My 5 Projections for Economy in 2024.
I recently attended the MBA Annual conference in Philadelphia, where I participated in many closed door meetings and talked to some of my clients on their views on the 2024 economy.
Here are my TOP 5 conclusions based on what I have learned:1. Recession is imminent in 2024 - I call it “blood on the street”.
Based on the MBA Chief Economist, Joel Kan:
We should see 5% unemployment,
Feds will hold interest rates for at least 2 quarters.
Inflation will get to 2% Fed target by 2025 (2 years away),
Feds will have to cut rates by around a 1 point mid- to end- of 2024.
This will translate to the mortgage interest rate coming down to 6% toward the end of next year.2. Current state of the market:
The mortgage origination volume is down 50% from the high of last year.
With high interest rates, mortgage origination will be slow growing from now to 2024.
This would mean that big banks will need to cut mortgage origination and servicing staff.
Just last week, PNC Bank announced 2,000 layoffs, Citi announced 5,000 + layoffs, Goldman Sachs, Bank of America and even JP Morgan made the announcements of layoffs.
In fact, the five largest U.S. banks cut a combined 20,000 positions so far this year, according to companies filing.3. Big banks are planning to sell assets for a major loss
Big banks and real estate funds are reducing MBS portfolio, due to mounting pressure with investor redemption requests.
The redemption requests come at the most inconvenient time as MBSs have a low 2-3% interest rate and are valued 25-30% less in the high rate environment. 4. Banks will Mark to Market all fixed rate assets below 3%
This will be a huge blow to all REITs and Commercial banks.
Goldman Sachs was the first major institution to mark-to-market commercial asset holdings by 50%.
This caused a huge sell off of all bank stocks last Friday.
I am convinced that many more banks will follow to write off the loss and move on.5. Opportunities and bright spots
Credit Card companies are in great shape and may be an interesting investment.
While defaults are on the rise, credit card companies such as American Express, Discover and Capital One are incredibly sound.
The amount of charges going onto credit cards are rising fast due to no more stimulus, giving more revenue to these companies.
My attendance of ABS East conference back in October only confirmed my assumptions presented above. Be sure to subscribe to my channel for more content and my market updates.
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