Weekly Update: January 22nd, 2023
It was another busy week in the economy with news of the US hitting the debt ceiling again. Treasury Secretary Janet Yellen has formally informed Congress of the need to raise the debt ceiling by June, or the country will face defaulting on its loans. We have been here before, with the need to raise the debt ceiling, but Congress and the President are at significant odds with each other. President Biden is requesting a “clean” bill that will increase the debt ceiling with no strings attached; however, the new GOP-controlled house says spending cuts must be included with any raising of the debt ceiling.
While it’s far from the first time Congress has been at odds with each other, it does present a severe challenge at the start of the negotiations. Furthermore, it’s been no secret that House speaker Kevin McCarthy has made significant promises to fellow representatives to secure his position. It’ll be interesting to see how things pan out. Yellen has instructed the Treasury to take steps regarding government spending, which buys the government time until June to prevent default. This buffer allows for almost four months for Congress to debate and hopefully conclude with a bipartisan agreement moving forward. If not, the country could face yet another government shutdown or default on our loans. Time will tell how the new Congress and the President will cooperate.
Last week the latest inflation data was released. The Consumer Price Index (CPI) numbers were released last Thursday and showed what many analysts were expecting: a slight decrease in the cost of goods and services. While this week’s stock market doesn’t reflect much positive news, we saw a decline in mortgage rates again. Rates have been falling slightly over the past three months. While this is good news, especially concerning inflation, we still expect the Federal Reserve to raise rates at least one more time, if not two. This isn’t great news for people looking to buy a home or take out a new auto loan, but it’s necessary to get inflation under control.
Another less pleasant news was the announcement of more company layoffs. Microsoft announced layoffs, with 10,000 employees losing their jobs, and Google revealed they would be cutting nearly 12,000 jobs. Amazon has continued with its layoffs, as I reported previously. The retail giant is expected to cut about 20,000 jobs marking a considerable cut. This comes at a time when costs continue to soar for everyday families.
It was disclosed this week that Elon Musk sold $3.6 billion of Tesla Shares in December. Musk has been selling billions of dollars in Tesla stock over the past year totaling over $20 billion. Most of these sales have been related to Musk’s takeover of Twitter last year. Since the Tesla founder assumed control of Twitter, many Tesla shareholders have been upset with the decline in the company’s performance of late and the steep slide in the stock price. Tesla shares were around $400 per share at the beginning of 2022 and are currently around $127. The company’s earnings report is due on January 25th, and there are already talks of the company not meeting their deliveries as anticipated.
Furthermore, Tesla announced a price cut for the popular Model Y and 3. This price cut is likely due to maximizing the new tax rebates passed last year that go into effect in 2023. If Tesla can meet all the tax requirements, buyers can anticipate a $7,500 tax rebate. Be sure to consult your accountant for further details if you qualify.
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