Panicking early for the economy
Tomorrow is broke. (Photo: iStock)
America strugglin'
There’s a storm coming according to Jamie Dimon. He’s not a weather person, he’s the CEO of JPMorgan Chase as he prepares the biggest U.S. bank for an incoming economic mess from the Russia and Ukraine conflict. “JPMorgan is bracing ourselves and we’re going to be very conservative with our balance sheet.”
Investors in the west haven’t exactly been enthusiastic about the economy given the lovely headaches we've all had to deal with. Supply chain disruptions, inflation rates competing with each other on who can take the highest place every week, and last but most definitely feels like the least, the COVID-19 pandemic.
Concerns regarding the Federal Reserve will bring the economy into recession in order to fight back against price increase lingers. And boy do those price increases got hands.
While stocks have recently gotten a rough go at it with the Dow is 10.7% below its record, S&P 500 is down 14.2%, and the Nasdaq is off by 25.5%, Dimon claims that it’s going to get much worse. He has two things to blame.
The first one is pretty straightforward—the Russia and Ukraine conflict has been squeezing everyone’s wallets dry. Supply shortages are evident. I can’t even get a large order of fries anymore. The most painful out of all are the oil price increases. In the Philippines, a net increase of P23.85/liter for gasoline, P30.30/liter for diesel, and P27.65/liter for kerosene has not been fun to deal with.
Dimon’s second factor to worry about is the Federal Reserve reversing its emergency bond-buying programs and shrinking its balance sheet. This will shoot up reduced bond holdings to $95 billion a month.
“We’ve never had QT like this, so you’re looking at something you could be writing history books on for 50 years,” Dimon said.
Your turn, Philippines
On the local side of things, I’ve got good news (sort of) and bad news (as always).
The benchmark Philippine Stock Exchange (PSE) index dropped 0.92%, or 62.47 points, to 6,712.21 while the broader all-shares index shed 0.47%, or 17.13 points, to 3,589.78.
Local investors are once again fearing for the Philippine economy not being able to carry the weight of high inflation, and have decided to take their money overseas.
Will the Philippines be in the same rocky place America is heading into? We have no idea. It’s hard to see what the economy will be like in the second half of 2022 as it depends on what the next administration is planning to do.
The first few months saw an 8.3% growth momentum that will carry over to the second quarter. First Metro Investment Corp. and University of Asia and the Pacific (FMIC-UA&P) Capital Markets Research said in a Market Call report that “while a tighter fiscal space and inflation pose serious headwinds in the second half of the year, an economic team of high-quality technocrats in the new President’s cabinet can handle the emerging scenario,”
The economy is definitely being boosted by more Filipinos being able to go out for work and leisure. Socioeconomic Planning Secretary Karl Kendrick T. Chua however pointed out that the Philippines lost P31 billion per week due to the Alert Level 3 status and another P12 billion per week due to a lack of face-to-face classes.
Maybe Marcos Jr. will push through with the proposal to increase our taxes to recoup losses? Or maybe we’ll just keep piling up debt for generations to come?
