• The Federal Reserve kept interest rates unchanged after their latest meeting
• Some analysts think economic indicators show Fed rate hikes aren’t working
• A severe recession may be necessary to break the hold of inflation on the economy

Fed Pauses Rate Hikes

After its most recent meeting, the Federal Reserve choose not to raise interest rates again. Instead, they are taking a wait and see approach to observe the impact of previous rate hikes. While some may be happy to see a pause, others see a potential mistake.

¹

The facts on the ground show that the Fed’s policy isn’t working as anticipated. The economy is still too strong, and inflation is too high, even with 5.25 percentage points of rate hikes since March 2022. While the current 3.4% PCE rate (a measure of inflation that reflects changes in the prices of goods and services purchased by households for consumption) is better than the previous 7%, it is still far from 2%.²

In addition, the labor market is too resilient to reach the 2% inflation objective. The ratio of unfilled jobs to unemployed workers is well above the 1-to-1 ratio that Fed Chair Powell considers necessary.

Despite wages going up, overall inflation has outpaced wage growth. Consumers have been making up the difference with excess savings boosted by Covid relief. But those savings are running out. Consumers are cutting back and sinking into debt to stay above water. To make matters worse, spiking oil prices are eroding purchasing power and putting the brakes on the American economy.

Another indicator of the Fed’s policy not working is that the GDP is growing too fast. The third quarter of 2023 far exceeded the 20-year annual average for growth. Economists attribute the GDP growth to robust consumer spending and $1 trillion of government spending on infrastructure, green energy, and the semiconductor supply chain. Also, the sudden AI boom caused an S&P 500 rally that largely reversed the Fed’s tightening of financial conditions. Even if growth slows in the fourth quarter, it may not be enough to push inflation lower.³

These factors are leading analysts to think that the neutral rate Powell is aiming for may be higher than planned. The “neutral rate” refers to the level at which the interest rate neither stimulates nor restricts economic growth. It is often considered the ideal or balanced interest rate for the economy.

No Soft Landing

Economists have compared the Fed’s quest for a soft landing to a unicorn hunt. At this time, the Fed hopes that holding rates steady will result in 2% inflation without a recession. Historically, soft landings are almost as rare as unicorns. Only once, in 1994, has the Fed accomplished a soft landing. But the inflation it tamed was hardly comparable to the recent record heights.

The Fed is playing a dangerous balancing act. If rates aren’t high enough to push inflation down to 2%, inflation expectations could rise. When people expect prices to rise, they might buy things sooner, thinking it will cost more later. This can lead to higher demand for products and services, which, in turn, can increase prices. All the accomplishments of previous rate hikes could be undone. The Fed could be forced to return with more drastic rate hikes.

Unfortunately, it may take a severe recession to reach the 2% goal. In the 1980s, then Fed Chair Paul Volcker had to inflict a recession on the US to break the rampant inflation of the 1970s. Powell is amply aware of the history. Nonetheless, he may be repeating it.

Future Hikes

Fed Chair Powell is open to more rate hikes in the future. The Federal Reserve will keep the possibility open until all signs point to a steady path to 2% inflation. The problem is that the rate of inflation is growing chaotic. It slows, then speeds up and then slows again. When the stock market believes the Federal Reserve is done increasing interest rates, financial conditions get easier. This fuels more growth, and more inflation, so the Fed must consider another rate hike. Powell outright dismissed any talk of rate cuts soon.

It’s like the Fed is driving a car on a winding road with unpredictable weather. The Federal Reserve needs to adjust its speed and direction as the road conditions change, even though they don’t control the weather. They have an idea where they want to go, they just don’t have a clear vision to get there. And if they aren’t careful, they can steer right off a cliff.

According to some analysts, we are facing more than the risk of recession, we are facing the NEED for recession. Otherwise, the economy will be trapped in this endless up and down inflationary cycle. Whether its inflation or recession, things are going to need to get worse before they get better. If you are looking to protect your savings, now is the time to investigate a Gold IRA from American Hartford Gold. Contact us today at 800-462-0071 to learn more.

Notes:
1. https://www.fool.com/the-ascent/federal-reserve-interest-rates/
2. https://seekingalpha.com/article/4644859-market-wont-be-pleased-fed-message-this-week
3. https://www.investors.com/news/economy/why-no-fed-news-is-bad-news-for-the-sp-500/

• Massive 3rd quarter GDP growth caught economists off guard
• The growth occurred despite the Fed’s rate hikes meant to tame inflation
• Prominent Wall Street voices warn to prepare for an economic downturn

Warnings Amid Unexpected Growth

The economic landscape continues to surprise those in charge of mapping it out. In the third quarter, our Gross Domestic Product (GDP) showed surprising growth. It soared at an annual rate of over 5%. Such robust economic expansion contradicts expectations. It’s squashing the Federal Reserve’s desire for the economic slowdown needed combat rising inflation. Despite this sudden economic surge, Wall Street is weighing in with a pessimistic outlook on the future.¹

²

Let’s unpack the surprising economic growth in the third quarter. The GDP figures far surpassed the predictions, raising eyebrows across the board. As far the Fed’s policy goals are concerned, this should not have happened.

Economists point to the government’s fiscal policy as the reason. The budget deficit doubled in the past year. It reached an astounding $2 trillion, according to the Congressional Budget Office. This sizable deficit, more than 7% of our GDP, contributed to the boost in economic growth. Such deficits are typically considered a result irresponsible fiscal management unless we are facing an extraordinary situation like a war.

About $500 billion of the $1 trillion added to the deficit served as an indirect stimulus. The other half a trillion dollars didn’t add to the economy. Instead, it was put toward things like bailing out collapsing banks.

Another factor boosting the GDP was an unanticipated easing the government’s monetary policy. The Treasury took actions that wound up countering the effects of the Fed’s interest rate hikes. The Treasury Department halted some debt issuances and borrowed from various savings accounts. This happened because the Fed reduced its bond purchases. The Treasury responded by issuing fewer bonds. As a result, it made more money available to people.

Now that the effects of the deficit and the shift in monetary policy have been felt, this boost in GDP unlikely to be repeated. A return to fiscal tightening is pointing towards a shrinking economy and a recession.

The coming downturn has the attention of some of the most powerful voices on Wall Street.

Wall Street Weighs In

Amid this economic chaos, several renowned figures in the financial world are offering their perspectives.

Jami Dimon is the CEO of JPMorgan Chase. As uncertainty grows, he warned about the dangers of locking in an outlook about the economy. He pointed to the poor track record of central bank predictions.

“I want to point out the central banks 18 months ago were 100% dead wrong,” Dimon said. “I would be quite cautious about what might happen next year.” He is referring to when the Fed insisted that the inflation surge was just transitory. Then it shot up to a 40-year high of 9.1%. Fed officials also projected their key interest rate rising to just 2.8% by the end of 2023. The rate is now almost double that at 5.25%.³

Dimon doubted “this omnipotent feeling that central banks and governments can manage through all this stuff.” He then warned that the Fed funds rate could eclipse 7%.⁴

Dimon recommends investors be prepared for fresh challenges in the new year. “This may be the most dangerous time the world has seen in decades,” he concluded.⁵

Ray Dalio is a legendary investor and founder of the world’s largest hedge fund, Bridgewater Associates. He is pessimistic about the global economy. He identifies geopolitical conflicts and the historic levels of government debt as key destabilizing factors.

David Solomon is the CEO of Goldman Sachs. He gauged the strength of the economy through mergers and acquisitions (M&A). He points out that the economic stimulus and low interest rates during the post-pandemic period led to a boom in M&A activities. However, capital has now become scarce, leading to a significant reduction in M&A deals. This is leaving Solomon uncertain about the current economic climate.

Larry Fink is the CEO of Blackrock. He predicted interest rates will rise further. The increase will ultimately be due to heightened conflicts around the world. Not only will interest rates rise, Fink says that unless the wars are resolved, it will lead to a “contraction in our economies.”⁶

Steve Schwarzman is the CEO of the Blackstone Group. He believes that it will take time to move past the pain of inflation and higher interest rates. He pointed out that recession struck after the Arab-Israel war in 1973. He said, ” We’re coming off the top and we’re starting to go down, so that would say to me that next year perhaps is not so wonderful.” Schwarzman pointed to the fragile commercial real estate market that is now facing up to 30% vacancy rates. “That’s going to have a very bad ending.”⁷

Conclusion

With a GDP bump soon to be in the rearview mirror, Wall Street experts are offering pessimistic takes on the financial future. As the economic landscape undergoes rapid shifts and uncertainties, it’s crucial to diversify your portfolio and explore options that can withstand the economic turbulence. One such option is to consider a Gold IRA from American Hartford Gold.

With a Gold IRA, you can secure your assets with physical gold, a proven hedge against uncertainty. In times of rising inflation and economic unpredictability, physical assets like gold can provide a valuable safety net. Contact us today at 800-462-0071 to learn more.

Notes:
1. https://www.wsj.com/articles/get-ready-for-a-short-lived-economic-boom-da221867
2. https://www.bloomberg.com/news/articles/2023-09-06/us-economic-data-strength-has-fed-set-to-double-growth-outlook?embedded-checkout=true#xj4y7vzkg
3. https://www.cnbc.com/2023/10/24/jamie-dimon-rips-central-banks-for-being-100percent-dead-wrong-on-economic-forecasts.html
4. https://www.cnbc.com/2023/10/24/jamie-dimon-rips-central-banks-for-being-100percent-dead-wrong-on-economic-forecasts.html
5. https://www.cnbc.com/2023/10/24/jamie-dimon-rips-central-banks-for-being-100percent-dead-wrong-on-economic-forecasts.html
6. https://www.businessinsider.com/dalio-dimon-fink-schwarzman-solomon-economic-outlook-inflation-recession-war-2023-10
7. https://www.businessinsider.com/dalio-dimon-fink-schwarzman-solomon-economic-outlook-inflation-recession-war-2023-10

• The housing market is frozen in ‘gridlock’: not getting worse but not getting better
• High interest rates are dampening sales, keeping prices elevated, limiting supply, and increasing foreclosures
• With home equity becoming inaccessible, people are turning to physical precious metals for long-term stores of wealth

The American Dream of Homeownership Put on Hold

The American Dream of home ownership continues to be deferred. A once reliable long-term store of wealth is escaping the grasp of most Americans. As mortgage rates race to 8%, mortgage demand has plummeted to its lowest point in three decades. Housing affordability is now worse than it was during the peak of the 2008 housing bubble. And real estate experts fear the only thing that can fix the situation stands in direct opposition to the policy that created the problem in the first place.¹

Overall Housing Market Decline

The slide in the housing market is primarily due to the increase in interest rates. The average rate for a 30-year loan has been on the rise six consecutive weeks. It is now reaching 7.7%. This figure is the highest it’s been since November 2000. In comparison, the average rate stood at 3.9% before the pandemic hit. The Fed has hinted at yet another rate hike this year. There is an expectation that rates will remain high for an extended period of time.²

In response to the Fed’s aggressive interest rate hikes, there has been a dramatic shift in application volumes. The Mortgage Bankers Association’s index of mortgage applications fell a staggering 6.9% in the last week. They dropped to levels last seen in 1995. Application volume has shrunk by 21% compared to the same time the previous year. The demand for refinancing is no exception. It has fallen by 10% over the past week, down 12% from the same period last year.³

Affordability and Inventory

⁴

High mortgage rates are having a direct impact on housing affordability and inventory. Homeowners are hesitant to sell their properties. Those who locked in low mortgage rates now find themselves unwilling to sell while rates hover near two-decade highs. Consequently, there is a shortage of available homes for potential buyers, resulting in a surplus of demand.

The shortage of homes on the market has led to a plummet in sales. In 2021, mortgage rates had dropped to the mid-2% range, leading to a surge in home sales. However, after the spike in mortgage rates, sales have significantly decreased. This year is on pace for a 17% decline from 2022.⁵

Real estate experts suggest that the housing market will not rebound until more homes are available. Available home supply remains down by a staggering 45.1% compared to pre-pandemic levels. This scenario is unlikely to change until mortgage rates fall to at least the mid-5% range, according to experts.⁶

Homebuilders are unable to construct new homes quickly enough to alleviate the housing shortage, which has led to a gridlock in the housing market. The National Association of Home Builders/Wells Fargo Housing Market Index, which measures the pulse of the single-family housing market, has fallen for the third straight month, dropping by 5 points to 40. This is the lowest reading since January 2023, and any reading below 50 is considered negative.⁷

Home builders are doing everything in their power to attract buyers, including cutting prices. In October, 32% of builders reported cutting home prices to encourage sales. Typically, a near tripling of mortgage rates over such a short period would result in lower home prices as buyers can only afford so much. However, the scarcity of supply is keeping prices inflated. Homeowners are only selling if there is a life event necessitating a move, such as a death, divorce, or relocation for work.

The Fed’s Housing Market Trap

Experts in the real estate market have pointed out the paradox that the Federal Reserve and the housing market find themselves in. Although high interest rates were intended to combat inflation, they are preventing builders from increasing the housing supply. Thereby, reducing demand pressure and lowering prices. In the realm of housing, lowering rates would actually reduce inflation. Robert Dietz, Chief Economist of the National Association of Home Builders, stated, “Boosting housing production would help reduce the shelter inflation component that was responsible for more than half of the overall Consumer Price Index increase in September and aid the Fed’s mission to bring inflation back down to 2%. However, uncertainty regarding monetary policy is contributing to affordability challenges in the market.”⁸

Devyn Bachman, Senior Vice President of Research at John Burns Research and Consulting, stressed, “In order for the market to recover, we need more inventory. The only way we’re going to receive that inventory is if or when mortgage rates retreat.”⁹

Other Concerns

Adding to these concerns is the increase in home foreclosures across the nation. They have surged by 34% compared to the same time last year, according to real estate data provider ATTOM. Their data shows that foreclosure filings have spiked by 28% in the third quarter. Analysts fear the problem may worsen with the resumption of student loan payments.¹⁰

A poll conducted by Pulsenomics revealed that most economists believe that homeownership rates will be affected for at least a year by the resumption of student loan payments. In total, borrowers will resume paying approximately $10 billion a month, posing a significant challenge to the stability of the housing market.

Conclusion

As the deputy chief economist at First American Financial Corp said, “This market is anything but normal.”¹¹ The housing market is facing a challenging gridlock, with the root of the issue stemming from interest rate hikes aimed at curbing inflation. While homeowners watch their home equity grow, it remains locked in without an opportunity to access it without losses due to high mortgage rates. In such times of uncertainty, people should consider seeking additional pillars of support for their retirement. One solution that can weather the storm of interest rate hikes is a Gold IRA. Offering safety, stability, and long-term preservation of portfolio value, it stands as a reliable alternative to personal real estate in an unpredictable housing market. Contact us today at 800-461-0071 to learn more.

Notes:
1. https://www.foxbusiness.com/economy/mortgage-demand-plummets-new-three-decade-low-rates-race
2. https://www.foxbusiness.com/economy/mortgage-demand-plummets-new-three-decade-low-rates-race
3. https://www.foxbusiness.com/economy/mortgage-demand-plummets-new-three-decade-low-rates-race
4. https://unusualwhales.com/news/housing-affordability-in-the-us-is-near-all-time-lows-per-goldman-sachs
5. https://www.realtor.com/news/trends/the-housing-market-is-in-gridlock-and-why-its-not-getting-better-or-worse/#:~:text=%E2%80%9CThe%20housing%20market%20is%20in,better%20than%20the%20resale%20market.
6. https://www.foxbusiness.com/economy/mortgage-demand-plummets-new-three-decade-low-rates-race
7. https://www.foxbusiness.com/economy/homebuilder-sentiment-continues-downward-spiral-spike-mortgage-rates
8. https://www.foxbusiness.com/economy/homebuilder-sentiment-continues-downward-spiral-spike-mortgage-rates
9. https://www.realtor.com/news/trends/the-housing-market-is-in-gridlock-and-why-its-not-getting-better-or-worse/#:~:text=%E2%80%9CThe%20housing%20market%20is%20in,better%20than%20the%20resale%20market.
10. https://www.foxbusiness.com/economy/home-foreclosures-upswing-nationwide
11. https://www.realtor.com/news/trends/the-housing-market-is-in-gridlock-and-why-its-not-getting-better-or-worse/#:~:text=%E2%80%9CThe%20housing%20market%20is%20in,better%20than%20the%20resale%20market.

• War, oil shocks, and stubborn inflation has some analysts predicting a return to ’70s-style stagflation
• High interest rates are stagnating the economy along with prolonged inflation expectations
• Market makers advise minimizing market risk and exposure, in the way physical precious metals can

Analysts Warn of Stagflation Threat

With trouble in the Middle East, spiking oil prices, and skyrocketing inflation, it’s like we’re in a 1970’s flashback. But instead of a return to disco, the US is facing a return to stagflation – the dreaded economic condition characterized by stagnant economic growth, high unemployment, and simultaneously high inflation.

Stagflation is when the economy gets caught in a trap. Imagine you have two levers: one for taming inflation, and the other for boosting economic growth. Pulling one lever, say, to control inflation, often ends up pushing the other in the wrong direction, potentially making the recession worse while trying to combat rising prices, and vice versa. It’s like trying to fix one thing and accidentally breaking another. The only solution that seems to work is essentially breaking the whole machine and starting from scratch.

Warning from JPMorgan Chase

Jamie Dimon is the CEO of JPMorgan Chase. He sees potential stagflation on the horizon. His forecast is tied into his belief that interest rates may break 7%. Dimon’s worries come from the impact that higher interest rates have on debt repayment. Higher interest rates can make repaying debt more expensive. This adds financial stress on individuals and businesses. When interest rates rise significantly, the risk and number of loan defaults also increases. Dimon calculates a 7% interest rate could be devastating to an economy.¹

Deutsche Bank Prediction

Deutsche Bank also fears a return to ’70’- style stagflation. Deutsche Bank sees current parallels with that decade – unrest in the Middle East, anemic growth, stubborn inflation, and labor unrest.

²

Between 1973 and 1983, GDP rates plummeted. Inflation averaged 11.3% and there was an
oil price shock caused by war. Today, the Russia-Ukraine war lifted oil prices from around $80 per barrel at the start of 2022 to over $139 in just three months. Deutsch Bank analysts said, “These supply shocks caused serious difficulties for the economy, both in the 1970s and today, since they push up inflation and dampen growth at the same time.”³

The number of striking workers is also on the rise in a repeat of the 1970s. Actors, screenwriters, autoworkers, journalists, and more have all taken steps to push for higher wages to compensate for inflation. Fifty years ago, US workers struck to raise their wages by as much as 9% annually to compensate for rising prices. But some economists believe the persistent wage increases helped exacerbate inflation and fear current worker strikes could do the same.

Deutsche Bank analysts are concerned unchecked inflation expectations will lead to recession. Inflation expectations refer to people’s anticipations about the future rate of inflation. These expectations influence economic decisions such as spending, saving, and investing. If expectations aren’t contained, spending and investing could dry up. Recession would result.

Their stagflation warning was based on several other reasons. One is that is inflation is still above target in every G7 nation. US inflation started rising again in August. It grew at a faster clip than the 3.2% price growth recorded in July.

Second, a new price shock could easily set inflation expectations soaring. An oil crisis, grain failure, or even the predicted El Nino weather event could send the global economy into disarray.

Added to that is the sluggish rate of economic growth. Tighter financial conditions have begun to take a toll on the economy, and there’s little room for that to change. Increasing interest rates and higher borrowing costs are further dragging growth down. However, there is a difference between now and then. The US debt-to-GDP ratio has soared well-above what it was in the 1970s. The amount of fiscal stimulus that can be used to stoke economic growth has been severely limited. And that stimulus is even further restricted by sticky inflation.

Deutsche Bank concludes that the last stretch of the Fed’s inflation war is likely to be the hardest. As inflation inches closer to its target, markets are putting more pressure on the Fed to slash interest rates. Higher borrowing costs weigh heavily on asset prices. Factoring in the lag between hikes and effects, there is a risk the Fed could plunge the economy into recession. But if the Fed stops too soon, inflation will persist. And the country will find itself back in the middle of a stagflation crisis.

Conclusion

Economic indicators are pointing to a repeat of the stagflation that plagued the 1970s. Pointing out the downward trajectory of the economy, Dimon said it would be a “significant misjudgment” to assume prolonged prosperity for the US economy.⁴ His comments underscore his belief that preparation is key when navigating uncertain economic waters. People should be working to avoid and minimize risk. One of the best ways to mitigate risk is with physical precious metals in a Gold IRA. Learn more about how you can protect the value of your portfolio from the dangers of stagflation by calling us today at 800-462-0071.

Notes:
1. https://www.investing.com/news/economic-indicators/jpmorgan-ceo-jamie-dimon-warns-of-potential-7-interest-rate-hike-amid-stagflation-concerns-93CH-3185318
2. https://twitter.com/LHSummers/status/1695045318524440688
3. https://fortune.com/2023/10/09/israel-war-like-1970s-stagflation-risk-deutsche-bank-warns/
4. https://www.investing.com/news/economic-indicators/jpmorgan-ceo-jamie-dimon-warns-of-potential-7-interest-rate-hike-amid-stagflation-concerns-93CH-3185318

• The banking crisis is quietly persisting as bank stocks continue to slide
• “Higher for longer” interest rates are destabilizing traditional sources of bank income
• Banks are turning to unreliable ‘hot money’ (outside depositors) to stay afloat

Banking Crisis Continues

Now out of the limelight, the banking crisis continues. Surging interest rates are affecting their stability, profitability, and stock prices. The bond market upon which banks rely is eroding. This crisis isn’t just about banks; it affects consumers, government policies, and the overall financial stability of the nation.

Bank stocks are on pace for yearly losses as high interest rates take their toll. The S&P 500 financial sector was down 5.5% this year. Regional banks were hit harder. The S&P Regional Banking ETF was down about 32%.¹

The downward slide accelerated when the Fed said it will keep interest rates higher for longer. Kathy Jones is the chief fixed-income strategist at Schwab Center for Financial Research. She said, “It’s fairly obvious it’s not good for banks. The rise in yields has just been relentless.”²

Bank stock prices have slumped in four of the last five years. That is according to the calculations of veteran bank analyst Dick Bove, chief financial strategist at Odeon Capital Group. Over that five-year period, only four of the 106 banks he follows have outperformed the S&P 500.³

Bond Market Troubles

The increase in longer-dated Treasury yields has largely wiped-out the US bond-market return for the year. The popular iShares Core US Aggregate Bond ETF recently closed at its lowest level since October 2008.

The higher yields on newly issued Treasury bonds erode the value of portfolios that include older bonds issued with lower rates. Old bonds are less valuable because the new ones are offering better returns. The value of bonds goes down when interest rates go up because of an inverse relationship between bond prices and interest rates. Here’s a simple way to understand it:

Imagine you have a bond that pays you a fixed interest rate, let’s say 3%. If you’re holding that bond and interest rates in the market suddenly rise to 4%, the new bonds are paying more interest than yours.

This means your bond, which pays less interest, is not as attractive to investors anymore. They can get better returns with new bonds. So, to make your bond more appealing in the secondary market, its price must drop. When its price drops, the effective interest rate it pays (relative to its new lower price) increases to be more competitive with the higher rates available in the market.

Other Factors

The uncertainty of the commercial real estate market is destabilizing some banks. Commercial property loans will be difficult to refinance as rates stay higher for longer.

Banks can see the trouble ahead. The Fed created an emergency lending fund for banks after the Silicon Valley Bank collapse. Demand on that fund spiked in September. Banks are bracing for recession by increasing their reserve levels. Reserves are at their highest in three decades. But that may not be enough to cover their exposure. Banks were exposed to an estimated $558.4 billion of unrealized losses in the second quarter from debts that are worth less than what they were bought for.⁴

Impact on Consumers

The growing bank risk forced the President to say the government would guarantee all deposits at all banks. Now the government is working to reduce the risky position it put itself in. They are trying to shrink bank exposure by raising the capital requirements needed to make loans. This, in turn, will make it harder for people to get mortgages, car loans and credit cards. Lending restrictions can lead to a negative loop that hurts a bank’s bottom line. The whole economy can suffer as people lose access to spending money.

‘Hot Money’

Availability of loans will become more difficult for another reason. Banks aren’t attracting and holding onto enough depositors. They aren’t making enough money to pay depositors a market rate.

Banks are turning to ‘hot money’ to fill in the gaps. Hot money is brokered deposits from outside firms that funnel large amounts of customers to higher-yielding certificates of deposit offered by banks. These deposits are typically more expensive for a bank. They cut into profits during a challenging time for many financial institutions.

⁵

Brokered deposits across the banking industry surged to $1.2 trillion in the second quarter. That is up 86% from the same period the year before. They accounted for 6.5% of total US bank deposits, the highest percentage in four years.⁶

But reliance on ‘hot money’ presents a risk to banks. These new customers hold no loyalty to the banks and will leave during periods of stress. “There has been a significant increase in broker deposits in the banking system over the past year,” FDIC Chairman Martin Gruenberg said, “and they can present liquidity risk.”⁷

It’s not just the mid-sized banks. Big banks are taking in more hot money too. Among the country’s four largest banks, Wells Fargo’s concentration rose from near zero to 6.39%. Citigroup maintains the highest concentration of brokered deposits among the big four, at 9.54%.

Higher concentrations can be problematic according to Alexander Yokum, a regional bank analyst for CFRA. He said, “It’s symbolic that a bank’s core operations aren’t enough and it’s just less profitable.”⁸

Conclusion

In these uncertain times, it’s becoming increasingly clear that traditional banks may not be the safest haven for your hard-earned money. The banking crisis, lurking just out of the limelight, poses risks that can’t be ignored. Fortunately, there’s an alternative that has stood the test of time: gold. Unlike traditional currency, gold holds its value independently of the volatile banking and financial systems. If you’re looking to secure your financial future and protect your wealth, consider the stability and resilience of a Gold IRA from American Hartford Gold. It could be the smart choice for safeguarding your assets in an ever-changing economic landscape. Contact us today at 800-462-0071.

Notes:
1. https://www.msn.com/en-us/money/markets/banks-are-bracing-for-a-recession-as-treasury-yields-surge/ar-AA1hDWk6
2. https://www.msn.com/en-us/money/markets/banks-are-bracing-for-a-recession-as-treasury-yields-surge/ar-AA1hDWk6
3. https://www.rockdalenewtoncitizen.com/arena/thestreet/banks-woes-are-bad-news-for-consumers-analyst-bove/article_11235d2f-9066-57ed-9fa9-eda88b76649e.html
4. https://www.msn.com/en-us/money/markets/banks-are-bracing-for-a-recession-as-treasury-yields-surge/ar-AA1hDWk6
5. https://www.aol.com/finance/banks-may-lean-costly-hot-110739812.html
6. https://www.aol.com/finance/banks-may-lean-costly-hot-110739812.html
7. https://www.aol.com/finance/banks-may-lean-costly-hot-110739812.html
8. https://www.aol.com/finance/banks-may-lean-costly-hot-110739812.html