Morning Report: The World Bank cuts its global growth forecast.

Vital Statistics:

S&P futures4,138-31.25
Oil (WTI)120.410.64
10 year government bond yield 3.01%
30 year fixed rate mortgage 5.50%

Stocks are lower this morning after the World Bank cut its global growth outlook. Bonds and MBS are down small.

The World Bank cut its 2022 global growth forecast from 4.1% to 2.9%. This is a pretty sizeable slowdown from the 5.7% we experienced last year. The war in Ukraine, supply chain issues, and lockdowns in China are the big drivers of the downgrade. Stagflation is a risk as the economic environment looks similar to the 1970s, with a combination of supply shocks and a prolonged period of highly loose monetary and fiscal policy. The World Bank expects global growth to slow even further in 2023 to 2.3%.

This slowdown in growth will probably put pressure on the Fed to moderate its path of consecutive 50 basis point hikes in the Fed Funds rate. The Fed will be data-dependent, however the drop in new home sales is worrisome since housing has typically been a big driver of economic performance.

Consumer attitudes are pessimistic, according to a Wall Street Journal / NORC poll. 83% of consumers said that the economy was “poor” or “not so good.” A third said they were not satisfied with their financial situation, while only about a quarter expected to see an increase in their standard of living going forward. That said, the labor market is still strong, with 2/3 of respondents saying they could get a new job with similar salaries and benefits. Overall, these consumer sentiment surveys are often negatively correlated with gas prices. When prices at the pump are high, consumers get discouraged.

Mortgage Applications fell 6.5% last week as purchases fell 7% and refis fell 6%. “While rates were still lower than they were four weeks ago, they remained high enough to still suppress refinance activity,” Kan said. “Only government refinances saw a slight increase last week. The purchase market has suffered from persistently low housing inventory and the jump in mortgage rates over the past two months. These worsening affordability challenges have been particularly hard on prospective first-time buyers.” You can see below that the index eclipsed the lows of 2018. The index itself is at a 22 year low.

Home Prices rose 20.9% in April, according to the CoreLogic Home Price Index. They are expected to rise another 5.6% over the next year. It looks like CoreLogic bumped up their forecast which had been in the low single digits previously. Rising rates have driven buyer urgency this spring, as 70% of homes sold above the asking price.

“The record growth in home prices is a result of a scarcity of for-sale inventory coupled with eager buyers who want to purchase before mortgage rates go higher. Buyers who closed on their home in April had locked in their mortgage rate in February or March, when rates were lower than today. With 30-year fixed mortgage rates much higher now, we expect to see waning buyer activity because of eroding affordability. As a consequence, our forecast projects slowing price growth over the coming year.”

9 Responses

  1. Lol


  2. The MSM meltdown because Fox won’t parrot the rest of the networks on the January 6 Committee hearing coverage is absurd.

    How dare you give people an alternative.

    Edit: if Fox and Tucker Carlson are smart, they’ll play up the civil liberties angle and draw a comparison with the McCarthy hearings:


  3. Opps. Some people didn’t know it was BS and took it seriously.

    “Stop telling kids that climate change will destroy their world

    Some “climate anxiety” is the product of telling kids — falsely — that they have no future.

    By Kelsey Piper
    Jun 8, 2022, 8:10am EDT

    As I’ve written about before, climate change is going to be bad, and it will hold back humanity from thriving as much as we should this century. It will likely cause mass migration and displacement and extinctions of many species.

    What it won’t do, however, is make the Earth unlivable, or even mean that our children live in a world poorer than the one we grew up in. As many climate scientists have been telling us, the world is a better place to live in — especially for people in lower-income countries — than it has ever been, and climate change isn’t going to make it as bad as it was even in 1950.”

    That certainly is a new spin on things.


    • The tweet replies to the VOX tweet of the article were hilarious.


    • Most of those “studies” showing the end of the world assume that the population hits 30 billion by 2050 and coal generation capacity increases tenfold.

      Neither of which has any chance of happening. We probably top out at 10 billion people and natural gas continues to supplant coal


  4. Time to panic:


    • Lemme guess, their talking point will be “we’re against crime. this gun bill will reduce crime!”


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