Who just Threw a Spanner in the Works?
The Wall Street heaved a sigh of relief as latest signs emerged of a cooling labor market in the US and balancing between supply and demand in the labor market. As more companies embark on massive layoffs and freeze new hiring, there has been a decline in job openings. Along with a slowing demand amidst gloomy business outlook and rising geopolitical tensions, the relentless rate hikes by the Fed are taking a toll on the economy and companies are feeling increasing strains. As if these are not enough, the recent banking turmoil has raised liquidity and credit risks, lending a hand to the Fed by performing some of the heavy lifting to rein in the sticky inflation. These seemingly bad news may be welcomed by the Fed as they help to work towards its inflation target of 2%, leading the markets to predict a peaking of the Fed rate sooner than later.
However, OPEC+ took the markets by surprise during the weekend when the organization announced a drastic supply cut of a million barrels of oil a day, and worldwide crude oil prices jumped spontaneously. Rising oil prices are certain to fuel inflation that has otherwise shown signs of cooling amidst the rate hikes and liquidity crunch, creating complications for the Fed, which may have to press on with its rate hikes despite increasing risk of banking crisis and deep recession.
It seems like high interest rates may be here to stay for longer than the markets would wish, and I hope that the economy is not going to end up in a stagflation. Meanwhile, cash is king to me and I continue to source for competitive bank CASA deposit rates and build my ladder of T-bills to take advantage of the attractive short-term interest rates while they last, as they become increasingly a sizeable source of my passive incomes, while I maintain liquidity to deploy my funds whenever market opportunities present themselves. I look forward to add to $Vanguard S&P 500 ETF(VOO)$ on market weaknesses, as I believe that the broad market will prevail and emerge stronger after every crisis.
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