The roller coaster of the stock market and economy continues to be volatile. We had a fantastic first two days of the week with substantial stock rallies. Still, the rest of the week tumbled following lackluster economic data, mainly focusing on the employment numbers. As inflation continues to rage across the country and the overall dismal economic strength numbers, we can almost be certain the Federal Reserve will raise interest rates again. Raising interest rates will mean borrowing money will be higher for everyday families. The cost of a new mortgage or a car loan will undoubtedly be higher, resulting in a much higher monthly loan payment than a year ago. In other news this week, we heard Elon Musk has agreed to follow through with his original Twitter purchase agreement, which could be finalized by the end of the month. From Musk’s comments, we can likely expect changes to the social media platform shortly after his purchase is complete.
Interest rates on mortgages are nearing 7% for the first time in decades and undoubtedly have the intended effect that the Fed hoped for as the housing market has slowed. With mortgage rates on a steep climb, re-finances have significantly slowed, and many families are re-thinking if they should enter the housing market. The supply of homes is still down and has varied dramatically depending on the region. Many builders are still finishing contracted homes that were signed last year, but generally, we’ve seen a significant slowdown in the market that will continue into next year.
Big news that came out this week that will affect many people’s daily pocket is OPEC’s decision to cut oil production by roughly two million barrels starting next month despite Biden’s Administration efforts to lobby against it. This decision mid-week undoubtedly weighed on investors, which caused stocks to fall Thursday and Friday of this week. Moreover, we’ve seen gas prices inching up over the last two weeks (more in some regions), but this production cut will likely cause prices at the pump to rise (again). While increases can vary wildly in different areas, places in Michigan have already seen their gas prices jump almost a whole dollar in the past couple of weeks, and oil production cuts haven’t even taken place. Typically, the oil used during winter months is relatively cheaper, resulting in lower prices at the pump; however, with OPEC’s cuts and the war in Ukraine still raging on, plenty of factors will likely keep costs much higher than the past few years. The past month we’ve seen crude oil priced in the $80 range, with a recent uptick in the $90s. OPEC has signaled that with the upcoming production cut, they want the oil to be priced in the low $100 range. The next coming months will be interesting to see where pricing will finally land.
If rising gas prices weren’t enough of an issue, which is causing many families to tighten their pocketbooks, we could expect higher heating costs this winter as high inflation has caused overall costs to rise. The price of natural gas has also increased, and most families will need to expect higher heating costs this winter and ensure they build that into their budgets so you can stay on financial track.
The big topic last week for the east coast was Hurricane Ian, which ended up being one of the most powerful hurricanes to hit Florida. The flooding and damage seen in Florida have been extensive and will likely take years to recover. Initial estimates suggest economic damages will be around $50-70 billion. An additional effect of the hurricane that many will see is the price of orange juice. Following poor weather last year, the orange crop was already slightly down, and this recent hurricane has devastated the crop across much of the state. Keep an eye out at the grocery store for rising OJ costs for likely the next year as Florida goes through a long rebuilding process.
In additional signs of the economy slowing, we’ve seen numerous companies cutting their workforce to help their bottom line. Peloton was one of these companies, stating they’re cutting over 10% of their workforce. Peloton has been struggling since the end of the pandemic and has been working to redefine its business model. The company recently announced it would begin selling its bikes in Dicks Sporting Goods and even offer them at select Hilton Hotel gym locations.
As we move closer to the holiday season with 40-year high-inflation families, you must ensure you’re building a realistic budget and sticking to it. As the cost of borrowing money and credit card interest rates are rising, it’s not the time to go into increased debt. As you purchase Christmas gifts this year, avoid carrying over credit card balances wherever possible, as it’ll cost you more than ever.