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Updated February 20, 2024

recessions ripple across the globe + january inflation runs hotter than expected

recessions ripple across the globe + january inflation runs hotter than expected

recessions ripple across the globe + january inflation runs hotter than expected

AJ Giannone, CFA

Adam Damko, CFA

The Piggy Bank


🌍 Japan and the UK have entered recessions, a worrying sign for the global economy. 

 📉 Recessions Ripple Across the Globe.

Both Japan and the UK have reported two consecutive quarters of negative economic growth, meeting the qualification for a recession.  

Officials in Europe are also forecasting slower economic growth across the continent in the coming quarter. Both of these factors are warning signs that global economic turmoil could be on the horizon.  

Fortunately, the US economy has remained strong over the past few months. The US has kept up a stable job market, low unemployment, and strong consumer spending lately. However, a recent slip in retail sales is starting to worry investors. 

👀  Here are the biggest economic reports to keep an eye on for next week: 

Monday: Markets closed. Happy Presidents Day!
Tuesday: CB Leading Index MoM
Wednesday: FOMC Minutes, 30-Yr Mortgage Rate
Thursday: Jobless Claims, Existing Home Sales 

Here are the biggest earnings reports to watch out for next week: 

Tuesday: Walmart, Home Depot, Caesars
Wednesday: Rivian, NVIDIA, Etsy, Jack in the Box
Thursday: Intuit, Booking, Block
Friday: Warner Bros. Discovery 

 📰 In Other News

🐴 The Dark Horse of the “Streaming Wars.” There might be an unexpected competitor in the streaming wars: YouTube.  

The video-streaming company is typically considered more of a social media platform than a streaming company. But Netflix CEO Reed Hastings recently labeled YouTube as a major threat. In terms of view time and advertising, YouTube beats Netflix easily. By the end of 2023, it also boasted the biggest market share of TV viewing. Younger generations especially are drawn to the platform.  

Netflix’s closest competitor in the streaming arena is technically Disney+ — but it’s not particularly close. The Flix has 260 million users compared to Disney+’s 111 million. With that in mind, YouTube might be the real threat to Netflix. 

🏠 The CRE Reckoning is Close. A massive shakeout in the $20 trillion commercial real estate (CRE) industry is almost upon us.  

Over the past few years, values for commercial properties have been dropping rapidly, driven by the rise of remote work. Up until now, many CRE firms have kicked the can down the road by delaying deals and refinancing their leases.  

But with maturation dates on the horizon, many firms are finally starting to enter the market at a massive discount. The next few months could see significant downgrades across this industry. Billionaire investor Barry Sternlicht predicts that the office sector will see $1 trillion in losses. 

👑 The Mickey Mouse Union. Disneyland’s characters, parades, and cast members announced their intent to join the Actors' Equity Association on Tuesday.  

The majority of Disneyland Resort's 35,000 workers already have labor unions. But up until now, characters have not unionized. This announcement is part of a larger unionization trend for employees across the country

.US retail sales declined in January. Consumer spending is a major factor in economic growth. Typically, consumer spending aids in avoiding a recession. Strong spending leads to higher profits, increased hiring, and rising stock prices. 

Over the last few years, strong consumer spending has buoyed the U.S. economy. This report might show a chink in its armor.  

However, most analysts don’t feel this report is cause for immediate alarm. Growth might be slowing a bit, but it’s not a surefire sign that the country is headed for a recession.


🥵 January Inflation Runs Hotter Than Expected

Inflation for JanuaryThe government announced that consumer prices increased by an average of 0.3% monthly and 3.1% annually in January. This was slightly hotter than investors expected. Price increases for goods like food (+0.4%), shelter (+0.6%), and medical care (+0.7%) helped send inflation higher. The price of shelter is up 6% over the past 12 months. This is a sign that rents are still sharply rising across the country. On top of that, the price of household repair items increased by a whopping 18.2% annually in January, a record high. This includes costs like fixing household appliances, pest control, and gardening. Underlying core inflation, which doesn’t account for the more volatile prices of energy and food, rose 3.9% from a year earlier. Core inflation is a key metric that the Fed watches to make decisions. 

What Does This Mean?January’s inflation report threw a curveball at a market that widely expects the Federal Reserve to cut interest rates this year, perhaps as early as March. But to date, the central bank has decided to forgo cutting rates, holding the federal funds rate steady at 5.25% to 5.5% in January, where it has been sitting since last July. With inflation coming in higher than expected, it may postpone any potential rate-cut plans even further. An inflation rate of 3.1% is actually fairly close to the Fed’s target rate of 2%. However, the fact that inflation is staying steady and not decreasing incentivizes the Federal Reserve to maintain interest rates for a few more months. Investors are still pricing in interest rate cuts in 2024. But it doesn’t look like they’ll be coming until later this year. 

Putting It in PerspectiveAs a general rule, the economy tends to respond well to the Fed lowering rates. The federal funds rate impacts the rates of credit cards, personal loans, mortgages, auto loans, and other forms of financing. Lower rates mean cheaper debt which encourages consumers to spend more. The reverse is true of high interest rates. A lower rate can save consumers a significant sum in interest in future years, so many spenders won’t bite the bullet and get the loan until rates are low.  Interest rate decisions like this play out every day across the country and the aggregate of these decisions makes up the economy.


🔥Millennials Choose the ‘Coolest’ Brands

Who’s Cool?

It’s one thing for a company to beat earnings expectations or be profitable. It’s another thing for it to be “cool.”  Whether or not a brand is considered cool by consumers is one of the key intangible qualities comprising a company’s ever-important reputation. Not to mention, it can also be a pivotal turning point that helps accelerate sales.  A great example is the recent Stanley cup phenomenon. The brand has been around for more than a century. But it only started selling out new collections in minutes once TikTok got a hold of it. After surveying thousands of Americans, market research firm YPulse compiled a report on America’s coolest companies. Items and services that are considered “cool” vary significantly from generation to generation. According to millennials in particular, these are the three coolest companies:NikeSavage X FentyYouTubeOther “cool” companies for younger consumers included TikTok, Apple, and Nike’s Jordan brand.

Becoming ‘Cool’

High school reminded all of us that being cool is incredibly challenging — and highly subjective. This is especially true when trying to convince an array of consumers of different ages, races, sexes, and income levels.  That said, when it comes to spending money, there are two main factors that the majority of consumers seem to consider cool. To start, consumers like when brands are bold and start new trends.  For example, Nike, Fenty, and YouTube were all the first to start cutting-edge trends. Nike was one of the first apparel companies to treat athleticwear like everyday apparel. Wearing running shoes and a sweatshirt to the office might be the norm today. But this wasn’t the case in the 1960s when Phil Knight started Nike. Phil launched all types of experimental running shoes and helped turn them from a specialty item into a staple.  Similarly, Fenty was one of the first makeup companies to embrace diversity and inclusion, while YouTube was one of the first software companies to let users upload videos. Americans also appreciate companies that continue to test new things instead of resting on their laurels. This is the case for another company ranking high on the “cool” list: Apple. Apple officially became cool when it released the iPhone, or perhaps even the iPod before it. But ever since then, Apple has kept releasing more unique items like watches, headphones, media players, and VR headsets. Apple is cool because it’s in a constant state of beta.

Strategic Partnerships

The other key move that makes a company cool: A familiar face. Partnering with a popular celebrity, influencer, or athlete is one of the most common features of brands appearing on YPulse’s list. A classic example of a highly successful celebrity endorsement is Nike and Michael Jordan. This partnership was so successful that it eventually spawned the Jordan brand, which now ranks alongside Nike as one of the coolest brands. Likewise, Fenty likely owes much of its clout to its founder, Rihanna.  So, for today’s companies, the recipe for being cool is relatively simple (in theory):Be bold and take risksChange with the timesPartner with someone famousBut, as we all know, being cool is much easier said than done.

👩‍❤️‍👨 Rising Popularity of the DINK Lifestyle

To DINK or Not to DINK?

Younger generations love to do things differently than their parents did.  Today’s young adults still have a strong desire to find a partner and get hitched. But they’re not nearly as concerned about having kids. People call this the DINK lifestyle (Dual Income, No Kids). In theory, being DINKs means double the income and spending power, without the financial stress of having a kid. So why are younger couples shying away from having kids? Well, let’s start with the price tag. A new study estimates that it costs roughly $26,000 per year to raise a kid, which includes food, clothing, and all of the other miscellaneous expenses it implies. Some quick math shows that couples stand to save around $468,000 over 18 years if they choose not to have a child. Considering the rising cost of living in America, choosing to not have kids may be one of the most surefire ways to secure your personal finances. At least, that’s how DINKs would describe it, loudly and proudly. Thanks to social media, DINK has quickly become an aspirational class for many among younger generations — a sort of modern American Dream that promises you plenty of time to travel, hang out with friends, save some cash, and pursue your passions. 

Decreasing Social Pressure

Many people are taking to social media to shed light on just how attractive the DINK lifestyle can be. TikTok videos highlighting the DINK lifestyle regularly receive millions of views. The related subreddit r/childfree has eclipsed 1.5 million members as well.  This underscores another reason young couples feel comfortable not having kids: The fading stigma around choosing to be childless. For previous generations, there was immense pressure to have kids. If you actively chose not to have kids, you ran the risk of being ostracized by family, friends, and community. But younger generations on the whole don’t face the same pressure. In the past, not having kids meant you might not have a community. Now there’s a growing community of DINK couples that’s waiting to welcome you with open arms.

Is DINKing Right for You?

So should you pursue the DINK lifestyle? Well, this is a personal choice. There’s little doubt that pursuing a DINK lifestyle could help save you some cash. Without kids, you’ll save a bundle right off the bat on things like prenatal care, childbirth classes, laboratory tests, medications, and hospital care. That’s before you even have the child. Then add to that the extra mouth to feed, activities, healthcare costs, travel expenses, and potential cost of college. It’s no doubt, from a financial perspective, DINK logic checks out.  With all these extra expenses, it’s no surprise that couples with no kids tend to have a lot more cash than couples with kids. In 2022, child-free couples’ median net worth hit $399,000, almost $150,000 more than couples with kids.  But, of course, life isn’t all about money. Any parent will likely be quick to tell you that having kids is a truly priceless adventure they wouldn’t trade for the world. Having a child means the invaluable fulfillment of watching and helping another human being to grow.  At the end of the day, it all comes down to personal preferences. Some people want the freedom and cost savings of not having kids. Others wouldn’t swap their life with kids for all the money in the world.


Costco ranked #1 on the American Customer Satisfaction Index with a top score of 82. But Target and Walmart were close behind with scores of 81 and 73, respectively.

 Mexico has officially overtaken China as America’s biggest bilateral trading partner. The US imported nearly $476 billion worth of goods from its southern neighbor and exported approximately $323 billion. 

The ability to cut a line is increasingly turning into a luxury good. For a fee, wealthy customers can now cut the line at airports, many ski resorts, and major amusement parks like Disney World. 

McDonald’s plans to cut prices on certain items after reporting weaker-than-expected sales. The fast-food chain has been highly criticized for raising prices too quickly. 

Credit card and auto loan delinquencies spiked to the highest level in more than a decade. This is a sign that young and low-income Americans are financially stressed.

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