The stock market is growing more optimistic about US regional banks, but the lenders still face serious pressure. A credit "contraction is invariably coming," Soros Fund Management Chief Executive Officer Dawn Fitzpatrick has said, adding that additional banks will fail because "there are more problems under the surface." One further source of trouble for the industry will be commercial real estate, an area that in recent years smaller and regional banks have become a bigger force in.

In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.

They discuss a report stating that the Federal Reserve will pause its historic rate-hiking campaign as it waits for the effects to trickle further through the economy, while also signaling that additional rate hikes are likely this year.

Chris and Saied look at data from the Labor Department indicating that the inflation rate cooled in May to its lowest annual rate in more than two years, likely taking pressure off the Federal Reserve to continue raising interest rates.

They also offer some thoughts on the Consumer Price Index showing that inflation has been cut by more than half from last year’s peak. On an annual basis, prices rose by 4% compared to a year ago. That’s a significant decline from April, when annual inflation was 4.9%.

Join Chris and Saied for this fascinating and informative conversation.

Enjoy!

What You’ll Learn in this Show:

• Why a terminal rate of 5.6% will likely be necessary.
• Why consumer spending has been the number one thing propping up the economy up until now.
• Why community banks are in serious trouble at the moment.
• And so much more...

Resources:

"The Fed holds rates steady, pausing its rate-hiking campaign" (CNN)

"Fed Chair Powell says more rate hikes coming this year" (CNBC via Instagram)

"Instant Reaction: Fed Decision June 14, 2023" (NARresearch via Instagram)

"Westfield leaving downtown San Francisco amid declining sales" (NBC via Instagram)

"Goldman Sachs CEO David Solomon says the U.S. economy has been incredibly resilient" (CNBC via Instagram)

"Inflation rose at a 4% annual rate in May, the lowest in 2 years" (CNBC)

"Here’s the inflation breakdown for May 2023, in one chart" (CNBC)

"CPI Report Shows Inflation Has Been Cut in Half From Last Year’s Peak" (The Wall Street Journal)

"Regional Banks Face Years of Trouble" (The Wall Street Journal)

"The Richest Person In Every State" (Forbes)

"Fed Holds Rates Steady but Expects More Increases" (The Wall Street Journal)

"Fed, SEC Probing Goldman Sachs’s Role in SVB’s Final Days" (The Wall Street Journal)

"Goldman Sachs Is at War With Itself" (The Wall Street Journal)

"Renters Are About to Get the Upper Hand" (The Wall Street Journal)

"There’s More Trouble Coming for Regional Banks" (Bloomberg)