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Tag: Economist

  • Housing Tracker: Southern California home values sink slightly in January

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    Southern California home prices dipped slightly in January. It’s the third month in a row that prices have fallen, and the eighth time in the last nine months.

    In January, the average home price fell to $855,335, according to data from Zillow. Prices were down .01% month over month and 0.9% year over year.

    It’s the lowest that Southern California home values have been since March 2024.

    The dip reflects a slow winter market with tepid sales and low inventory. But economists and real estate agents say a variety of factors have contributed to the broader decline over the last year, including high mortgage rates, rising inventory and economic uncertainty stemming from tariffs.

    Until the recent declines, July 2023 was the last time that year-over-year prices had fallen. Back then, rising mortgage rates were knocking many buyers out of the market. Values started increasing again when the number of homes for sale plunged as sellers backed away, unwilling to give up mortgages they took out earlier in the pandemic with rates of 3% or lower.

    Real estate agents say homeowners increasingly want to take the next step in their lives and are deciding to move rather than hold on to their ultra-low mortgage rates. But many first-time buyers, without access to equity, remain locked out.

    Add on the economic uncertainty and you get a market that’s noticeably downshifted.

    If the Trump administration’s policies end up pushing the economy into a recession, some economists say home prices could drop much further.

    Even accounting for the winter slowdown, January was an extremely slow month for new inventory in L.A. County. Only 3,472 new homes were listed for sale in January; that’s 1.4% less than December, and the lowest total since January 2024.

    For now, Zillow is forecasting that the economy will avoid a recession and home prices will increase over the next year. The real estate firm expects that over the course of the year, home prices will rise 1.2% both nationally and in L.A.

    Note to readers

    Welcome to the Los Angeles Times’ Real Estate Tracker. Every month we will publish a report with data on housing prices, mortgage rates and rental prices. Our reporters will explain what the new data mean for Los Angeles and surrounding areas and help you understand what you can expect to pay for an apartment or house. You can read last month’s real estate breakdown here.

    Explore home prices and rents for January

    Use the tables below to search for home sale prices and apartment rental prices by city, neighborhood and county.

    Rental prices in Southern California

    Rents continued to get cheaper across L.A., dropping to $2,163 in January. That’s the lowest median rent since January 2022.

    A variety of factors have contributed to the slowdown, but the simplest explanation is a case of supply and demand. In 2025, 15,095 multifamily units were completed in L.A., an 18% increase year over year and the second-highest total in the last decade.

    Meanwhile, L.A. County’s population shrank by 28,000 in 2025. As a result, vacancy rates climbed to 5.3% at the end of 2025, leading some tenants to declare L.A. a renter’s market.

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    Jack Flemming, Hailey Wang

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  • Housing Tracker: Southern California home values drop in December

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    Southern California home prices dropped again in December, capping off a yearlong skid that saw the average home value in the six-county region drop by more than $7,000.

    In December, the average home price fell to $854,993, according to data from Zillow. Prices were down 0.1% month over month and 1.3% year over year.

    It’s the lowest that Southern California home values have been since March 2024.

    Economists and real estate agents say a variety of factors have slowed the market, including high mortgage rates, rising inventory and economic uncertainty stemming from tariffs.

    Until the recent declines, July 2023 was the last time that year-over-year prices had fallen. Back then, rising mortgage rates were knocking many buyers out of the market. Values started increasing again when the number of homes for sale plunged as sellers backed away, unwilling to give up mortgages they took out earlier in the pandemic with rates of 3% or lower.

    Real estate agents say homeowners increasingly want to take the next step in their lives and are deciding to move rather than hold on to their ultra-low mortgage rates. But many first-time buyers, without access to equity, remain locked out.

    Add on the economic uncertainty and you get a market that’s noticeably downshifted.

    If the Trump administration’s policies end up pushing the economy into a recession, some economists say home prices could drop much further.

    In L.A. County, many sellers took their homes off the market over the holidays. There were 16,655 homes on the market (a 9% drop from November) and only 3,520 new homes were put up for sale (a 19% drop from November).

    For now, Zillow is forecasting that the economy will avoid a recession and home prices will increase over the next year. The real estate firm expects that next year, home prices will rise 1.2% both nationally and in L.A.

    Note to readers

    Welcome to the Los Angeles Times’ Real Estate Tracker. Every month we will publish a report with data on housing prices, mortgage rates and rental prices. Our reporters will explain what the new data mean for Los Angeles and surrounding areas and help you understand what you can expect to pay for an apartment or house. You can read last month’s real estate breakdown here.

    Explore home prices and rents for September

    Use the tables below to search for home sale prices and apartment rental prices by city, neighborhood and county.

    Rental prices in Southern California

    In December, the median rent across Los Angeles dropped to $2,167, the lowest it has been since January 2022. Rents dropped for the fifth consecutive month.

    The downward trend has continued in most markets across L.A. County. However, in Orange and Ventura counties, rents have risen slightly year over year.

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    Jack Flemming, Hailey Wang

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  • Housing Tracker: Southern California home prices dip in May

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    Southern California home prices declined slightly in May compared to a year earlier, the first annual drop since 2023.

    In May, the average home price across the six-county Southern California region fell 0.07% from April to $876,044, according to data from Zillow. Prices were down 0.2% from May 2024.

    Economists and real estate agents say a variety of factors have slowed the market, including high mortgage rates, rising inventory levels and economic uncertainty stemming from tariffs.

    The year-over-year price decline last month marked the first since July 2023. At the time, home prices had been falling because rising mortgage rates knocked many buyers out of the market. Values started increasing again when the numbers of homes for sale plunged as sellers also backed away, not willing to give up mortgages they took out during the pandemic with rates of 3% and below.

    The inventory picture, however, is changing.

    In May, there were 38% more homes for sale than a year earlier in Los Angeles County, with similar increases seen elsewhere in Southern California.

    Real estate agents say existing homeowners increasingly want to move rather than hold onto their ultra-low mortgage rates. But many first-time buyers, without access to equity, remain locked out.

    Add economic uncertainty and you get a market that’s noticeably downshifted.

    If the Trump administration’s policies end up pushing the economy into a recession, some economists say home prices could drop much more.

    For now, Zillow is forecasting the economy avoids a recession and for home prices to decline only slightly. By May 2026, the real estate firm expects home prices in the Los Angeles-Orange County metro region to be 1.1% lower than they are today.

    Map showing L.A. County housing prices from June 2025

    Zillow Research, Times analysis

    Note to readers

    Welcome to the Los Angeles Times’ Real Estate Tracker. Every month we will publish a report with data on housing prices, mortgage rates and rental prices. Our reporters will explain what the new data mean for Los Angeles and surrounding areas and help you understand what you can expect to pay for an apartment or house. You can read last month’s real estate breakdown here.

    Explore home prices and rents for May

    Use the tables below to search for home sale prices and apartment rental prices by city, neighborhood and county.

    Rental prices in Southern California

    In 2024, asking rents for apartments in many parts of Southern California also ticked down, but the January fires in L.A. County could be upending the downward trend in some locations.

    Housing analysts have said that rising vacancy levels since 2022 had forced landlords to accept less in rent. But the fires destroyed thousands of homes, suddenly thrusting many people into the rental market.

    Most homes destroyed were single-family houses, and some housing and disaster recovery experts say they expect the largest increases in rent to be in larger units adjacent to burn areas in Pacific Palisades and Altadena, with upward pressure on rents diminishing for units that are smaller and farther away from the disaster zone.

    A recent L.A. Times analysis of Zillow data found that in ZIP Codes closest to the fires rent rose more than the rest of the county between December and April.

    Other data sources show similar trends.

    In Santa Monica, which borders the hard-hit Pacific Palisades neighborhood, the median rent rose 5.1% in May from a year earlier, according to data from ApartmentList.

    Across the entire city of Los Angeles, which includes the Palisades and many neighborhoods not adjacent to any fire, rents dropped 0.33% last month.

    ApartmentList does not have data for Altadena, but it does for the adjacent city of Pasadena. Rents there rose 6.2% in May from a year earlier.

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    Andrew Khouri, Phi Do

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  • In a first, most California houses sell for over $900,000

    In a first, most California houses sell for over $900,000

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    Want a house in California? It’ll likely cost you over $900,000.

    The statewide median sales price for a previously owned single-family house surpassed $900,000 for the first time in April, a shocking figure that underscores just how unaffordable housing has become across the Golden State.

    The April median of $904,210 is up 11.4% from the same month a year earlier, according to data from the California Assn. of Realtors. The median — the point where half the homes sold for more and half for less — has now climbed more than $100,000 in just over two years.

    That rise in home prices comes despite the fact mortgage rates are sky-high relative to recent memory. Last week, the average rate on a 30-year fixed mortgage was 7.02%, more than double the 3% and below rates seen during the COVID-19 pandemic, according to Freddie Mac.

    High prices and high rates have created the most unaffordable housing market in a generation, but economists say prices keep rising because many homeowners refuse to sell and give up their sub 3% rates, creating an extreme shortage of inventory.

    Wealthy Californians also have hordes of excess cash they can plow into down payments that help offset high borrowing costs.

    If prices keep rising at 11% a year, the California median house price would climb above $1 million in 2025.

    That may not happen, however.

    In recent weeks, more homes have started to come onto the market as some owners start to decide a new home is more important than a low rate.

    Inventory is still extremely tight and economists don’t expect the floodgates to open. But in Los Angeles, Riverside, San Bernardino and Ventura counties, total listings in April climbed above year-ago levels for the first time since the first half of 2023, with each county recording an increase of at least 5%.

    Orange County was the only county to see a decline, while in San Diego County, inventory has risen for two consecutive months and is 18% above what it was a year ago.

    Some experts say the supply increase likely isn’t enough to send home prices down, but it should make values climb at a slower pace.

    That might mean a $1-million median is a bit further off, but not by much.

    “If we don’t hit it in 2025, we will probably hit it in 2026 — minus a big downturn in the economy,” said Jordan Levine, chief economist with the California Assn. of Realtors.

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    Andrew Khouri

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  • Could Bitcoin Ever Skyrocket To $10 Million? Possible, But Based On This Condition

    Could Bitcoin Ever Skyrocket To $10 Million? Possible, But Based On This Condition

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    Peter Schiff, a well-known critic of Bitcoin, recently engaged in a thought-provoking discussion about Bitcoin’s value relative to gold. Despite his longstanding skepticism, Schiff has presented a scenario where Bitcoin could reach roughly $10 million by 2031.

    However, the Bitcoin critic responded that this could happen under particular economic conditions.

    Schiff’s Extreme Hypothesis On Bitcoin’s Ascent To $10 Million

    This bold statement arises from the Economist’s comparison of Bitcoin’s potential growth trajectory to gold, highlighting the volatility of crypto assets and the spirited optimism of their proponents.

    Commenting under this post, an X user asked, “What if Bitcoin goes to $10,000,00 by 2031?” Schiff then replied with a “hypothetical” scenario that pivots on the dramatic collapse of the US dollar, akin to the fate of the German Papiermark post-World War I. During that period, Germany experienced rampant hyperinflation, devastating the value of its currency.

    Schiff suggests that only if a similar downfall of the US dollar happens does the BTC price catapult to $10 million. However, it’s important to note that this scenario is highly “hypothetical,” and the crypto critic is trying to convey that Bitcoin can only reach $10 million in an “extreme” case of economic turmoil.

    Community Reactions To Schiff’s Post

    Notably, Schiff remains a staunch critic of Bitcoin. He recently expressed concerns about potential regulatory changes under the Securities and Exchange Commission (SEC) Chair Gary Gensler. He predicted increased regulations could raise Bitcoin’s transaction costs and adversely affect its market value.

    The crypto community, however, often counters Schiff’s bearish outlook with a mix of criticism and humor. Influential figures like Samson Mow and Mike Alfred have directly responded to Schiff’s comparisons between Bitcoin and gold, often highlighting Bitcoin’s resilience and growth over the years.

    Mow, in particular, has pointed out that once Bitcoin surpasses gold’s market cap, gold could be relegated to its “industrial utility cost.”

    These responses from the crypto community showcase the strong belief in Bitcoin’s potential and its role in shaping the future of global finance.

    Meanwhile, in the current market, BTC has shown signs of recovery. At the time of writing, Bitcoin is trading above $40,000, a notable increase from its earlier values of below $39,000 earlier this week.

    BTC price is moving sideways on the 1-hour chart. Source: BTC/USDT on TradingView.com

    Featured image from Unsplash, Chart from TradingView

    Disclaimer: The article is provided for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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    Samuel Edyme

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  • Why Fed rate hikes take so long to affect the economy, and why that effect may last a decade or more

    Why Fed rate hikes take so long to affect the economy, and why that effect may last a decade or more

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    The U.S. economy continues to grow despite the 5.5% benchmark federal funds interest rate set by the Federal Reserve in 2023.

    The Fed’s leaders expect their interest rate decisions to eventually slow that growth.

    The increase in borrowing costs that stems from Fed decisions does not affect all consumers immediately. It typically affects people who need to take new loans — first-time homebuyers, for example. Other dynamics, such as the use of contracts in business, can slow the ripple of Fed decisions through an economy.

    “It might not all hit at once, but the longer rates stay elevated, the more you’re going to feel those effects,” said Sarah House, managing director and senior economist at Wells Fargo.

    “Consumers did have additional savings that we wouldn’t have expected if they had continued to save at the same pre-Covid rate. And so that’s giving some more insulation in terms of their need to borrow,” said House. “That’s an example of why this cycle might be different in terms of when those lags hit, versus compared to prior cycles.”

    A 1% interest rate increase can reduce gross domestic product by 5% for 12 years after an unexpected hike, according to a research paper from the Federal Reserve Bank of San Francisco.

    “It’s bad in the short term because we worry about unemployment, we worry about recessions,” said Douglas Holtz-Eakin, president of the American Action Forum, referring to the paper’s implications for central bank policymakers. “It’s bad in the long term because that’s where increases in your wages come from; we want to be more productive.”

    Some economists say that financial markets may be responding to Federal Reserve policy more quickly, if not instantaneously. “Policy tightening occurs with the announcement of policy tightening, not when the rate change actually happens,” said Federal Reserve Governor Christopher Waller in remarks July 13 at an event in New York.

    “We’ve seen this cycle where the stock market moved more quickly in some cases, more slowly in other cases,” said Roger Ferguson, former vice chair of the Federal Reserve. “So, you know, this question of variability comes into play, as in how long it’s going to take. We think it’s a long time, but sometimes it can be faster.”

    Watch the video above to see why the Fed’s interest rate hikes take time to affect the economy.

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  • Zombie firms are filing for bankruptcy as the Fed commits to higher rates

    Zombie firms are filing for bankruptcy as the Fed commits to higher rates

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    In the U.S., 516 publicly listed firms have filed for bankruptcy from January through September 2023. Many of these firms have survived for several years with surging debt and lagging sales.

    “The share of zombie firms has been increasing over time,” said Bruno Albuquerque, an economist at the International Monetary Fund. “This has detrimental effects on healthy firms who compete in the same sector.”

    Zombie firms are unprofitable businesses that stay afloat by taking on new debt. Banks lend to these weak firms in hopes that they can turn their trend of sinking sales around.

    “A really healthy, well-capitalized banking system and financial sector is one of the most important factors in ensuring that unhealthy firms are wound down in a timely way rather than being propped up,” said Kathryn Judge, a professor of law at Columbia University.

    Economists say that zombie firms may become more prevalent when banks or governments bail out unviable firms. But the Federal Reserve says the share of firms that are zombies fell after the Covid-19 emergency stimulus measures were implemented. The Fed says banks are refusing to keep weak firms in business with favorable extensions of credit.

    The Fed economists point to healthy balance sheets at U.S. firms, despite the increasing weight of interest rate hikes. The effective federal funds rate was 5.33% in October 2023, up from 0.08% in October 2021.

    “The biggest implication of the rapid rise in interest rates that we’ve seen the last five or six quarters, actually, is that it reestablished cash,” said Lotfi Karoui, chief credit strategist at Goldman Sachs. “That actually puts some constraints on risk assets.”

    The Fed says it thinks interest rates will remain higher for longer. “Given the fast pace of tightening, there may still be meaningful tightening in the pipeline,” Fed Chair Jerome Powell said at an Economic Club of New York speech Oct. 19.

    Watch the video above to learn more about the Fed’s battle with unviable zombie firms in the U.S.

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  • How the Fed fights zombie firms

    How the Fed fights zombie firms

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    Some firms sustain their businesses by taking on more debt that they can repay. Economists call them zombie companies. When compared to their peers, zombies are smaller in size and deliver lower returns to investors. These companies distort markets, keeping resources from their fundamentally sound competitors. Banks and governments keep zombie firms alive with bailout loans. As the Federal Reserve resets the economy with higher interest rates, many zombie firms are filing for bankruptcy.

    10:01

    Tue, Oct 31 20236:00 AM EDT

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  • Here’s the real reason the stock market is so horrid. And, yes, it’s rather spooky.

    Here’s the real reason the stock market is so horrid. And, yes, it’s rather spooky.

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    Some say it’s the fear of stagflation.

    Some say it’s chaos on Capitol Hill.

    Some say it’s turmoil in the Middle East.

    But we all know the real reason the stock market is so crummy, right?

    It’s October! Of course stocks are down!

    It is a bizarre, inexplicable, and yet undeniable, fact that, throughout history, Wall Street has produced almost all of its gains during the winter months of the year — from Nov. 1 to April 30. It is an even more bizarre, inexplicable and yet undeniable fact that the rest of the world’s stock markets have done the same thing.

    The so-called summer months, meaning the half of the year from May 1 to Halloween, have generally given you bupkis or worse. 

    Around the world, over the course of centuries of recorded financial history, stock-market returns have averaged four full percentage points higher from November to April than from May to October, report researchers Ben Jacobsen at Tilburg University and Cherry Yi Zhang at Nottingham University’s Business School in China. This so-called Halloween Effect seems “remarkably robust,” they concluded, after studying the financial returns of 114 different countries going back as far as they could find reliable monthly data — starting with the stock market in 1693 London. 

    Even more extreme: In the 65 countries for which they had extensive data both about the stock market and about short-term interest rates, it’s fair to say you would have been better off selling your stocks on May 1, putting the money in the bank, then taking it out again at the end of October and buying back your stocks (ignoring fees and taxes, of course).

    “In none of the 65 countries for which we have total returns and short-term interest rates available — with the exception of Mauritius — can we reject a Sell in May effect based on our new test. Only for Mauritius do we find evidence of significantly positive excess returns during summer.”

    Italics mine. Mauritius? 

    The Dow Jones Industrial Average
    DJIA
    is now lower than it was at the end of April. So is the Russell 2000
    RUT
    index of small-cap U.S. stocks. The benchmark international stock index, the MSCI EAFE, is down about 6%. Japan’s Nikkei
    NIY00,
    +1.90%
    is slightly up, as the yen has tanked.

    The S&P 500
    SPX
    is hanging on to a small gain, but that is only because of the early summer gains of a few tech titans. The average S&P stock is down about 2.5% since the end of April — while an investment in no-risk Treasury bills is up more than 2%.

    Meanwhile, let the record show that, over the same period, according to the record keepers at MSCI, the stock market in Mauritius is up 12%.

    Booyah!

    Every time I write about this Halloween or “sell in May” effect, I make the same two points, and I make no apologies for repeating them here, because they are unavoidable.

    The first is that, every spring, after looking at this data, I am tempted to sell all my stocks at the end of April, and every year I don’t, because I think it’s absolutely ridiculous. (And someone on Wall Street who is much smarter than me usually persuades me not to.) And most years I end up kicking myself for not doing it.

    The second is to recall the old economists’ joke: “I don’t care if it works in practice! Does it work in theory?” Selling in May — or, sure, the Halloween Effect — has absolutely no reason that anyone can find for working in theory. But apparently, it works in practice — which is pretty much where we are now.

    Does this mean stocks are going to rally? It’s anyone’s guess. It would be crazy if it were that simple. But, then, the whole Halloween Effect is crazy.

    If history is any guide, now is the time to buy stocks, not sell them, because the next six months are likely to be the time when they make you money. And if history isn’t any guide, well, aren’t we all sunk anyway?

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  • East Coast mayors call for more office-to-apartment conversions

    East Coast mayors call for more office-to-apartment conversions

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    Mayors in cities across the U.S. want to loosen rules that can slow the pace of office-to-residential conversions. In some instances, cities have offered generous tax abatements to developers who build new housing.

    “We have a great opportunity to change the uses in the downtown,” said Washington, DC, Mayor Muriel Bowser at a December 2022 news conference in support of her housing budget proposals.

    “It’s absolutely a budget gimmick” said Erica Williams, executive director at the DC Fiscal Policy Institute, referring to Bowser’s 2023 proposal to increase the downtown developer tax break. “We fully support the idea that some of these buildings could be turned into residential properties or into mixed-use properties, but that we don’t necessarily need to subsidize that.”

    In New York City, a task force of planners assembled by Mayor Eric Adams is studying the effects of zoning changes, and possible abatements for developers who include affordable units in conversions.

    Cities like Philadelphia have previously embraced these policies to revitalize their downtowns. In Philadelphia, homeowners and investors received more than $1 billion in tax breaks for their renovation projects.

    A small collective of developers have taken on this challenging slice of the real estate business. Since 2000, 498 buildings have been converted in the U.S., creating 49,390 new housing units through the final quarter of 2022, according to real estate services firm CBRE.

    Prominent investors Societe Generale and KKR have worked with developers like Philadelphia-based Post Brothers to finance institutional-scale office conversions in expensive central business districts.

    “Capital has gotten much more limited,” said Michael Pestronk, CEO of Post Brothers. “We’re able to get financing today. … It is a lot more expensive than it was a year ago.”

    Many experts believe local governments will alter zoning laws and building codes to make these conversions easier over the years.

    “Our rules are in the way, and we need to fix that,” said Dan Garodnick, director of New York City’s Department of City Planning.

    Watch the video above to learn how cities are getting developers to convert more offices into apartments.

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  • Americans are spending big with credit cards. Here’s what that means for the possibility of a recession

    Americans are spending big with credit cards. Here’s what that means for the possibility of a recession

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    Economists have been forecasting a recession for months, and that looming downturn is one of the most anticipated in U.S. history. But it’s not yet materialized, in part due to strong consumer spending.

    “Consumer spending represents more than half of the economy,” said Curt Long, chief economist at the National Association of Federally-Insured Credit Unions. “So if consumer spending is strong, that alone is, generally speaking, enough to keep the economy from slipping into a recession.”

    In the first quarter of 2023, gross domestic product grew at a 1.1% rate compared to the previous quarter. This modest level of growth is an improvement from mid-2022 GDP figures, which initially brought recession fears to light.

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    A key reason for the fear: Inflation stayed stickier than economists anticipated. In May, the U.S. Bureau of Labor Statistics reported headline annual inflation of 4.9%.

    To combat inflation, the Federal Reserve has hiked its overnight bank lending rate 10 times over the past year or so. At the Fed’s May meeting, policymakers hinted that they may pause further interest rate increases, barring unexpected developments.

    The end of this tightening cycle may be coming into focus as consumers reach their breaking point. As the pandemic fades, historic levels of personal saving have taken a nosedive. Deposits at banks have crested as consumers keep spending amid continually rising prices.

    This is happening as the least well off are increasingly relying on credit in their day-to-day lives. Roughly 29% of households earning less than $50,000 a year were using credit cards to finance their spending, according Bank of America Institute economists. Credit-use rates have risen steadily in recent years despite being below higher pre-pandemic levels.

    Moderate-income Americans also are facing the significant headwind of less tax-refund money. The average refund this year is $2,777 through April 28, down 8% from the same period last year, according to IRS data.

    “Because this is the same household that rely more on the tax refund to finance their spending, a lower refund really has some negative impact on their spending,” said Anna Zhou, an economist at the Bank of America Institute.

    Analysts at the New York Federal Reserve report record levels of credit card debt in 2023. This underscores the economic split in the country, with some consumers flush with savings following a thrifty pandemic while others are finding it increasingly difficult to spend wisely amid rising prices, mounting layoffs and the potential of recession.

    Still economists see the chance for a soft landing. “We don’t think … the slowdown process will be as dramatic as some people have feared,” said Zhou. “And it will be a gradual process.”

    Watch the video above to learn how U.S. consumer spending has so far fended off a recession.

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  • Americans are saving far less than normal in 2023. Here’s why

    Americans are saving far less than normal in 2023. Here’s why

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    The U.S. personal savings rate remains below its historical average, according to the U.S. Bureau of Economic Analysis.

    The seasonally adjusted annual rate of personal saving was 4.6% in February. That’s well below the average annual rate of more than 8%, according to the data, which traces back to 1959. In June 2022, the rate had dipped to 2.7%, a 15-year low.

    This was a large fall from periods of the pandemic when households across the country were saving as much as 30% of their monthly income.

    “Something like $2 [trillion] to $2.5 trillion above what we would have otherwise expected were saved by American households,” said Curt Long, chief economist at the National Association of Federally-Insured Credit Unions.

    Collectively, Americans have trillions in excess savings compared with expectations leading up to the pandemic, according to Federal Reserve economists.

    “That really has helped to buoy the economy,” said Shelley Stewart, a senior partner at McKinsey & Company, “particularly in a place like the U.S., where consumption is such a big part of GDP.”

    Federal Reserve economists note that the lion’s share of excess savings is concentrated in the top half of households by income.

    But the lower half built up savings in this time, too, according to the central bank’s October note. They noted at the time that the lower half of earners had roughly $5,500 in excess savings per household. Experts believe these stockpiles of cash will begin to dwindle in 2023.

    In the months since, headline inflation stayed stubbornly high, at an annual rate of 5% in March. This weighs on consumer spending, while devaluing savings held in low return positions such as cash.

    Watch the video above to learn about how the personal savings rate affects you and the wider economy.

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  • Why Americans are saving less in 2023

    Why Americans are saving less in 2023

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    Americans started the 2020s with a personal savings boom. The trillions in excess personal savings built up in the pandemic are beginning to vanish amid high inflation, according to Federal Reserve economists. The annual savings rate fell to a 15-year low in 2022. It started a recovery in 2023, but remains well below long-term trends. Despite this slowdown in saving, consumer spending has remained robust, keeping the U.S. from recession.

    11:56

    Thu, Apr 27 20239:54 AM EDT

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  • How the Fed affects the stock market

    How the Fed affects the stock market

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    When members of the Federal Reserve make public statements, investors tend to listen. Over the past two decades, central bankers have consistently shared key information about the future trajectory of important inputs like interest rates. The Fed’s forward guidance on interest rates amid historic inflation has taken stock markets for a ride in 2022. As investors wait for a pivot, a panel of experts explains why many in the market choose not to fight the Fed.

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  • How the Federal Reserve affected 2022’s stock market

    How the Federal Reserve affected 2022’s stock market

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    The Federal Reserve, over its more than centurylong existence, has emerged as a leading force in the stock market.

    This stature was bolstered by the central bank’s adoption of two unconventional policy tools in the 2000s – large-scale asset purchases and forward guidance.

    Large-scale asset purchases refer to the Fed’s emergency buying of government debt and mortgage-backed securities. Forward guidance refers to the central bank’s public communications about the future trajectory of monetary policies. The guidance often hints at the expected path of the federal funds interest rate target in advance of a policy change.

    Central bankers in 2022 repeatedly told the public to expect tighter economic conditions as it battles inflation. Economists believe this has contributed to months of declining prices across the S&P500.

    “I think they know they gambled and lost and that they have to do something serious in order to get inflation back under control” said Jeffrey Campbell, an economics professor at Notre Dame University and former Federal Reserve economist. “I fear that they took a gamble that inflation wasn’t too real at the beginning of 2021.”

    The Fed has reacted to hotter-than-expected inflation with seven interest rate hikes in 2022. These higher rates can weigh on publicly traded companies, particularly growth stocks in tech.

    Meanwhile, the Fed’s asset portfolio has decreased more than $336 billion since April 2022.  Experts tell CNBC that the full combined effects of this economic tightening are unknown.

    That has many people on Wall Street waiting for the central bank to pivot, and bring interest rates back down. At the same time, many financial advisors are calling for caution.

    “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.” said Victoria Greene, founding partner and chief investment officer at G Squared Wealth Management.

    Nonetheless, many experts believe that central bank policy is only one piece of the puzzle. Both black swan events and investor sentiment play a massive role in shaping the trajectory of markets, too. “Sure don’t fight the Fed but … don’t believe too much that the Fed is all powerful,” said John Weinberg, policy advisor emeritus in the research department at the Federal Reserve Bank of Richmond.

    Watch the video above to learn how the Fed shaped 2022’s stock market.

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