates in years, despite the dip in those figures in the past two weeks. Higher rates, coupled with economic uncertainty, are raising questions about whether the US housing boom has met its limit with signs emerging that the once-intense pace of the market could be decelerating.
4. Inflation Eased Slightly in April — Consumer prices rose 6.3% in April from a year earlier, down from 6.6% in March, as measured by the Commerce Department’s personal-consumption expenditures price index, which it reported Friday. The March rise was the fastest since January 1982. April’s reading was the first time the measure eased since late 2020. The so-called core PCE index—which excludes volatile food and energy prices—increased 4.9% in April from a year ago, down from 5.2% in the year through March. On a monthly basis, core prices rose a seasonally adjusted 0.3%, the same as in February and March. That pace marked a moderate slowdown from the average monthly pace for the previous four months. Minutes from the Fed’s May 3-4 meeting, released Wednesday, show that officials discussed the possibility that they would raise interest rates to levels high enough to slow economic growth deliberately as the central bank races to combat high inflation.

The week ahead — Economic data from Econoday.com: