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May 5, 2022 | Contagion: Rising Rates, Falling Stocks, Home Prices and the Economy

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

Interest rates have risen sharply, and financial and housing markets are under pressure. With households holding a record amount of their net worth in highly-levered assets, this cycle’s contagion risks are higher than average.   It’s another good time to read or re-read Robert Frank’s timeless 2011 book The High Beta Rich. Nicholas Gerli connects the dots very well in the segments below.

Netflix and Robinhood recently announced large layoffs. Both are large tech companies whose stock prices have collapsed in recent months. This is part of a crash in the stock market with the S&P 500 down 14% and NASDAQ 22% Year to Date. As the performance of these companies continue to erode, more layoffs will be announced. That’s because a shocking number of companies in America LOSE MONEY. 44% of the NASDAQ has negative earnings. 67% of Public Companies in San Francisco. 57% of Companies in Boston. As interest rates and inflation continue to rise, these companies will struggle to fund operations and be forced to layoffs employees. And potentially shutdown altogether. This could trigger a massive Recession and Housing Crash, particularly in tech-driven cities and Housing Markets such as San Francisco, Seattle, Boston, Austin, and Denver. The Netflix and Robinhood layoffs were just the start. Historically, it takes about 6-months from a big correction in the stock market before heavy layoffs in the economy begin to occur. That’s what happened in the Dotcom Bust of 2001 and the Financial Crash in 2008. That suggests the layoff spike in April 2022 could be a prelude to much larger layoffs, and unemployment claims, in the Summer of 2022.  Here is a direct video link.

How likely is coming correction in the housing market? If one occurs, how bad could it be? Which markets are most vulnerable? And which looks best positioned? For answers to these important questions, I’m pleased to welcome Nicholas Gerli to the program. Nick is the CEO of re: venture consulting which provides business analytics and market research on US real estate.  Here is a direct video link.

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May 5th, 2022

Posted In: Juggling Dynamite

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