The Chicago Journal

Bank stocks become priority after fears of recession

Bank Analysts predict that major economies would either stagnate or enter a recession.

As a result, in 2023, investors will defy conventions by flocking to huge bank equities.


The Stoxx Europe 600 Banks index, which includes 42 major European banks, increased by 21% between January and late February.

It exceeded the Euro Stoxx 600, its larger benchmark index, to hit a five-year high.

Yet, the KBW Bank, which tracks 24 of the largest American banks, increased by 4% in 2023, well surpassing the S&P 500.

The two bank-specific indices have risen since their lows in October.

The economy

So far, the economic situation is less favorable.

The biggest economies in the United States and the European Union are expected to increase somewhat more than last year.

In the United Kingdom, however, output is anticipated to fall.

Former Treasury Secretary Lawrence Summers believes that a rapid recession poses a risk to the United States at some time.

But, central banks were obliged to hike interest rates as a result of widespread economic weakness and unsustainable inflation.

In any case, it has aided banks by allowing them to earn higher profits on consumer and commercial loans as more money is deposited into savings accounts.

Although interest rate increases have kept big bank stocks stable, fund managers and analysts believe investor and analyst confidence in their capacity to weather economic storms because the 2008 financial crisis has also contributed to the situation.

“Banks are, generally speaking, much stronger, more resilient, more capable to [withstand] a recession than in the past,” said Roberto Frazzitta, the global head of banking at Bain & Company.

Interest rate increases

As major countries’ interest rates rose last year, governments took efforts to contain rising inflation.

The huge increases came after a period of cheap borrowing prices, which began in 2008.

The financial crisis devastated the economy, causing central banks to cut interest rates to historic lows in an attempt to stimulate consumption and investment.

Central banks have done nothing for more than a decade.

Investors seldom gamble on banks in an environment where lower interest rates imply reduced lender profitability.

Thomas Matthews, senior markets economist at Capital Economics:

“[The] post-crisis period of very low interest rates was seen as very bad for bank profitability, it squeezed their margins.”

But, the rate-hike cycle beginning in 2022, as well as a few indicators of weakness, have changed investors’ views.

Fed Chair Jerome Powell cautioned on Tuesday that interest rates may grow faster than expected.

Read also: Mary Daly thinks more hikes would be beneficial

Returning investors

The increased prospect of shareholder gains has converted investors.

According to Ciaran Callaghan, Amundi’s director of European market research, the average dividend yield for European bank shares is now 7%.

The S&P 500 dividend yield is 2.1%, while the Euro Stoxx 600 yield is 3.3%, according to Refinitiv data.

Also, European bank stocks have risen in the last six months.

According to Thomas Matthews, Capital Economics beat its American rivals because interest rates in nations that use euros are closer to zero than in the US, implying that investors have more to gain from rising rates.

He also said it may be attributed to Europe’s unexpected turn of events.

Wholesale natural gas prices in the region reached a new high in August of last year, but have since fallen down to pre-Ukraine conflict levels.

“Only a few months ago, people were talking about a very deep recession in Europe compared to the US,” said Matthrew.

“As those worries have unwound, European banks have done particularly well.”

Structural changes

At the present, the European economy is still struggling.

As the economy slows, bank stocks take a blow since bank profits are linked to borrowers’ capacity to repay loans and satisfy consumers’ and companies’ need for further credit.

Banks, on the other hand, are better positioned to sustain loan defaults than they were in 2008.

Authorities proactively enacted legislation mandating institutions to have a significant capital buffer in the event of a loss during the global financial crisis.

Lenders must also have sufficient cash (or fast convertible assets) to repay depositors and other creditors.

According to Luc Plouvier, senior portfolio manager at Dutch asset management firm Van Lanschot Kempen, banks have undergone structural changes in the last decade.

“A lot of the regulation that’s been put in place [has] forced these banks to be more liquid, to have much more [of a] capital buffer, to take less risk,” he noted.

Mary Daly thinks more hikes would be beneficial

Mary DalyThis year has been overshadowed by a succession of upheavals, but the impacts of inflation may still be felt today.

While it has fallen slightly, the Federal Reserve is on track to raise interest rates to address the underlying concern.

The necessity of another rate increase was also emphasized by Mary Daly, President of the San Francisco Fed.

The news

On Saturday, Mary Daly proposed that the Federal Reserve not only raise but also maintain interest rates at their present levels.

She said that doing so would allow them to deal with inflation-related pricing increases.

“There is more work to do,” said Daly at Princeton University.

“In order to put this episode of high inflation behind us, further policy tightening, maintained for a longer time, will likely be necessary.”

“Restoring price stability is our mandate, and it is what the American people expect. So, the FOMIC remains resolute in achieving this goal.”

Mary Daly also admitted that excessive inflation and the Fed’s aggressive rate rises to reduce prices scared both Main Street and Wall Street.

“The responses range from fearing these actions will tip the economy into a recession to fearing they won’t be enough to get the job done.”

The revelation of new economic data caused significant market volatility, as uncertainty motivates investors to seek immediate solutions.

Nonetheless, Daly believes that reaching the stated aim would take time and “a broader view.”

But still, Mary Daly noted that, given the volume and duration of high inflation readings, the Fed’s current tightening strategy was (and continues to be) reasonable.

Daly also puts into doubt the disinflationary trend, citing high inflation in the products, housing, and associated sectors, as well as solid economic indices.

Mary Daly is a member of the Federal Open Market Committee and attends policy meetings, although she does not vote on Fed policy at the moment.

Federal Reserve warnings

The Federal Reserve expressed similar worries a week before Mary Daly’s address.

Minneapolis Federal Reserve President Neel Kashkari stated last Wednesday that he is open to a larger interest rate rise during the Fed’s March policy meeting.

“Whether it’s 25 or 50 basis points,” said Kashkari.

Similarly, Atlanta Fed President Raphael Bostic suggested that at the next meeting, the Fed’s policy rate should be raised by half a percentage point.

The next day, Fed Governor Christopher suggested that interest rates might climb faster than expected.

He stressed a series of economic data that were stronger than expected.

Read also: Nishad Singh enters guilty plea with apologies

Interest rate progress

The Federal Reserve has done a lot in the last year to keep inflation under control.

It increased its goal range from close to zero to 4.5% to 4.75%.

After a half-point drop in December, they lowered increases to a quarter-point cut in February.

In 2022, inflation hit a four-decade high, although it began to recede in the last quarter.

Yet, January inflation figures revealed that the rate of price rises was progressively increasing once more.

Gold price

Gold prices have stalled as a result of the fresh concerns.

Prices fell from a two-and-a-half-week high on Monday as traders looked for indications about future rate rises from US Federal Reserve Chair Jerome Powell’s decision.

Spot gold reached a high of $1,858.19 per ounce on February 15, but it is presently down 0.3% at $1,849.33 per ounce.

Similarly, gold futures in the United States climbed little to $1,855.10.

Also, the dollar index rose 0.1%, making greenback-priced bullion more costly for foreign purchasers.

Awaiting testimony

Many people are anticipating Powell’s congressional testimony on Tuesday and Wednesday, followed by the February employment data, which is expected Friday.

“Currently, gold is in a wait-and-see mode,” said UBS analyst Giovanni Staunovo.

“There’s unlikely to be a change of script from Powell, reiterating the need for further rate hikes to bring inflation under control.”

While gold is commonly used as an inflation hedge, increasing interest rates may reduce demand for the zero-yielding metal.

Mary Daly speculated on the likelihood of interest rates rising (and staying there) if Saturday’s report is hotter than predicted.

According to Reuters technical expert Wang Tao, current gold prices may increase further into the $1,867 to $1,876 per ounce range if resistance at $1,853 is broken.

Prices of 2022: the highs and lows

Prices: The United States experienced its highest level of inflation last year.

The Federal Reserve has been battling inflation throughout 2022 and has used all available options, including hiking interest rates.

Price hikes

Recent data on inflation from the Bureau of Labor Statistics show a decline in price rises to 7.1%.

Retail prices increased 7.6% (inflation unadjusted) between November 1 and December 24, making it impossible for customers to purchase gifts without going over budget.

The information was provided by the Mastercard Spending Pulse, which looks at retail purchases beyond auto sales.

The cost of holiday meals skyrocketed throughout 2022 as food prices increased faster than inflation.

Some products had remarkable double-digit growth, but others experienced no change or a drop.


As soon as the demand for expensive electronics fell, retailers noticed a change in consumer behavior.

Prices for major electronics decreased throughout the year that ended in November.

  • Smartphones plunged 23.4%
  • TV prices dropped 17%
  • Computers rolled back prices by 4.4%
  • Major appliances fell by 1%

Several businesses, like Best Buy and Walmart, stocked up at the beginning of 2022 in preparation for supply chain problems and anticipated rises in consumer demand.

Their plans, however, were derailed by mounting prices and declining client confidence.

In addition, during the early stages of the epidemic, when people were confined, they made significant purchases or upgrades.

Read also: Real estate market hopes for consistency this year

Apparel & toys

Although slowly, apparel prices rose last year.

  • Clothing prices rose by 3.6%
  • Footwear increased by 2.3%
  • Sporting goods climbed 2.7%
  • Toys had a meager 0.6% increase

The items were a bargain despite the slight price increase because inflation surpassed it.

In December, Walmart CEO Doug McMillon made the following remarks:

“In toys, sporting goods, categories like that, prices have come down more aggressively.”

“We’re still inflated, but we’re not inflated nearly as much as we are in the other categories.”

However, because retailers overestimated client demand, there was a stockpile of extra goods.

Stores made offers to move inventory, enticing customers to make purchases.

Retailers were able to control prices as a result.

Plane tickets

The 2020 pandemic prompted air travel demand to decline, dropping to an all-time low.

However, it was revived last year.

However, the cost of travel increased by 36% yearly.

Glen Hauenstein, the president of Delta, described the increase as “unprecedented” in March.

“I have never seen… demand turn on so quickly as it has over Omicron,” said Hauenstein.

Airlines made a record amount of money in April, May, and June due to high airfares and congested flights.

Two years after the pandemic-induced lockdowns, they made a full-force comeback owing to travelers.

Gas prices

The cost of land travel increased.

The price of gasoline increased by 10.1%; however, it has since fallen from its record highs.

Gas price volatility was caused by the Russian invasion of Ukraine and geopolitical plans that depended on the availability of oil.

GasBuddy predicts the chances of the national average returning to the $4 per gallon price level could occur as early as May.

The fuel price tracking app GasBuddy does not anticipate another year of extreme volatility.

Read also: Minimum wage to go from $7 to $15 this year

Food prices

Food prices increased by 10.6% in 2022, which is more than overall inflation.

Numerous factors contributed to price increases for particular supermarket items through November 2022.

Egg prices rose by 49.1% as a result of the terrible avian influenza, a lack of supplies, and excessive demand.

Margarine prices increased by 47.4% due to the Russian invasion of Ukraine.

In addition, butter prices increased by 27% as the world’s milk supply plummeted.

Flour is an additional casualty of the Ukrainian situation.

The price of flour increased by 24.9% as a result of the disruption of the global grain market and high US transportation expenses.

In California, lettuce prices jumped by 19.8% as a result of crop disease.

Food prices increased by 12% over that period.

As the cost of eating out increased in 2022, many customers chose to accept higher prices as an alternative.

The price of dining out increased by 8.5% last year as restaurants raised menu prices to offset their rising material expenses.


What got really expensive this year, and what got cheaper

Fast-food survive Q4 as a leader in revenue

Fast-food Businesses from a broad range of industries have already started to submit their quarterly results following the fourth quarter.

Overall, it’s a mixed bag, with fast-food restaurants performing well.

The good news is that casual dining and fast-casual restaurants have had problems attracting new patrons.

The news

Very few publicly listed restaurant companies have released their most recent quarterly results, despite the fact that the fourth quarter has concluded.

A new trend was emphasized by the few who reported it.

During the Christmas season, consumers who were dealing with inflation cut back on eating out and shopping.

Instead, fast-food outlets offer restricted menus and discounts to entice customers from a range of socioeconomic levels.

Economy resilience

The market has been affected by economic upheavals and downturns throughout the years, but the fast-food sector has consistently been among the most resilient.

For instance, McDonald’s, one of the biggest fast food chains in the industry, recorded same-store sales growth of 10.3%.

Low-income customers, who came more frequently than they had in the previous two quarters, were primarily responsible for the increase.

Executives claim that the Adult Happy Meal marketing was a resounding success.

When incorporated into McRib’s yearly return, they greatly enhanced sales.

Contrary to expectations from the industry, the fast-food giant’s US traffic increased for a second consecutive quarter.

Other chains

A different fast-food business, Yum Brands, said there was significant US demand.

Taco Bell’s domestic same-store sales increased by 11% throughout this time.

The increase in morning orders, the return of Taco Bell value meals, and the enduring appeal of Mexican pizza are the causes of the remarkable sales.

Pizza Hut’s same-store sales increased by 4% in the US.

KFC had a paltry 1% gain and difficult year-over-year comparisons.

In the next few weeks, more fast-food restaurants aspire to elevate their position.

Burger King’s parent company, Restaurant Brands International, is anticipated to release its fourth-quarter financial results on Tuesday.

Pizza Hut will report its financial results on February 23.

A disappointing quarter

Despite the fact that many fast food businesses claimed growth, Chipotle Mexican Grill’s sales were a touch underwhelming.

For the first time in more than ten years, the company’s quarterly profits and sales on Tuesday fell short of Wall Street expectations.

Customers were told by Chipotle’s CEO, Brian Niccol, that there had not been a “meaningful resistance” to the fast-food restaurant’s price increases.

Instead, management at Chipotle provided a list of explanations for its disappointing performance, including:

  • Bad economic weather
  • The underperforming debut of the Garlic Guajillo Steak
  • Challenging comparisons to 2021’s brisket launch
  • Seasonality

Chipotle’s chief financial officer, Jack Hartung, blamed the dip in December on the month’s subpar retail sales.

“As we got around the holidays, we didn’t see that pop, that momentum, that we normally see,” said Hartung.

“Frankly, we started the quarter soft, and we ended the quarter soft.”

Read also: United Airlines among many set for a good year

According to Chipotle, traffic started to go up in January.

The Omicron outbreaks from a year ago, which forced Chipotle and other businesses to either close their doors early or for a small period of time, are easy to compare to, though.

The moderate January weather raised demand across the board for the sector, claims a research note issued by Bank of America analyst Sara Senatore and published on Wednesday.

The fourth quarter financial records for the fast-casual food industry are still unavailable to the general public.

The date of February 16 has already been decided by Shake Shack.

However, the massive fast food restaurant business acknowledged at the beginning of January that its same-store sales growth fell short of Wall Street forecasts.

Portillo’s will report its profits on March 2, while Sweetgreen will do so on February 23.

The casual dining scene

Although the fast-food industry has mostly prospered, fast-casual restaurants have had more difficulties than casual dining establishments.

Casual dining establishments struggle to bring in new clients since Chipotle, Sweetgreen, and Shake Shack have established themselves as preferable alternatives.

Red Lobster and Applebee’s used a variety of strategies, including significant discounts and increased promotional expenditure.

The problem already existed for many restaurant firms, including Brinker International, and the rise in inflation did little more than make it worse.

Chili’s Grill and Bar is now being turned around by the firm.

Brinker said at the beginning of the month that for the three months that concluded on December 28, Chili’s traffic fell 7.6%.

Investors were told on the conference call by Brinker’s CEO and former US President Kevin Hochman that a decline was anticipated as the company attempted to lessen its reliance on unfavorable agreements.

Chili’s increased their prices to discourage customers from using coupons.

Minimum wage to go from $7 to $15 this year

Minimum wage: News of an increase in the minimum wage for workers was announced at the start of the year.

Because the federal minimum wage has stood at $7.25 an hour since 2009, workers in more than half of the states have advocated higher pay.

Several states and cities already have set their own minimum wage rates, but most plan to implement them in 2023.

The news

Higher minimum salaries for this year have been declared in 26 states.

The US payroll specialists at Wolters Kluwer Legal & Regulatory said that one more state would join the update in July.

According to the Economics Policy Institute, 23 states, including Washington, DC, began implementing the higher compensation on January 1.

As a result, eight million workers will be impacted.

There will be wage increases ranging from 23 cents to $1.50.

States implementing the minimum wage increase

  • Delaware: $10.50 – $11.75
  • Illinois: $12 – $13
  • Maryland: $12.50 – $13.25
  • Massachusetts: $14.25 – $15
  • Michigan: $9.87 – $10.10
  • Missouri: $11.15 – $12
  • Nebraska: $9 – $10.50
  • New Jersey: $13 – $14.13 (includes inflation adjustment)
  • New York: $13.20 – $15 (in and around the city), $14.20 (upstate New York)
  • Rhode Island: $12.25 – $13
  • Virginia: $11 – $12

States that will implement the increase later this year

  • Connecticut: $14 – $15 (July 1 implementation)
  • Florida: $11 – $12 (September)
  • Nevada: $9.50 – $10.25 (firms with benefits), $10.50 – $11.25 (firms without benefits)
  • Oregon: $13.50 (July 1 implementation)

Read also: Real estate market hopes for consistency this year


Inflation hit a 40-year high, and people were having difficulty keeping up with rising costs, so last summer, a critical choice was made.

Sebastian Martinez Hickey of EPI said:

“The fact that there’s high inflation really just underscores how necessary these minimum wage increases are for workers.”

“Even before the pandemic, there was no country in the United States where you could affordably live as a single adult at $15 an hour.”

The pandemic and the economic recovery made the wealth divide in America painfully clear.

Over the past two years, significant employers’ initiatives to raise the minimum wage have been sparked by poor working conditions and low salaries.

Additionally, the pandemic contributed to a prolonged gap between the supply and demand for labor.


Due to a personnel shortage that affected employers during the majority of the year, the average annual hourly salary increased.

Even when workers in competitive industries learned their new pay was higher than inflation, skyrocketing inflation exceeded most compensation.

Californian economics professor Michael Reich said:

“The story is different because wages have been increasing at the low-end, much faster than inflation and much faster than in middle- or high-wage jobs.”

“And that means that many workers, even in the $7.25 states, are already getting paid above the minimum wage.”

“Even though the minimum wage might go up by 7% in many states and cities, labor costs aren’t going to go up anywhere as much as they have in the past,” Reich added.

“Because they have already gone up. That also means that prices aren’t going to go up at [places like] restaurants.”


Joe Biden, the US president, launched initiatives to boost the federal minimum wage to $15 per hour.

In 2022, he signed an executive order raising the salaries of contractors and employees of the federal government to that amount.

However, Congress would need to approve any significant changes before they could occur in the country.

Although a fee increase was suggested, it wasn’t included in the legislation for the 2021 Covid-19 relief.

Kevin Werner of the Urban Institute, contends:

“As the gap between that and the federal minimum wage increases, it will be interesting to see if that can kind of spur more momentum for more states to increase their wages or try to get more momentum on the federal level.”

According to a September report from the Urban Institute, the $15 per hour pay adjustment would have an influence on 56 million workers.

As a result of the new minimum wage, the study simulated two scenarios in which no jobs were lost and two scenarios in which job losses were more remarkable.

“Even in our highest job loss scenario, we still found that on average, the average worker was better off, and that poverty declined overall,” said Werner.

“Even though some individual people who lost their jobs may have been worse off, the net effect was still positive.”

Read also: Robots prove clinical to restaurant industry this year


According to Kevin Werner, the bulk of laborers who would be impacted by the $15 minimum wage are older than 25.

The likelihood of relying on the minimum wage is higher for people of color and those living in poverty.

Werner made the point that raising the federal minimum wage would help those in need.

The CEO of Business for a Fair Minimum Wage, Holly Sklar, maintains that raising the minimum wage can also increase consumer demand.

As a result, the local economy will be able to recover.

“Putting needed raises in minimum wage workers’ pockets [is] really the most efficient way you can boost the economy,” said Sklar.

“Those are the people who have to go right back around and spend it.”


These states are raising their minimum wages in 2023. Chart shows where workers can expect higher pay

New Year’s pay boost: these states are raising their minimum wage

The Federal Reserve influences 2022 stock market, Thursday market movement

The Federal Reserve: After more than a century, the Federal Reserve has long been recognized as a significant player in the stock market.

Through the 2000s, the central bank adopted unconventional policy measures, such as large-scale asset purchases and forward guidance, which boosted the institution’s reputation.

The policy tools

The Federal Reserve makes large-scale asset acquisitions due to emergency government debt and mortgage-backed securities purchases.

On the other hand, forward guidance refers to the Federal Reserve’s public statements on the direction its monetary policies will take.

The guideline includes the expected federal funds’ interest rate target before a policy change.

Inflation and economic landscape

Central bankers advised the populace to prepare for more difficult economic times as they faced inflation in 2022.

The attempts, according to experts, contributed to the decrease in the price of the S&P 500.

Professor of economics at Notre Dame University and former Federal Reserve economist Jeffrey Campbell said the following:

“I think they know they gambled and lost, and that they have to do something serious in order to get inflation back under control.”

“I fear that they took a gamble that inflation wasn’t too real a thing at the beginning of 2021.”

In 2022, the Federal Reserve raised interest rates seven times in response to inflation that was stronger than predicted.

The effects of higher rates may be felt by publicly traded companies, especially growth shares in the technology industry.

Cautious warnings

Since April 2022, the Federal Reserve’s asset portfolio has decreased by more than $336 billion.

According to experts, the cumulative effect of economic tightening is still unknown.

On Wall Street, there is a lot of hope that the central bank would change its mind and decrease interest rates.

At the same time, many financial gurus are advising caution.

Victoria Green, founding partner and chief investment officer of G Squared Wealth Management, stated the following:

“If you have somebody that has a thumb on the scale or has a decided advantage about what’s going to happen, whether we think good things or bad things are going to happen, it’s best not to fight that policy.”

Experts claim that central bank policy is just one piece of the puzzle.

Investor sentiment and “black swan” events have a significant impact on the direction of the market.

John Weinberg, a former policy adviser for the research department of the Federal Reserve Bank of Richmond, stated:

“Sure, don’t fight the Fed, but… don’t believe too much that the Fed is all powerful.”

Stock movement

Numerous businesses produced headlines on Thursday with their stock movement during the trading session around lunch.


Airline shares fell due to the Thursday announcement of multiple flight cancellations.

Due to a harsh winter storm, the US American and United stocks fell 3.6% and 1.9%, respectively.

Both Delta and Southwest saw drops of 2% and 3%.

AMC Entertainment

The company’s shares dropped 7.4% after it proposed a reverse stock split to lower its debt and announced a new $110 million capital raise.

Its preferred stock shares increased by more than 75%.

Read also: Solar power found to have two benefits for users


Following the most recent quarter’s earnings, the auto retailer’s stock value decreased by 3.7%, and revenue fell short of Wall Street projections.

CarMax generated 24 cents per share on $6.51 billion in sales instead of the analysts’ forecast of 70 cents per share on $7.29 billion in sales.

Micron Technology

Due to the dismal earnings and revenue for the quarter, the company’s shares decreased by 3.4%.

The revenue was attributed to a drop in demand, which is expected to last until 2023.

Additionally, Micron announced a 10% staff decrease for the future year.

Advanced Micro Devices and Nvidia’s respective other semiconductor stocks declined by 7% and 5.6%, respectively.

Marvell Technology lost more than 4%.


After reporting earnings and revenue for the second quarter of fiscal 2023 that beat forecasts, MillerKnoll saw a jump of more than 14%.

The corporation claims it reduced annualized costs by $30 to $35 million.

Even if just somewhat in the third quarter, these savings would be realized in the fourth.

Mirati Therapeutics

Shares of the pharmaceutical company increased by more than 5% after the Food and Drug Administration named its colorectal cancer treatment a “breakthrough therapy.”


On Thursday, the company’s stock fell by roughly 9%.

The Tesla website claims that a $7,500 discount was offered on the Model 3 and Model Y automobiles that will be sent to the US before the end of the year.

The cars also include a free supercharge that is good for 10,000 miles.


After the stock lost more than 11% of its value, TuSimple announced it would remove 25% of its workforce.

The announcement would impact over 350 employees at the self-driving truck startup.

Tyson Foods

The manufacturer of meat and poultry closed the day with unchanged stock prices after The Wall Street Journal reported that the company intended to lay off hundreds of employees in 2019.

Tyson Foods’ corporate offices will consolidate in 2023.

Read also: Elon Musk sells giant chunk of Tesla shares again

Under Armour

On Thursday, the athlete wear company’s share price dropped by more than 2.3%.

Additionally, the business revealed that Stephanie Linnartz of Marriott International would become CEO next year.


How the Federal Reserve affected 2022’s stock market

Stocks making the biggest moves midday: AMC Entertainment, Tesla, Micron, Under Armour and more

Solar power found to have two benefits for users

Solar: Solar energy is one of the finest ways for people to reduce their carbon footprint and has significantly improved their capacity to save money.

A California utility regulator has limited net metering usage.

As a result, it will at least 60% reduce the overall savings for houses from selling electricity to the grid.

Additionally, it affects the country as a whole by changing the economic balance.

What solar brings

Josh Hurwitz, a resident of Connecticut, decided to install solar electricity at his house for three reasons:

  • Reduce his carbon footprint
  • Store electricity in a solar-powered battery in the event of a blackout
  • Save money

Hurwitz’s choice will enable him to save tens of thousands of dollars over the following fifteen years and pay for his system in six years.

Thanks to it, he is also shielded from growing electricity costs.

Hurwitz is getting ready to build a Tesla battery to store the energy he produces because solar has so far operated without a hitch.

“You have to make the money work,” said Hurwitz.

“You can have the best of intentions, but if the numbers don’t work, it doesn’t make sense to do it.”

Inflation Reduction Act

The Inflation Reduction Act, passed in August of this year, is beneficial, according to Josh Hurwitz’s experience.

It will encourage the usage of solar power systems placed on residential properties, which is one advantage of extending and boosting tax advantages.

The Solar Energy Industry Association and Wood Mackenzie estimate that the law will hasten adoption growth by 26%.

Also prolonged are the tax credits, which have a 2024–2035 expiration date.

The credits will cover 30% of the system’s cost.

A 30% credit is also available for batteries that can store recently generated electricity for later use.

Warren Leon, executive director of the Clean Energy States Alliance, spoke before a bipartisan coalition of state government organizations and made the following remarks:

“The main thing the law does is give the industry, and consumers, assurance that the credit will be there today, tomorrow, and for the next ten years.”

“Rooftop solar is still expensive enough to require some subsidies.”

Read also: Mortgage applications advance as interest rates decline

California solar market

Having assurance about anything is the hardest part about solar.

Due to ongoing legislative changes, market analysts have dubbed the industry a “solar coaster.”

California removed a key incentive on December 15, the day after the new federal tax credits went into effect.

Solar energy systems owned by homeowners can sell any excess power they generate back to the grid.

As a result, both the estimates and California’s enormous solar energy business were perplexing.

It will, however, start working in April 2023.

According to Wood Mackenzie, the solar business will face a dramatic 39% reduction in 2024 if the state and federal amendments are implemented simultaneously.

Even without considering the incentives offered by the Inflation Reduction Act, the consultancy firm projects a 50% decrease due to the California policy shift.

According to Mackenzie, home solar is also coming off a historic quarter.

Currently, California represents 1.57 GW, or over one-third of the total, a 43% increase from the previous year.


Potential switchers could quickly recoup some of their early costs by going green, thanks to tax credits.

Josh Hurwitz installed his solar system using the federal tax credit.

He is currently preparing to install a battery due to the tax benefits.

Several contractors provide packages that let customers pay the entire sum up front and earn credit for later rentals of the same piece of equipment while they wait.

Rooftop solar systems can pay for themselves in as little as five years when tax advantages are paired with savings on electricity that households don’t purchase from utilities.

Furthermore, if the initial investment is reimbursed in 20 years, it can save more than $25,000.

Portfolio manager for the Van Eck Environmental Sustainability Fund, Veronica Zhang, stated:

“Will this growth have legs? Absolutely.”

“With utility rates going up, it’s a good time to move if you were thinking about it in the first place.”

Read also: Sam Bankman-Fried found to donate to lawmakers probing FTX collapse

Energy storage

Utilities may be required to pay a higher price in some areas for any excess electricity generated by residential solar systems during peak output or used to replenish home batteries.

However, these states also have more substantial subsidies and consumer-friendly legislation.

Before this week, California had some of the laxest rules.

However, state utility regulators decided to let utilities pay less for any additional power they were required to buy after power firms protested that the prices were too high and increased the cost of electricity for other customers.

The facts of California’s verdict, according to Wood Mackenzie, made it seem less demanding than the company had anticipated.

EnergySage estimates that California’s payback period without a battery will be ten years rather than six when the new laws take effect.

The company expects savings to drop by 60% in the upcoming years.

Battery-powered systems, according to EnergySage, will be more positively impacted because owners keep the majority of the extra power rather than selling it to the grid.

“The new [California rules] certainly elongate current payback periods for solar and solar-plus-storage, but not by as much as the previous proposal,” said Mackenzie.

“By 2024, the real impacts of the IRA will begin to come to fruition.”


Rooftop solar: how homeowners should do the math on the climate change investment

Mortgage rates to stay neutral if Feds hike rates this week

Mortgage rates: The Federal Reserve is expected to raise rates further this week, but mortgage rates are expected to remain unchanged.

Mortgage rates have had several ups and downs this year but peaked at 7% for weeks in October and November.

However, signs of slowing inflation pushed mortgage rates down.

According to a Bankrate survey (owned by Red Ventures alongside NextAdvisor), the average 30-year fixed-rate mortgage is down to 6.62%.


JR Gondeck, financial advisory partner and managing director of Lerner Group, is optimistic about the interest rates.

“From a mortgage perspective, rates have actually gone down even though the Fed has raised rates. We would expect the worst is over,” said Gondeck.

“We think you’re going to see lower rates into the next year despite further rate hikes.”

Meanwhile, experts and financial markets expect the US Federal Reserve to raise its benchmark short-term interest rate (the federal funds rate) by 50 basis points this week.

However, experts also say the next steps for mortgage rates depend more on Fed Chairman Jerome Powell’s 2023 projection.

Odeta Kushi, the American Financial Corporation deputy chief economist, suggested it’s all about expectations.

“If the market is surprised by the Fed’s projections, we could see some movement in mortgage rates,” said Kushi.

“Whether that surprise is to the upside or the downside.”

The Fed

Housing costs are already a significant component of consumer spending.

The housing market was a critical indicator of the Fed’s continued efforts to contain inflation, standing at 7.7% year-over-year in October.

Since early 2022, the Fed has raised the federal funds rate from 0% to 3.75%, one of the central bank’s fastest rate hikes.

The hikes were an attempt to curb ongoing inflation.

Denis Poljak, the co-founder of Poljak Group Wealth Management, provided a unique perspective on inflation, saying:

“Inflation is, essentially, too much money chasing, too few foods.”

The Federal Reserve is making it harder to borrow money by raising interest rates.

Additionally, they said they will continue to increase rates until they see continued declines in consumer spending and inflation.

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Housing market

The current inflationary climate did not occur overnight.

It has gained momentum since the outbreak of the 2020 pandemic, of which the real estate market is a clear example.

The pandemic boom in the housing market led to massive price hikes, with demand failing to meet supply.

The rise in house prices continued until they peaked in the middle of the year.

Since then, prices have slowly declined as high mortgage rates have curbed demand. Also, the housing market has been in neutral territory lately.

However, falling home prices and stabilizing mortgage rates may make affordability difficult, especially for first-time buyers.

The Fed & mortgage rates

Mortgage rates are not directly tied to Federal Reserve actions but are affected by inflation.

When people take out a mortgage, it is sold to investors in the bond market as part of a pool of mortgages called mortgage-backed securities.

Inflation and rising borrowing costs have prompted lenders to increase mortgage rates to give investors higher yielding mortgage-backed securities.

When inflation eased in October, mortgage rates fell, and the bond market rallied.

The housing market represents an important sector of consumer spending.

If the Fed slows housing cost growth, it will likely substantially affect the economy.

“As long as new lease inflation keeps falling, we would expect housing service inflation to keep falling sometime next year,” said Jerome Powell.

“Indeed, a decline in this inflation underlies most forecasts of declining inflation.”

The Fed’s pace

The Federal Reserve has consistently maintained rate hikes through its December meeting.

The Fed aggressively hiked rates by 75 basis points after four consecutive meetings.

“And the reality is, it’s working,” said JR Gondeck. “They started late, but they’re catching up to where things are.”

Despite the progress, the Fed must find a balance between being aggressive and going too far too fast.

The decision to raise rates by 50 basis points instead of 75 suggests the Fed is hoping for a soft landing instead of an outright recession.

“This way, Powell can continue with his agenda to slow the economy down but help create a softer landing, a more moderate recessionary environment,” says Poljak.

The Fed should observe incoming data on housing inflation for a soft landing or a moderate recession.

“The housing market is the leading indicator of a recession,” says Odeta Kushi.

“But traditionally, it has also aided the economy in recovering from one.”

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The Federal Reserve will adjust interest rates and make forecasts for 2023 at its December meeting.

The latest inflation report shows a positive sign, but the Fed needs more to curb rate hikes.

Additionally, the Fed has indicated that it is cautious about easing interest rate hikes until there are indications that inflation has been around or below the Fed Funds rate for several quarters.

However, further hikes may not lead to drastic mortgage rate changes.

Indications of easing inflation should stabilize mortgage rates at lower levels.

“I think the rate hike is pretty much already priced into the market. The Fed is going to raise their short-term rate by half a percent,” said Gondeck.

“But from there, it’s going to matter more what they say about the future, and specifically, the tone they use.”


‘The worst is over’ for mortgage rates despite another looming Fed hike, experts say

The Federal Reserve resort to smaller hikes

The Federal Reserve recently said it may slow the pace of aggressive rate hikes sooner than expected.

The announcement came on Wednesday as Fed Chairman Jerome Powell spoke at an economic forum.

The announcement

Federal Reserve Chairman Jerome Powell delivered fiscal and monetary policy remarks at the Hutchins Center.

It was his last public appearance before the central bank entered a blackout period at its December 13-14 policy meeting.

“The time for moderating the pace of rate increases may come as soon as the December meeting,” said Powell.

“Despite some promising developments, we have a long way to go.”

The Federal Reserve chairman also noted that they had not seen any noticeable progress in the decades-high inflation dragging the economy down.

Rate increases

Meanwhile, investors are looking for signs that the Fed is slowing or halting its aggressive rate hikes.

Recently, the Federal Reserve has increased its rhetoric to spread the message that more needs to be done.

Additionally, officials will continue to raise interest rates until inflation shows signs of slowing.

This time, however, the rate increases will be lower than before.

Stock market

James Bullard, president of the St. Louis Federal Reserve, warned this week that the stock market underestimates the risk of an aggressive Fed.

Meanwhile, John Williams, president of the New York Federal Reserve, said inflation remains the foremost economic concern worldwide.

Williams called underlying inflation in the services sector the most challenging aspect of the battle.

Read also: Federal Reserve continues with another rate hike


The Fed raised interest rates six times in 2022 for the following reasons:

  • Discouraging borrowing
  • Cooling the economy
  • Bringing down the high inflation that peaked at 9.1% over the summer

Since then, the latest consumer price index showed a drop in inflation to 7.7%.


Despite aggressive measures, the labor landscape has proven to be sustainable.

The economy has regained the jobs lost after millions were out of work at the start of the pandemic.

In recent months, hundreds of thousands of jobs have been added to the labor market.

Moreover, the market has maintained a low unemployment rate at nearly half a century.

While workers may have good news, the labor market puts the Fed in a difficult position.

A staff shortage means employees can charge their prices, adding to inflationary pressures.

A recent Job Vacancies and Labor Turnover survey showed on Wednesday that nearly 1.7 vacancies were available to job seekers in October.

According to Powell, the decline in job postings is a positive sign.

However, he noted that although the relationship between job vacancies and unemployment is strained, he and other Fed officials believe the labor market could regain equilibrium as job vacancies decline.

“We’ve seen that so far, but it’s way too early,” said Powell.


The Federal Reserve is tackling a supply-side inflation problem with blunt tools.

Demand for goods in the United States soared last summer as consumers emerged from days of shutdowns and layoffs.

However, the recovery of the global supply chain is taking longer, leading to bottlenecks, goods shortages, and price hikes.

The Federal Reserve has resisted calls to deal with runaway inflation, calling them “transitory.”

Moreover, the Fed kept interest rates at historically low levels because it did not want to risk a resumption of economic growth.

As demand rises, inflation has become the central bank’s primary concern.

In March, the Federal Reserve launched a rapid corrective course with the following actions:

  • Hiking its benchmark lending rate by a quarter of a point
  • Hiking lending rate by half a point
  • Rolling out four consecutive massive three-quarter-point hikes

However, the measures have not yet succeeded in curbing inflation in the United States.

Instead, rate hikes could possibly do more harm than good.

Read also: Signs of inflation collapse could prompt Federal Reserve to cease interest rate hike

New approach

The Federal Reserve currently employs a new model of sustained, smaller rate hikes over an extended period.

They believe the approach will result in a soft landing that will keep inflation in check while avoiding a recession or major layoffs.

“I do continue to believe that there’s a path to a soft or softish landing,” said Jerome Powell.

“I think it’s still achievable.”

“It is likely that restoring price stability will require holding policy at a restrictive level for some time.”

“History cautions strongly against prematurely loosening policy,” he added.

“We will stay the course until the job is done.”


Small rate hikes are likely coming in December, says Fed Chair Powell

Amazon shares plans to remove 11,000 employees

Amazon is planning a major workforce restructuring.

According to the New York Times, from unnamed sources, the company plans to lay off more than 10,000 employees in trades and technology.

The layoffs could begin as early as this week.

The overhaul would include the workforce responsible for Amazon devices, as well as that of retail and human resources.

The news

The Wall Street Journal published a similar report Monday that Amazon was laying off thousands of workers, citing an anonymous source.

The new ranks Amazon among other tech companies that recently announced massive layoffs.

Most companies chose to make a difficult decision amid general economic uncertainty and the sharp slowdown in demand seen by tech giants during the pandemic.

It was at the start of the pandemic that they were prompted to increase their numbers.

Additionally, Meta announced plans to lay off 11,000 workers last week.

Read also: Elon Musk reveals life after buying Twitter

Amazon shares

In early November, Amazon announced it was freezing the company’s hiring for a few months.

The company cited economic uncertainty and the number of people hired in the past few years.

During the pandemic, Amazon’s workforce grew as consumers and consumption habits shifted towards e-commerce.

However, in its latest earnings report, Amazon’s forecast for its holiday quarter revenue showed it falls below analysts’ expectations.

So far in 2022, Amazon shares are down more than 40% on a broader market decline.

Read also: Google agrees to pay $392 million to 40 states

The industry

Amazon’s potential layoffs come at a critical time for the retail industry as the holiday shopping season nears.

As recession fears and inflationary pressures persist, the National Retail Federation forecasts a 6% to 8% year-over-year sales increase for holiday shopping.

Additionally, in October, Jeff Bezos tweeted about the possibility of a recession, writing:

“The probabilities in this economy tell you to batten down the hatches.”

Last Saturday, Bezos told CNN’s Chloe Melas that the advice applied to businesses and consumers.

“Take some risks off the table,” he said.

“Just a little bit of risk reduction could make the difference.”


New York Times: Amazon plans to lay off thousands of employees