The Fed Rate Forecast Surprises at 5.6%
Almost everyone expected the Fed to pause its rate-hiking cycle, and that's just what Jerome Powell announced after two days of meetings.
What was not expected, and what sent the markets lower, was the median rate forecast was lifted to 5.6% in 2023, compared with 5.1% from previous projections. In plain English, that's at least two more rate hikes this year.
But yesterday morning we predicted Powell's remarks would be anything but dovish, even as he hit the brakes. Inflation is still much too high for Fed Presidents to even think about a rate cut this year.
While this likely means a stock rally is out of the question, there's still plenty of money to be made out there. AI stocks are still strong and sections like commercial real estate are good candidates for finding short positions.
Here's what you do about both of them...
Google Is Pushing to Integrate AI
It was only a matter of time before Google’s parent company Alphabet Inc. (GOOGL) started integrating its AI into its many platforms... and yesterday they announced they were bringing generative AI technology to shopping. With this, Google aims to get a jump on e-commerce sits like Amazon. They announced features that would help customers with apparel fitment, and new capabilities for finding products using search and image-recognition technology. For customers "in search of," this would mean trying on clothing virtually or making refined searches by color, style and pattern. The best part about this feature is it will be across retailers given Google’s reach.
Commercial Real Estate Is Tanking in Every Big City
San Francisco and New York have been clobbered by the commercial real estate downturn, and now Chicago also joins the list. Current economic conditions have put a pause on commercial property sales - numbers from the first three months of this year down by more than half from the same period in 2022, according to the latest estimates by MSCI Inc. Sales were down from $5.9 billion to $2.7 billion. The office and industrial sectors were the hardest hit with sales volume down 70%
Shah Gilani has been watching this market all year, and now that Powell has confirmed interest rates will stay higher for longer, CRE is going to sink banks. Read here for how he sees this playing out.