2024 Market Commentary

Many of you noticed the exuberant upward market movement in January, February and March with a sharp correction in the middle of April. For reasons beyond comprehension Wall Street traders anticipated six or seven interest rate cuts in 2024. They persisted in this belief even as the January and February inflation reports remained stubbornly untamed. When the March inflation report was published on April 15th, we saw a third month of disappointing numbers. The traders’ enthusiasm was finally curbed, and traders gave full expression to their gloominess in the next market sessions.

Once traders wiped away the figurative bucket of cold water to their faces, they reexamined the fundamentals. Our economy (our Gross Domestic Product or GDP) is still growing-albeit at a slower pace-1.60% quarter over quarter. Slower growth indicates that the Federal Reserve’s rate increases may be having the desired effect and slowing consumer spending, which will lead to lower prices. If prices result from the law of supply and demand, and demand decreases while the supply remains steady, prices will go down.

So far, the shrinking and shriveling have been limited to package sizes. “Shrinkflation” is one of corporate America’s ways to hide price increases. For example, a package of Baker’s chocolate still costs the same, but it only contains half the product. Instead of eight individually wrapped one-ounce squares, the package, which is the same length and width, but half the depth, contains one 4 oz sheet.

The Federal Reserve’s only tool is the raising or lowering of interest rates, but this is only one agency of the Federal government. Congress also plays a role in regulating business practices that lead to higher prices.The nearly 50/50 split between Republicans and Democrats in the House of Representatives has caused a stalemate.

Two of the most volatile components of the Consumer Price Index are housing and energy. Everybody needs shelter, and most people need heating, cooling, and transportation. But since 2008, private equity firms and other corporate interests have purchased homes and apartment buildings in astonishing numbers. It is almost impossible to find a real human being as landlord these days.

Like airlines, hotels, and delivery services, real estate has employed dynamic pricing models. Quite simply, these are algorithms that monitor supply and demand and adjust prices in real time. An apartment listed for $1,500 per month on the internet might cost $1,600 a month by the time you view it, and $1,700 a month by the time you sign the lease. In addition, corporate landlords have added
their cost of doing business as surcharges to the tenants’ rent. Many corporate landlords have mandatory fees for rubbish collection, pest control, and cleaning between tenants. Why aren’t these standard costs of doing business incorporated into the rent itself? Excellent question for your elected officials.

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