Elon Sounds Off Recession Risk

• 3 min read
Elon Sounds Off Recession Risk

MARKET MOVERS

  • US rents surge by another record, led by a 41% jump in Miami. US single-family rents jumped 14% year-over-year in April. Supply shortages and a strong job market are driving prices up, according to CoreLogic. They expect single-family rent growth to continue to increase at a rapid pace throughout 2022. Miami posted the biggest gain while the East Coast metros posted some of the smallest increases.

  • Amazon announces Doug Herrington as CEO of Worldwide Amazon Stores. Herrington has served on the high-level S-team at Amazon since 2011 after initially joining the company in 2005. He started on the company’s consumables business then launched AmazonFresh in 2007 and began leading the North American consumer business in 2015, according to Amazon.
    Read more here.

  • Apple’s iPhone output is said to have soared in China. Apple increased iPhone shipments out of China last month at a considerably faster pace than overall smartphones, UBS said. Shipments for the broader market climbed 16% in May from April, whereas iPhone shipments jumped 155% as Covid lockdowns ended and supply-chain problems eased. That shows that it is increasing its market share of production at the expense of local Chinese brands. Read more here.

  • Inflation hasn't peaked yet, according to the latest Bloomberg Economics forecasts. The team sees global inflation edging up from 9.2% year on year in 2Q to 9.6% in 3Q, and ending the year at a still elevated 8.6%. Source.

  • Sales of existing homes fell in May. Sales of existing homes in May fell 3.4% to a seasonally adjusted annualized rate of 5.41 million units, according to the National Association of Realtors. Higher short-term rates from the Fed are helping to drive a housing reset – a real estate refresh. While rebalancing is needed, it’s upping the challenge of navigating the housing market for both sellers and buyers.

  • Opendoor's buy-to-list premium falls back to Earth. The buy-to-list premium is the best leading indicator of iBuyer profitability. As of June 16th, Opendoor's median buy-to-list premium across 2,700 listings was 7.3 percent -- down from a record 17 percent in March. A buy-to-list premium of 7 percent is still healthy (and on par with the entirety of 2018 and 2019) -- but anything much lower, for longer, could present challenges. Read more here.

  • Nearly 40% of the homes in the US have no mortgage at all. This indicates that a real estate crash is far from happening. In order to have a real estate crash, you have to have distressed borrowers with low credit scores. People with no mortgage balance are unlikely to go into foreclosure. When someone has 100% equity, it's unlikely that they will let their house go because they can use it as leverage. Source(10:49)

WHAT TO WATCH

  • Elon Musk sounds off on recession risk, Twitter deal, and layoffs. In an interview with Bloomberg at the Qatar Economic Forum in Doha, the Tesla Inc. chief executive officer said "a recession is inevitable at some point." As for the Twitter deal, he said there are “a few unresolved matters” and he’s still waiting for a resolution on how many bots there are. Meanwhile, layoffs will affect around 3.5% of Tesla’s overall workforce. Read more here.

  • Kellogg plans to split into 3 companies. Global Snacking Co. will encompass Kellogg’s global snacking, international cereal and noodles, and North American frozen breakfast. North America Cereal Co. will be a cereal company focused on the U.S., Canada, and the Caribbean. Plant Co. will be a pure-play plant-based foods company with business primarily in North America. Read more here.

  • Mondelez to acquire Clif Bar & Co. for $2.9 billion. The global food giant said Monday that it would continue to operate Clif Bar’s business out of the company’s headquarters in Emeryville, Calif., and would continue to manufacture products out of facilities in Indiana and Idaho. Mondelez said it expects the deal, which it said could pay out more to the sellers over time, to close in the third quarter.

  • Goldman Sachs raises recession probability odds to 30%. Jan Hatzius, the firm’s chief economist, said in a note to clients on Monday that a recession could come sooner than he and his team had previously expected. They are increasingly concerned that the Fed will feel compelled to respond forcefully to high headline inflation and consumer inflation expectations if energy prices rise further, even if activity slows sharply.

  • FedEx and FourKites to share package-tracking data. The two companies are building a data platform that aims to predict shipping delays and prescribe alternative plans for their customers. The new supply-chain intelligence platform, called FourKites X, combines data from FedEx’s network of more than 16.5 million daily shipments and FourKites’ tracking platform, which currently supports more than 2.5 million daily shipments. Read more here.
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