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INVERTED – Each of the 8 recessions that have occurred in the USA since 1969 have been preceded by an “inverted” yield curve, i.e., the 2-year Treasury note yield exceeding the 10-year Treasury note yield. As of 7/29/2022, the 2-year note yield has exceeded the 10-year note yield for 18 consecutive trading days. The 2022 inversion is a function of the 2-year note yield quadrupling since the beginning of this year, reacting to Fed rate hikes that are expected to drive down inflation (source: Treasury Department).
FED ACTION – The Fed raised short-term rates by 0.75 percentage points on 7/27/2022, its 4th rate hike since 3/16/2022, making it a total of 2.25 percentage point increases this year (source: Federal Reserve).
HOME SELLING – When the pandemic started (January 2020), the median sales price of existing homes sold in the USA was $266,300. In June 2022, the median sales price of existing homes sold in the USA reached a record $416,000 (source: National Association of Realtors).
OOPS! – The city of Chicago decided in 2020 to raise property taxes in 2021 and beyond based on our nation’s rate of inflation up to a maximum increase of 5% in any single year, i.e., inflation to be measured by the nationally calculated “Consumer Price Index” (source: Property Tax Extension Limitation Law).
THIS WILL CHANGE IN THE FUTURE – 91% of the 128 million households in the USA own at least 1 car, SUV or light-duty truck, a total of 250 million vehicles. Surprisingly, electric cars and trucks make up just 2 million of the 250 million vehicles in our country today (source: Census Bureau).
YOU PROMISED – The “aggregate funded ratio” of state and local pension plans across America is 77.9%, i.e., the pension plans’ assets divided by the present value of the pension plans’ liabilities. Since 2001, the ratio has been as high as 95.1% (2001), as low as 62.4% (2009) and was 84.8% in 2021 (source: Equable Institute).
INFLATION REDUCTION ACT – On Friday 8/12/2022, the House of Representatives passed the “Inflation Reduction Act of 2022.” This bill was signed into law by President Joe Biden on 8/16/2022. HR # 5376 is projected to reduce our deficit by $294 billion over the next 10 years (source: House).
CLIMATE – IRA injects $369 billion over the next decade into climate and energy programs, spending that is forecasted to reduce US greenhouse gas emissions by 42% below our 2005 levels by 2030 (source: Senate).
EV – IRA includes a $7,500 tax credit for the purchase of a new electric vehicle (EV) and a $4,000 credit for the purchase of a used EV. The credits are limited to purchases of cars costing no more than $55,000 and trucks maxed out at $80,000, and the batteries must contain minerals from a short list of countries (source: Senate).
CORPORATE MINIMUM TAX – IRA is expected to raise $258 billion over the next decade via a 15% minimum tax on the 150 US companies that have annual profits of at least $1 billion (source: Joint Comm. on Taxation).
PRESCRIPTION DRUGS – IRA will allow Medicare to negotiate directly with drug companies for lower prices on 10 prescription drugs beginning in 2026, including inflation caps for the drugs it purchases. These changes have been scored to produce $288 billion of savings over the next decade (source: Senate).
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