US equities started the month lower after a strong set of data suggested the Federal Reserve has not yet slowed growth enough to tamp down inflation, while JPMorgan Chase & Co.’s Jamie Dimon warned restrictive policies threaten to tip the economy into recession.
After doubling in size through asset purchases in the first two years of the pandemic, the FED’s balance sheet will be reduced at a pace that’s almost twice as fast as after the last financial crisis. While the process officially commences on Wednesday, the first US Treasury securities won’t run off until $15 billion mature on June 15.
Minutes of the Fed’s most recent policy meeting, on May 3-4, said that, “Regarding risks related to the balance-sheet reduction, several participants noted the potential for unanticipated effects on financial market conditions.” The next meeting is scheduled for June 14-15.
And Americans are putting more on their credit cards and taking out fewer mortgages, as they need to increasingly borrow to cover the higher cost of everyday essentials and respond to rising interest rates. US consumer borrowing soared in March by the most on record as credit-card balances ballooned and non-revolving credit jumped, underscoring the combined impact of solid spending and rising prices.
The S&P 500 fell 0.8% as data showed an unexpected advance in US manufacturing activity as well as exceptionally high job openings, fueling concern the Fed will need to get more restrictive to slow runaway price gains. Financial firms in the index slid 1.7% after Dimon said private borrowers may be stranded as conditions tighten.
Jamie Dimon warned investors to prepare for an economic “hurricane” as the economy struggles against an unprecedented combination of challenges, including tightening monetary policy and Russia’s invasion of Ukraine.
“That hurricane is right out there down the road coming our way,” the JPMorgan Chase & Co. chief executive officer said at a conference sponsored by AllianceBernstein Holdings Wednesday. “We don’t know if it’s a minor one or Superstorm Sandy. You better brace yourself.”
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