Everything is going in the wrong direction

The high rate of inflation eased a bit in April, satisfying no one. President Biden now says Fighting inflation is a top priorityBut the market doesn’t seem to believe it. Stocks are obsessed, gas prices are hitting new highs, homes are getting more expensive, and something weird has happened in cryptocurrencies that may or may not spill over into the broader economy.

Inflation in April was 8.3%Down from 8.5% in March. Well sure, it’s gone down, not up, great, but economists thought it would go down even more, given improvements in clogged supply chains and other hopeful signs. Stubbornly high inflation means the Federal Reserve has no choice but to keep raising interest rates, to cool spending. The higher the rates, the more likely the Fed will fail and push the economy into recession.

Stocks hate it. S&P 500 Index (^ Salafist Group for Preaching and Combat) is down 13% since late March and 16% since its peak in early January, close to a bear market. Nasdaq Index (^ ninth) and its high-tech stocks are already in a bear market, down 26% from their November peak. There is still an occasional rally, like the 2% gain in the S&P on May 13. But the sell-off drowned out rallies throughout the year, as the Fed deactivated the turbochargers, pressed the brakes, and re-priced shares lower. Selling stocks could get worse.

Thirty-year mortgage rates have gone from 3% to 5.3% in less than six months, and it can happen Hit 6% before long. Rates are still not high by historical standards, but they rarely rise that fast. Homebuyers’ heads are spinning. Higher borrowing costs may eventually cool the hot housing market, but there aren’t enough homes to start with, so for now, affordability is only going to get worse.

A cyclist rides near a gas station as fuel prices continue to rise near a record area in Encinitas, California, US, May 9, 2022. REUTERS/Mike Blake

A cyclist rides near a gas station as fuel prices continue to rise near a record area in Encinitas, California, US, May 9, 2022. REUTERS/Mike Blake

Tired of hearing gas price hikes? Too bad, because they keep going up. The average price of the regular is now $4.43 a gallon, the highest nominal price ever. Diesel prices have gone up more than gasoline prices, and the average is now $5.56 per gallon. Trucking costs are rising, and a diesel shortage on the East Coast can lead to this Rationing and interruption of delivery for all types of merchandise. This isn’t something that’s supposed to happen.

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How does your cryptocurrency wallet work? If you have one, bad. a A stable currency that most people have never heard ofcalled Terra (LUNA1-dollar), basically collapsed, leading to the sale of Bitcoin and most other cryptocurrencies. Bitcoin (BTC-USD) even more than shares, to about $30,000, a 55 percent drop from its highs last November. There is schadenfreude among the traditionalists who think crypto is a hoax and the crypto pioneers deserve to lose all their money, but it would be better if billions of dollars in cryptocurrency wealth evaporated when other things were going well.

If you ran the Republican National Committee and could plot another way to sabotage the Biden presidency, what would it be? baby milk? Wow! Now we get to see if it works, because There is a nationwide shortage of infant formula. A large Abbott plant linked to the contaminated formula closed in February and has yet to open, leaving shelves bare in many stores. It’s not clear why no one has fixed the problem, but there’s now a new entry on the presidential ban list: Don’t Ban Children.

Consumer confidence lower than at the outbreak of COVID and back to 2011 levels, when the scars of the Great Recession were still stagnant. The economy is not that bad. The job market is still hot, unemployment is very low and production is still increasing. But many things are moving in the wrong direction, and while it’s not an economic recession, it is a political one for Biden.

The window for Biden and his fellow Democrats to get a breather in the economy and thwart disaster in the November midterm elections is very slim. Voter selection tends to take hold about six months before an election, unless a drastic change occurs. That gives Democrats just two months for inflation to fall sharply, and gives Americans some relief at the gas pump and the grocery store. Economists believe that inflation has peaked, but they also do not expect a significant drop in prices.

Russia’s war in Ukraine has reached a stalemate and sanctions on Russian energy are likely to intensify, adding pressure on global energy prices. The Fed has indicated that it will raise interest rates aggressively for at least the next several months, regardless of what inflation does. The Fed tries to lower demand by raising the cost of borrowing, and it usually succeeds. Sometimes it works very well, which is why markets are increasingly concerned about a recession.

Biden is not the first president to be shocked by rising inflation. Beacon Policy Advisors note that many other postwar presidents had similarly low approval ratings to Biden, at the same point in their presidency. Harry Truman, Gerald Ford, Jimmy Carter, and Ronald Reagan were all unpopular with unusually high inflation. Ford and Carter lost their re-election bids, while Truman and Reagan won. So it is possible that things will improve for Biden and the rest of the people. It can’t come soon enough.

Rick Newman is the author of four books, including “Rebounders: How winners pivot from setback to success.Follow him on Twitter: @Regignyuan.

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