Fed to Shrink Balance Sheet by $95B a Month

• 3 min read
Fed to Shrink Balance Sheet by $95B a Month

MARKET MOVERS

  • Boeing taps Amazon, Microsoft, and Google for a Cloud mega-deal. They are hiring the three biggest U.S. cloud-computing companies to help with a digital makeover aimed at giving airplane designers and software developers more tools. The multi-year agreements are intended to upgrade the company’s current system of hosting and maintaining software applications through a network of servers.

  • Oil rises as Europe proposes new sanctions against Russia. The U.S. is working with allies on new sanctions. The U.K. has said it will phase out imports of Russian oil by the end of the year and has encouraged others to take similar measures. Meanwhile, the EU said it may ban imports of coal from Russia, which would be the first on any of Russia’s energy supplies since the country invaded Ukraine.

  • Fast-fashion retailer Shein is worth as much as SpaceX. It’s worth more than H&M and Zara combined. Shein just nabbed a gigantic $100 billion valuation in its most recent funding round. The fast-fashion brand is best known for turning that matching set you saw on TikTok into an affordable dupe within three days. In other words, it might be time to tear up the narrative about young consumers opting for sustainable clothing over fast fashion.

  • Rents are still increasing, but not as quickly as a year ago, but faster than the growth observed in the years immediately preceding the pandemic. Year-over-year rent growth currently stands at a staggering 17.1 percent. Lots of new apartment construction to meet the tidal wave of demand, and hopefully, boost vacancy/availability. New completions will top 400k units for the first time in 40+ years in 2022 and even more in '23. Read more here.

  • Office space is making a comeback in the Southern Sun Belt region. It made up 58% of all office leasing activity in Q3 2021. Up-and-coming markets, including smaller secondary cities, are taking over. Miami is quickly becoming the hottest new tech hub. But a growing number of companies relocating or expanding their headquarters into these markets is only solidifying the Sun Belt as the dominant leader for office space. Read more here.

  • Fed plans to shrink the balance sheet by $95 billion/month. Participants generally agreed that monthly caps of about $60 billion for Treasury securities and about $35 billion for agency MBS would likely be appropriate. Participants also generally agreed that the caps could be phased in over a period of three months or modestly longer if market conditions warrant. The FOMC is expected to approve the balance-sheet reduction at its next gathering on May 3-4. Read more here.

  • We're seeing a super cycle of commodities and equities, says Mish Schneider, Director of Trading Education at MarketGauge.com. Even though the Fed was hawkish, it seems like Powell and his team are doing things very slowly and as a result, you have a lot of retail investors, a huge amount of options buying, volatility still at relative lows, and that's really why maybe at some point there's a recession. Source(7:20)

WHAT TO WATCH

  • Uber looks to add planes, trains, and rental cars. The San Francisco-headquartered firm announced Wednesday that it is adding trains, buses, planes, and car rentals to its U.K. app this year. In a statement, Jamie Heywood, Uber’s boss in the U.K., said that Uber hopes to become a one-stop-shop for all your travel needs. Uber will not provide these travel services itself but it will allow users to book them through its app. Read more here.

  • Millennials ditching starter homes will lead summer inventory boost. Realtor.com's latest housing report revealed that 64% of home sellers plan to list their homes by October. Millennials are primed to lead the charge as they ditch starter homes for bigger abodes. This will be key to the forecasted 2022 inventory recovery and critical for buyers hoping to find a home before mortgage rates climb even further.

  • Global government debt is set to soar to a record $71 trillion this year. British asset manager Janus Henderson projected a 9.5% rise in global government debt. The pandemic has had a huge impact on government borrowing – and the after-effects are set to continue for some time yet. The tragedy unfolding in Ukraine is also likely to pressure Western governments to borrow more to fund increased defense spending.

  • Twitter edges toward the edit button. The company disclosed it was finally moving toward an edit feature — something its millions of members have been clamoring for years. They have been exploring how to build an Edit feature in a safe manner since last year and plan to begin testing it within TwitterBlue Labs in the coming months. This came a day after Elon Musk became the company's largest shareholder.

  • JetBlue submitted a proposal to acquire budget carrier Spirit Airlines. In its unsolicited bid for Spirit, JetBlue is offering $33 per share in an all-cash transaction, putting the total value of the deal at $3.6 billion. The potentially acquiring airline didn't hesitate to point out that the per-share price represents a 50% premium to Spirit's closing stock price on Monday.
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