With one of three major rating agencies warning that America’s AAA credit is at risk, the stakes are growing in the standoff in Washington over raising the nation’s debt limit. On Wednesday night, the rating agency Fitch put the nation’s credit on “Rating Watch Negative,” which amounts to a warning that it might downgrade the U.S. credit as a result of the impasse. The government reached the $31.4 trillion debt limit in January, and Treasury Secretary Janet Yellen has resorted to “extraordinary measures” since then to keep paying the bills. But Yellen has warned that Treasury will likely run out of money to meet all its obligations as soon as June 1, which is being described as the “X-date.”
In a recent note, we showed that equities tend to do well when (headline) inflation peaks. But with peak inflation reached more than nine months ago, when the June CPI numbers were released, and the S&P 500 Index up 9% since peak inflation likely has run its course. The question is whether equities will hit the inflation ‘sweet spot’ soon. Even though equities offer a theoretical hedge against inflation, as most companies exhibit at least some pricing power, the relationship between the two is mostly negative. Equities realize their best returns when inflation is (very) low.
When local bureaucrats in Hennepin County, Minnesota, seized an elderly woman's home over a small tax debt, sold it, and kept the profit, they likely had no idea they would set in motion a series of events that would cripple the practice known as "home equity theft" across the country. Yet that's what happened. The Supreme Court on Thursday unanimously ruled that the government violated the Constitution when it took possession of Geraldine Tyler's condo over an overdue property tax bill, auctioned the home, and pocketed the proceeds in excess of what she actually owed.
China’s muted economic rebound and Beijing’s reluctance to deploy large-scale stimulus are reverberating around the globe, crushing commodity prices and weakening equity markets. Investors are pegging back their expectations for the world’s second-biggest economy as worries mount that its recovery from pandemic restrictions has lost momentum. Recent data suggest gross domestic product growth this year will be closer to the government’s target of about 5%, contrary to expectations of a large overshoot formed earlier in the year. The figures also show a lopsided rebound that’s being led by consumer services, while industrial activity lags far behind.