The Chicago Business Barometer, also known as the Chicago PMI, rose 4.8 index points to 48.6 in April.
Economists polled by the Wall Street Journal forecast a decline to a 43.8 reading.
This is the eighth straight reading below the 50 threshold that indicates contraction territory.
The index is produced by the ISM-Chicago with MNI. It is released to subscribers three minutes before its release to the public at 9:45 am Eastern. It is the last of the regional manufacturing indices before the national ISM data for April is released on Monday.
So far, the regional data suggest a modest improvement this month in the manufacturing ISM. In March, the ISM factory index fell to 46.3% from 47.7% in the prior month. It was the fourth month in contraction territory.
Major U.S. stock indexes posted big gains on Thursday as Meta and other major technology companies embolden bullish investors with better earnings results than anticipated. The Dow Jones Industrial Average DJIA rose about 524 points, or 1.6%, ending near 33,826, while the S&P 500 index SPX gained 2%, according to preliminary FactSet figures. That marked the best daily percentage gains for both since Jan. 6, according to Dow Jones Market Data. The Nasdaq Composite Index COMP led the charge higher Thursday, jumping 2.4%, its best daily advance since Feb. 2. Meta Platforms Inc.’s META said Wednesday that the company’s profit…
David Rosenberg honestly doesn’t want to be bearish on stocks or bash the Federal Reserve. The veteran market strategist will get no satisfaction if he’s right about Americans having to slog through recession and consequently endure deflation, job losses and a wallop to the stock market.
“As I play the role of economic detective, I can see the smoking gun,” says Rosenberg, a former chief North American economist at Merrill Lynch and now president of Toronto-based Rosenberg Research.
Nicolas Cage admitted that his continued interest in acting isn’t just for fun.
The “Face Off” actor revealed on “60 Minutes” that his Hollywood roles have kept him afloat after he fell into $6 million in debt following some bad investments.
“I was overinvested in real estate. … The real estate market crashed, and I couldn’t get out in time,” he said about the years of the housing crisis in the late 2000s.
In 2009, Cage ended up owing the IRS and creditors $14 million, according to ABC News, after he sued his former business manager for allegedly leading him “down a path toward financial ruin,” he told GQ in 2022.Despite reportedly owing $14 million, Cage told “60 Minutes” that he “paid them all back, but it was about $6 million. I never filed for bankruptcy.”
Cage told “60 Minutes” he moved to Las Vegas in the midst of his financial woesin 2006which is notably tax-free, and started making three to four movies a year.
“It was dark, sure,” he said of his days to get back in good financial standing but said there was “no doubt” that acting helped him in his darkest times.
“Work was always my guardian angel. It may not have been blue chip, but it was still work,” he said. “Even if the movie ultimately is crummy, they know I’m not phoning it in, that I care every time.”
According to CNBC, the actor once owned 15 multi-million-dollar properties around the world. He also purchased a 70-million-year-old dinosaur skull for $276,000, that later had to be returned after it was discovered to have been stolen.
Bustle reported that Cage had once owned 50 cars, including a $450,000 Lamborghini that was custom-made for the Shah of Iran. He also reportedly paid $150,000 for a pet octopus, and he owns a pyramid tomb he hopes to be buried in.
In 2019, Cage told the New York Times his finances play a big role in his continuous work efforts.
“Money is a factor. I’m going to be completely direct about that. There’s no reason not to be,” he said. “There are times when it’s more of a factor than not.”
What Is Nicolas Cage’s Net Worth Today?
Although Nicolas Cage’s fortune was once estimated to be around $100 million, the actor’s net worth is estimated to be around $25 million today, according to CNBC.
U.S. Treasury Secretary Janet Yellen on Tuesday warned of severe economic consequences if Congress does not address the debt ceiling, as Republicans were readying a House vote on the matter.
“It is unlikely that the federal government would be able to issue payments to millions of Americans, including our military families and seniors who rely on Social Security,” she said in remarks prepared for delivery to the Sacramento Metropolitan Chamber of Commerce.
Stocks ended a choppy session slightly higher Friday, with major indexes suffering small weekly declines as investors weighed corporate earnings and the economic outlook. The Dow Jones Industrial Average DJIA rose around 22 points, or 0.1%, to close near 33,809, according to preliminary figures. The S&P 500 SPX and Nasdaq Composite COMP each eked out a rise of 0.1%. That left the Dow down 0.2% for the week, while the S&P 500 lost 0.1% and the Nasdaq declined 0.4%.
The numbers: An early reading of the U.S. economy in April from S&P Global showed that business activity has escaped the doldrums after struggling over the fall and winter months.
The S&P Global U.S. service sector purchasing managers index rose to 53.7 in April from 52.6 in the prior month. This is a 12-month high.
It was a two-week trading period like few had ever seen in the $24 trillion Treasury market.
In a span of roughly nine trading sessions between March 7 and 17, the yield on 2-year Treasury notes — a gauge of where U.S. central bankers are most likely to take interest rates over the next two years — sank a full percentage point to 3.85% from an almost 16-year closing high above 5%, with wide swings in both directions on the way down.
The 2-year yield’s yearlong upward trajectory made a sudden and dramatic descent, as investors swung from a view that interest rates would remain higher for longer to a scenario in which the Federal Reserve might need to cut borrowing costs to avert a deep recession and repeated bank failures. The wild swing in sentiment turned the 2-year Treasury rate TMUBMUSD02Y, 4.178%
into a roller-coaster ride and made it the most exciting space to watch in the traditionally staid government-debt market.
For traders like David Petrosinelli of InspereX in New York, a 25-year veteran of markets, March’s daily volatility was akin to “getting on an elevator with no buttons,” he said. He recalls telling people at his firm, who were worried about the positions they held at the time, that “a lot of this is a knee-jerk reaction to the unknown” — even if it felt both “eerily reminiscent” of rates volatility seen ahead of the 2007-2008 financial crisis, and “distinctly different’’ because it was driven by rapidly changing market expectations for the Fed and contained within the U.S. regional-banking system.
For more than a decade, there wasn’t much to say about the 2-year Treasury yield because the U.S. was mired in mostly low interest rates and “no one knew how to trade it,” according to Petrosinelli, 54, who began his career in the late 1990s as a as a portfolio manager focused on asset-backed and residential mortgage-backed securities. It was an overlooked rate in a sleepy corner of the market and nobody paid it much attention. That changed beginning in 2022, when monetary policy makers finally undertook the most aggressive rate-hike campaign in four decades to combat inflation — reinforcing the 2-year yield’s role as the best proxy for where the market thinks interest rates will end up. The 2-year yield rocketed to above 5% in early March from 0.15% in April 2021.
Suddenly, the 2-year Treasury became the most watched financial indicator on Wall Street, influencing the trajectories of stocks and the U.S. dollar throughout much of 2022. “This thing is relentless,” declared market commentator Jim Cramer on CNBC last year. He told viewers he was buying 2-year notes, not meme stocks. “The run to 4 is probably the most punishing one I can recall for the 2-year.” Other prominent names like Mohamed El-Erian, the former chief executive of PIMCO, and Jeffrey Gundlach, founder of DoubleLine Capital, wanted to talk about it. “If you want to know what’s going to happen in the year, follow the 2-year yield at this point,” El-Erian said on CNBC. “That’s the market indicator that has the most information.” More hedge funds and macro private-equity firms jumped on board and started trading it, said InspereX’s Petrosinelli. And head trader John Farawell of Roosevelt & Cross in New York, said family and friends who never showed much interest in fixed income before began regularly asking him if it was the right time to buy the 2-year Treasury note.
“Once we started to hit 4% on the 2-year yield last September for the first time since 2007, everyone got interested,” said Farawell, 66, a trader for the past 41 years. He estimates that interest in the 2-year yield among his firm’s clients has gone up about 30% in the past 12 months. “We have seen retail customers suddenly saying they want to put their money to work in the 2-year note because of an interest rate that we have not seen in years.”
From his office in Midtown Manhattan, Nicholas Colas noticed an abrupt and unexpected shift over the past year and it had to do with the 2-year Treasury. As the co-founder of DataTrek Research, a Wall Street research firm, Colas realized that the 2-year Treasury yield was influencing trading in the stock market. When the 2-year Treasury yield shot higher in 2022, the equity market would become volatile and often drop. In fact, the 2-year Treasury seemed to influence equity-market volatility in both directions. Whenever the 2-year yield briefly stabilized, Colas said, stocks tended to rally since equity investors took the stabilization in the 2-year rate to mean that Fed policy was “no longer as much of a wild card.”
To Colas, equity markets appeared to be taking any selloff in the 2-year note, and thus a rise in its corresponding yield, as a sign that the Fed would have to increase interest rates by more than expected and keep them higher for longer. With stocks and U.S. government debt both getting trounced regularly in last year’s selloffs, Colas said his first thought was that “all of a sudden, Treasurys were no longer a safe haven — something that has rarely happened since I started my career in 1983.”
Trading in government debt, like elsewhere in financial markets, is a two-way street of buyers and sellers. When yields are moving higher, that means the price of the corresponding Treasury security is dropping — and vice versa. The 2-year Treasury note pays out a fixed interest rate every six months until it matures. The trick to trading it, as opposed to buying and holding, is to either sell it before its underlying value gets destroyed by higher interest rates, or to buy it before the Fed starts cutting rates — which would, theoretically, produce a lower yield and make the government note more expensive.
Throughout the yield’s march higher, investors sold off the underlying 2-year note — a move which diminished the note’s value for existing holders like banks, pension funds, credit unions, foreign central banks, and U.S. corporations. Two-year Treasury notes also constitute about 1% to 2% of the total holdings at the 10 largest actively managed money-market funds, according to Ben Emons, senior portfolio manager and head of fixed income at NewEdge Wealth in New York.
“Policy expectations are what really drive the 2-year yield,” said Thomas Simons, a U.S. economist at Jefferies, one of the two dozen primary dealers that serve as trading counterparties of the Fed’s New York branch and help to implement monetary policy. “We had a major paradigm shift in terms of what investors’ expectations were for the sustainability of higher inflation and what the Fed would do in response. The impact on markets has been far less appetite for risk than there otherwise would be,” with stocks putting in a dismal performance in 2022, though generating somewhat better 2023 returns. Tucked into the note’s selloff, though, was plenty of interest from prospective government-debt buyers, which helped temper the magnitude of the 2-year yield’s rise once the rate got to 4%. Many looking to buy were individual investors hoping to benefit from higher yields and to diversify away from stocks, said traders like Tom di Galoma, a managing director for financial services firm BTIG.
Historically, banks, mutual funds, hedge funds, foreign investors and even the Fed have been the biggest buyers of Treasurys across the board; some of those players, particularly foreign central banks and money-market mutual funds, are mandated to buy and hold government debt. All two dozen primary dealers are involved as market makers for the 2-year security, stepping in to buy it in the absence of either direct or indirect buyers.
The 2-year note remains a reliable source of funding for the U.S. government, given the consistent demand for the maturity, which enables the U.S. Treasury Department to “raise a lot of cash quickly, if needed,” said Simons of Jefferies. In 2020, for example, when the government authorized $2.4 trillion in Covid-related spending and relief programs, the amount of 2-year notes sold at auction was one of the biggest of any maturity — far exceeding the 10- and 30-year counterparts — “because it had the capacity to handle that.’’
Sources: Treasury Department, Bureau of Public Debt, Federal Reserve Bank of Dallas.
Currently, the Treasury has $1.421 trillion in total outstanding 2-year notes, representing about 13% of all the debt issued out to 10 years, according to Treasurydirect.gov. The most recent 2-year note auction in March was for $42 billion — more than the 10-year note sale.
Fallout from the banking sector and worries about a potential recession altered the trajectory of the 2-year starting in March, triggering concerns that the Fed’s rate-hike cycle had gone too far. Fresh buyers poured into the 2-year space and pushed the yield below 4% — driven by the view that rates weren’t likely to go much higher from here and that policy makers might cut them by year-end.
Substantial downside volatility in the 2-year Treasury yield has actually helped to stabilize stock prices this year, in Colas’ estimation, because it’s been interpreted as the bond market’s sign that the Fed is approaching the end of its rate-hiking cycle.Like InspereX’s Petrosinelli, Colas says he had visions of the 2007-2008 financial crisis during March’s flight-to-quality trade, which occurred amid regional bank failures and “significantly more stress than the market was expecting.”
As of Thursday morning, the 2-year rate was at 4.17%, below the Fed’s benchmark interest-rate target range — implying that traders still believe policy makers will follow through with rate cuts. That’s a turnabout from the thinking that prevailed over most of 2022 through early last month, when the 2-year rate had been on an aggressive march toward 5% as the Fed continued to hike rates to combat inflation.
Meanwhile, poor liquidity continues to plague the Treasury market broadly, based on Bloomberg’s U.S. Government Securities Liquidity Index, which measures prevailing conditions. According to the New York Fed, the Treasury market was relatively illiquid throughout last year — making it more difficult to trade. As a result, there was a widening in the bid-ask spread — or difference between the highest price a buyer is willing to pay versus the lowest price a seller is willing to accept — of the 2-year note relative to its average.
“The volatility we’re seeing in the 2-year, we think, is largely a function of uncertain Fed rate hiking expectations coupled with poor liquidity,” said Lawrence Gillum, the Charlotte, N.C.-based chief fixed income strategist at LPL Financial.
“The 2-year is the most sensitive to changing policy expectations and since this Fed is ‘data dependent,’ any and all new data that could potentially change the inflation/economic growth narrative has increased volatility substantially,” Gillum said in an email. “As the Fed’s rate hiking campaign comes to an end (we think there is one more hike and then they’ll be done), we would expect the volatility to decline. Moreover, the Treasury and Fed are looking at ways to improve liquidity, but so far nothing has happened. Hopefully, they will do something, though, since the Treasury market is arguably the most important market in the world.”
At InspereX, Petrosinelli regards the 2-year note as an “anchor” to any short-term portfolio, and says that “it’s not a bad place for investors to hide out for at least a year.’’ That’s because even if the yield does come down, “investors wouldn’t be getting too hurt price-wise,” he said. “We think the Fed will leave rates elevated for some time.”
However, the 2-year could continue to dip below the fed-funds rate on soft economic data, especially related to consumption, later this year, Petrosinelli said. In order for the 2-year rate to go above the Fed’s main interest-rate target — now between 4.75% and 5% — “people would have to think the Fed is behind the curve again on inflation.”
For Farawell of Roosevelt & Cross, which was founded in 1946 and is one of Wall Street’s oldest independently owned municipal-bond underwriters, the 2-year note “has become such an attractive asset class for us’’ that “you almost can’t go wrong with putting money in it.” Friends and family “ask me about this 2-year and say, ‘It sounds good.’ I say, ‘It’s a great rate, you should buy it — until the Fed starts to change course.’”
U.S. stocks drifted, closing mostly lower on Tuesday, as investors waited for earnings season to gather more steam. The Dow Jones Industrial Average DJIA, -0.03%
ended down 10 points, or less than 0.1%, near 33,976, while the S&P 500 index SPX, +0.09%
gained 0.1%, according to preliminary figures from FactSet. The Nasdaq Composite Index COMP, -0.04%
fell less than 0.1%. Bank of America BAC, +0.63%
and Goldman Sachs GS, -1.70%
were among the major banks to report quarterly results, while streaming giant Netflix Inc. NFLX, +0.29%
was on deck after the bell. It is ending its red-envelope DVD rental service after 25 years. Investors also heard Tuesday from several more staffers at the Federal Reserve, with Atlanta Fed President Raphael Bostic telling Reuters that he expects one more rate hike, but for the Fed’s policy rate to stay higher for awhile. Continued gridlock in Washington on the debt-ceiling stalemate also has been coming into focus for markets. BlackRock also sold the first batch of seized assets from Silicon Valley Bank and Signature Bank, which fetched about 85 cents to 90 cents on the dollar.
During a period of high interest rates, it might be more difficult to impress investors with dividend stocks. But the stocks can have an important advantage over the long term. The dividend payouts can increase over the years, helping to push share prices higher over time.
When considering stocks for dividend income, yield shouldn’t be the only thing you consider. If a stock’s price has tumbled because investors are worried about the company’s business prospects, the dividend yield might be very high. A double-digit yield might mean investors expect to see a cut to the dividend soon.
There are many ways to look at companies’ expected ability to maintain or raise their dividend payouts. But one can also take a simple approach to begin researching stock choices.
For investors who would rather aim for long-term growth to go along with dividend income, or take a relatively conservative approach to growth while reinvesting dividends, a screen of stocks in the S&P 500 SPX, +0.33%
produces only 10 stocks with dividend yields of 4.5% or higher with majority “buy” or equivalent ratings among analysts polled by FactSet. Here they are, sorted by dividend yield:
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
The dividend yields for this group of 10 companies are based on current annual regular payout rates, with all paying quarterly except for Realty Income Corp. O, +1.30%,
which pays monthly.
These two oil and natural gas producers would have passed the above screen based on their most recent dividend payments and analysts’ sentiment, however, they pay a combined fixed-plus-variable dividend every quarter, with the fixed portion relatively low:
Shares of Pioneer Natural Resources Co. PXD, -0.77%
closed at $230 on April 14. Among analysts polled by FactSet, 59% rate the stock a “buy” or the equivalent, and the consensus price target is $257.42. The company pays a fixed quarterly dividend of $1.10 a share, which would make for a dividend yield of only 1.91%. However, the most recent variable quarterly dividend was $4.48 a share, for a combined quarterly dividend of $5.58, which would translate to an annualized dividend yield of 9.70%. The consensus estimate for dividends in 2025 is $4.63 — the analysts are only estimating the fixed portion of the dividend. Pioneer has held preliminary merger discussions with Exxon Corp. XOM, -1.16%,
according to a Wall Street Journal report.
Devon Energy Corp.’s DVN, -0.72%
stock closed at $55.70 on April 14. The shares are rated “buy” or the equivalent by 55% of analysts and the consensus price target is $67.66. The fixed portion of Devon’s quarterly dividend is 20 cents a share, for an annualized dividend yield of 1.44%. The variable portion of the most recent quarterly dividend was 69 cents a share. The total payout of 89 cents would make for an annual dividend yield of 6.39%. Analysts expect the fixed portion of annual dividends to total $3.61 in 2025, according to FactSet.
Here’s a thought for investors: If the Federal Reserve raises interest rates to 5% or more would that wreck the economy and stock prices ?
The U.S. stock market has been rallying to start 2023, clawing back a big chunk of the painful losses from a year ago. The bullish tone has been linked to a view that the Federal Reserve will need to cut interest rates this year to prevent a recession, reversing one of its quickest rate-increasing campaigns in history.
Doomsday investors, including hedge-fund billionaire Paul Singer, have been warning against that outcome. Singer thinks a credit crunch and deep recession may be necessary to purge dangerous levels of froth in markets after an era of near-zero interest rates.
Another scenario might be that little changes: Credit markets could tolerate interest rates that prevailed before 2008. The Fed’s policy rate could increase a bit from its current 4.75%-5% range, and stay there for a while.
“A 5% interest rate is not going to break the market,” said Ben Snider, managing director, and U.S. portfolio strategist at Goldman Sachs Asset Management, in a phone interview with MarketWatch.
Snider pointed to many highly rated companies which, like the majority of U.S. homeowners, refinanced old debt during the pandemic, cutting their borrowing costs to near record lows. “They are continuing to enjoy the low rate environment,” he said.
“Our view is, yes, the Fed can hold rates here,” Snider said. “The economy can continue to grow.”
Profits margins in focus
The Fed and other global central banks have been dramatically increasing interest rates in the aftermath of the pandemic to fight inflation caused by supply chain disruptions, worker shortages and government spending policies.
Fed Governor Christopher Waller on Friday warned that interest rates might need to increase even more than markets currently anticipate to restrain the rise in the cost of living, reflected recently in the March consumer-price index at a 5% yearly rate, down to the central bank’s 2% annual target.
The sudden rise in interest rates led to bruising losses in stock and bond portfolios in 2022. Higher rates also played a role in last month’s collapse of Silicon Valley Bank after it sold “safe,” but rate-sensitive securities at a steep loss. That sparked concerns about risks in the U.S. banking system and fears of a potential credit crunch.
“Rates are certainly higher than they were a year ago, and higher than the last decade,” said David Del Vecchio, co-head of PGIM Fixed Income’s U.S. investment grade corporate bond team. “But if you look over longer periods of time, they are not that high.”
When investors buy corporate bonds they tend to focus on what could go wrong to prevent a full return of their investment, plus interest. To that end, Del Vecchio’s team sees corporate borrowing costs staying higher for longer, inflation remaining above target, but also hopeful signs that many highly rated companies would be starting off from a strong position if a recession still unfolds in the near future.
“Profit margins have been coming down (see chart), but they are coming off peak levels,” Del Vecchio said. “So they are still very, very strong and trending lower. Probably that continues to trend lower this quarter.”
Net profit margins for the S&P 500 are coming down, but off peak levels
Refinitiv, I/B/E/S
Rolling with it, including at banks
It isn’t hard to come up with reasons why stocks could still tank in 2023, painful layoffs might emerge, or trouble with a wall of maturing commercial real estate debt could throw the economy into a tailspin.
Snider’s team at Goldman Sachs Asset Management expects the S&P 500 index SPX, -0.21%
to end the year around 4,000, or roughly flat to it’s closing level on Friday of 4,137. “I wouldn’t call it bullish,” he said. “But it isn’t nearly as bad as many investors expect.”
“Some highly levered companies that have debt maturities in the near future will struggle and may even struggle to keep the lights on,” said Austin Graff, chief investment officer at Opal Capital.
Still, the economy isn’t likely to “enter a recession with a bang,” he said. “It will likely be a slow slide into a recession as companies tighten their belts and reduce spending, which will have a ripple effect across the economy.”
However, Graff also sees the benefit of higher rates at big banks that have better managed interest rate risks in their securities holdings. “Banks can be very profitable in the current rate environment,” he said, pointing to large banks that typically offer 0.25%-1% on customer deposits, but now can lend out money at rates around 4%-5% and higher.
“The spread the banks are earning in the current interest rate market is staggering,” he said, highlighting JP Morgan Chase & Co. JPM, +7.55%
providing guidance that included an estimated $81 billion net interest income for this year, up about $7 billion from last year.
Del Vecchio at PGIM said his team is still anticipating a relatively short and shallow recession, if one unfolds at all. “You can have a situation where it’s not a synchronized recession,” he said, adding that a downturn can “roll through” different parts of the economy instead of everywhere at once.
The U.S. housing market saw a sharp slowdown in the past year as mortgage rates jumped, but lately has been flashing positive signs while “travel, lodging and leisure all are still doing well,” he said.
U.S. stocks closed lower Friday, but booked a string of weekly gains. The S&P 500 index gained 0.8% over the past five days, the Dow Jones Industrial Average DJIA, -0.42%
advanced 1.2% and the Nasdaq Composite Index COMP, -0.35%
closed up 0.3% for the week, according to FactSet.
Investors will hear from more Fed speakers next week ahead of the central bank’s next policy meeting in early May. U.S. economic data releases will include housing-related data on Monday, Tuesday and Thursday, while the Fed’s Beige Book is due Wednesday.
Opinions expressed by Entrepreneur contributors are their own.
As an entrepreneur, you’re likely keeping a close eye on the Federal Reserve and its efforts to cool inflation. It’s natural for business leaders to watch interest rate hikes closely. But despite uncertain forecasts and any banking turmoil, there’s no need to panic. Here’s why:
Your business should always come first, regardless of interest rates
No matter how interest rates go up or down, it’s important to remember that your business comes first. As an entrepreneur, you need to trust in your business and its ability to adapt to changing market conditions. Interest rates may fluctuate, but your business should remain your top priority.
If you believe in your business, you should be confident in its ability to weather any storm. While rising interest rates can pose challenges, they can also present opportunities for growth and innovation. By staying focused on your business goals and remaining flexible, you can navigate any changes in the market and emerge even stronger.
It’s important to remember that interest rates are just one factor that can impact your business’s success. By focusing on other areas, such as product development, marketing and customer service, you can ensure that your business remains competitive and profitable, regardless of interest rate fluctuations.
As an entrepreneur, taking on debt is often a necessary part of growing and expanding your business. Interest rates can play a significant role in determining the cost of borrowing, but they should not be the sole factor in your decision-making process. In fact, it is always advantageous to take on a debt no matter what the interest rate levels are.
But before taking on debt, make sure you understand and tick each point:
Make sure you have a solid plan in place for how you will use the borrowed funds: What specific investments do you plan to make? How will those investments help grow your business and increase profitability? By having a clear plan in place, you can make sure that you are using debt strategically to support your long-term goals.
Consider the costs and risks associated with borrowing: While interest rates may be low, you will still need to pay interest on the borrowed funds. Additionally, there may be fees and other costs associated with taking on debt. Make sure you carefully evaluate the costs and risks before deciding to borrow.
Shop around for the best interest rates and terms: Different lenders may offer different rates and terms, so it’s important to do your research and compare options before deciding where to borrow from.
Have a plan in place for how you will repay the borrowed funds: Taking on debt can be a valuable tool for growing your business, but it’s important to make sure that you can repay the debt on schedule.
How to leverage debt to grow your business during inflationary periods
If you’re confident in your business model and have a plan for how to use borrowed funds, taking on debt can help you grow your business faster than you would be able to otherwise.
But when inflation is high, it can be challenging to navigate how to leverage debt to grow your business. Here are some tips to help you make the most of your borrowing during inflationary periods:
Take advantage of fixed interest rate: If you can secure a fixed interest rate, it can protect you from rising inflation rates. As inflation goes up, so does the cost of borrowing, but a fixed-rate loan will lock in your interest rate at the time of borrowing.
Consider short-term loans: Inflation typically leads to higher interest rates, so opting for a short-term loan can help you avoid paying higher interest rates over an extended period.
Be cautious about long-term commitment: Long-term loans and investments can be riskier during periods of high inflation. While it may be tempting to lock in a low-interest rate for a longer period, you may end up paying more in interest over time.
Look for opportunities to invest in assets that will appreciate: During inflation, assets like real estate and precious metals tend to appreciate. If you can borrow money to invest in these assets, you may be able to benefit from their increased value over time.
Focus on revenue-generating investments: When borrowing during inflation, it’s essential to focus on investments that will generate revenue and help you pay off your debt faster. This could include expanding your business operations or investing in marketing and advertising to attract new customers.
Rather than worrying about short-term fluctuations in interest rates, it’s important to keep your eyes on the bigger picture. Remember that your goal as an entrepreneur is to build a sustainable, profitable business in the long run. Focus on making smart investments, building a strong team and staying true to your values and mission.
Stay agile and adaptable
As an entrepreneur, you’re no stranger to uncertainty and volatility. The best way to weather any storm is to stay agile and adaptable. Keep a close eye on market trends and be willing to pivot your business strategy if necessary. Don’t be afraid to take calculated risks and be creative in finding new growth opportunities.
As an entrepreneur, you have the skills and mindset needed to navigate these uncertain waters. Focus on leveraging debt, building a sustainable business and staying agile and adaptable. With the right mindset and strategy, you can thrive in any economic climate!
The U.S. economy could slip into recession given the fast pace of interest rate rates over the past year, said Chicago Fed President Austan Goolsbee on Friday.
“There is no way you can look at current conditions around the U.S. and not think that some mild recession is on the table as a possibility,” Goolsbee said, in an interview on CNBC.
At the same time, while inflation is coming down, there is “clear stickiness” in some categories of prices, he said.
Goolsbee said he is focused on whether there is a credit crunch in the wake of the collapse of Silicon Valley Bank in March.
The Chicago Fed president, who is a voting member of the Fed’s interest rate committee, said he wanted to see more data before deciding what to do at the Fed’s next meeting on May 2-3 .
“What I am looking at quite clearly coming into the next FOMC meeting is what’s happening on credit…how much of a credit crunch is there,” he said.
“Let’s be mindful that we’ve raised a lot. It takes time for that to work its way through the system,” Goolsbee said.
The March retail sales report, released earlier this morning, might be a sign of further slowing in the economy, he said. The government reported a 1% drop in retail sales, the biggest decline since November.
“If you add financial stress on top of that, let’s not be too aggressive,” he said.
After a long period of underperformance when compared with the U.S. equity market, stocks in other countries are holding their own this year. One way to lower your overall risk with real diversification is to add exposure to an active international management style that doesn’t mirror a broad stock index.
One example is the $2.7 billion Columbia Overseas Value Fund COSZX, which is rated four stars out of five by Morningstar in its Foreign Large Value category. Fred Copper and Daisuke Nomoto co-manage the fund and described…
IMF Managing Director Kristalina Georgieva on Thursday said it was important that the tensions between the U.S. and China not devolve into a second Cold War.
At a press briefing at the start of the IMF/World Bank meetings of finance ministers and central bankers. Georgieva called for “cool-headedness” and rational policies to lower tension.
Series I bonds had a good two-year run at the top of the interest-rate heap, but the next 6-month rate that will be announced on May 1 is likely to fall so low that buyers probably won’t show up in record-breaking numbers.
I-bonds are priced based on two factors: a variable rate based on six months of inflation data (from October through March) and a fixed rate that is less transparently calculated. The latest CPI numbers for March indicate that the variable rate is going to pan out at an annualized rate of 3.38%, down from…
Federal Reserve officials, meeting days after the collapse of Silicon Valley Bank, agreed that the stress in the banking sector would slow U.S. economic growth, but were uncertain about how much, according to minutes of the meeting released Wednesday.
The twelve voting members on the Fed’s interest-rate committee “agree that recent developments were likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation, but that the extend of these effects were…
U.S. investors will hop right back to work on Easter Monday, after the confluence of Good Friday and “jobs day” required an abbreviated trading session for stock-index futures and Treasurys.
Because Good Friday isn’t a federal holiday, the U.S. Labor Department released the March jobs report at its usual time of 8:30 a.m. Eastern. U.S. stock exchanges and most markets were closed Friday, but U.S. stock-index futures on the CME remained open until 9:15 a.m., giving investors a 45-minute window to trade the employment data….
The U.S. stock market is closed Friday, April 7, for the Good Friday holiday, but the bond market will be briefly open.
Friday morning has seen the release of the monthly jobs report for March, a key piece of economic data that households, investors and industry leaders will be following for clues to how much further progress the Federal Reserve has been making in its inflation fight.
The numbers: The U.S. added a robust 236,000 new jobs in March, defying the Federal Reserve’s hopes for a big slowdown in hiring as the central bank struggles to tame inflation. The consensus economist forecast called for a nonfarm-payrolls expansion of 238,000.
The solid increase in employment last month followed a revised 326,000 gain in February and a gain of 472,000 in January.
While the increase in hiring was the smallest monthly rise in more than two years, the number of jobs created last month was much greater than is typical.
The U.S. economy has shown recent signs of stress.
The unemployment rate, meanwhile, slipped to 3.5% from 3.6% as more people searched for and found work. That’s another sign of labor-market vigor.
There was some good news in the report for the Fed, though.
Wage growth continued to moderate closer to level the Fed would prefer. Hourly wages increased a mild 0.3% last month, the government said Friday.
The increase in pay over the past year also slowed again to a nearly two-year low of 4.2% from 4.6% in February.
What’s more, the share of people working or looking for work rose a tick to 62.6%. That’s the highest labor-force participation rate since February 2020, the last month before the pandemic’s onset.
When more people look for work, companies don’t have to compete as hard for workers via higher pay.
Still, the U.S. has added a whopping 1 million–plus new jobs in the first three months of the year. The labor market is not cooling off as much as the Fed would like.
“ The Black unemployment rate fell to 5% last month, the lowest level since records began being kept in the early 1970s. ”
Key details: About one-third of the new jobs created last month — 72,000 — were at service-sector companies such as bars and restaurants whose employment still has not returned to prepandemic levels.
Americans are going out to eat a lot and spending relatively more on services than on goods.
Government employment increased by 47,000. Hiring also rose at professional businesses and in healthcare. Retailers cut 15,000 jobs.
Employment fell slightly in manufacturing and construction, or goods-producing industries, which are under more pressure from rising interest rates.
The strong labor market has benefited all groups, but especially Black Americans. The Black unemployment rate fell to 5% last month, the lowest level since records began being kept in the early 1970s.
Big picture: The ongoing tightness in the labor market could inflame inflation and even push the Fed to raise interest rates more than currently forecast to try to get prices under control.
Higher borrowing costs reduce inflation by slowing the economy, but most Fed rate-hike cycles since World War II have been followed by recession.
On the flip side, the U.S. economy is starting to show more signs of deterioration due to the series of rapid Fed interest-rate increases since last year.
If these trends continue the economy — and inflation — are bound to slow.
The U.S. is still growing for now, however, and the labor market remains an oasis of strength.
Low unemployment and rising wages have allowed Americans to keep spending. And so far they’ve keep the economy out of a widely predicted recession.
Looking ahead: “The U.S. labor market is losing some momentum, but remains far too vibrant for the Fed to pause [its rate-hike campaign] in May,” said senior economist Sal Guatieri at BMO Capital Markets
“Although job growth is gradually slowing, it remains too strong for the Federal Reserve,” said Sal Guatieri of PNC Financial Services.
Market reaction: Futures contracts on the Dow Jones Industrial Average YM00, +0.19%
rose 64 points, or 0.2%, to 33,723. S&P 500 futures ES00, +0.24%
gained 9.75 points, or 0.2%, to 4,141.75. Stock trading resumes again on Monday.
