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LOCATION STRATEGY CHARTBOOK

U.S. Banks finished the year with almost $400 billion of unrealized losses on held-to-maturity assets. The assumption is this wouldn't be a problem because the Fed would cut A LOT this year but what if that doesn't happen?

The FDIC yesterday seized Philadelphia’s Republic Bank. The bank had $262 million in unrealized losses on bonds labeled “hold to maturity.”

This may have been caused by the fact that banks last week (Tax Day!) saw the largest since last April 2022 and the largest seasonally adjusted deposit outflows since 9/11.

This pushed small banks back into crisis mode - which are generally below the reserve constraint even with the Fed’s $126 billion Bank Term Funding Program. This remains in our view the strongest reason to suspect rate cuts this year whatever the levels of inflation, followed by skyrocketing federal interest payments.

Q1 GDP surprised to the downside - this is the time period we have been forecasting which would feel “recession-like” even if its not technically a recession.

Housing is again making a positive contribution to GDP.

The market is projecting limited rate cuts for the balance of the year.

The interval between the Fed’s final rate hike and the first rate cut in this cycle is likely to be one of the longest in recent history.

Will US inflation mirror the post-WWII pattern: a pause followed by a resumed decline in the CPI?

When adjusted for inflation, capital goods orders continue to decline, suggesting that business investment remains soft. It should be noted that while capital goods orders provide insights into physical investment in machinery and equipment, they do not comprehensively capture the full scope of modern business investments, particularly in technology-driven areas like software and data center development.

Leading indicators continue to signal slower wage growth ahead.

Discover Financial’s charge-off data suggests consumers are increasingly struggling to meet their credit card payment obligations.

Supply is increasing as active listings rise

Still, home price appreciation remained strong last month, according to Redfin.

Record High Number of Homes Without a Mortgage

Single Family homes by Stage of Construction - backlog is shrinking.

Sacrifices made by households to afford housing:

More Americans are planning to age in place, which is getting expensive.

Boomers are dominating ownership of large homes

Freelancing is a growing trend in the US