OPEC+ announced on Wednesday, October 5th, 2022, to cut oil production. (OPEC stands for Organization of the Petroleum Exporting Countries). By the way, OPEC+ includes Russia, which joined in 2016. One must understand OPEC+'s goals:
"Reduce oil price volatility by managing the production and supply of oil, ensuring it's profitable as possible for members of OPEC." So with a global recession, OPEC is reducing prices to ensure profit for all the OPEC+ members.
Who cares if OPEC+ is cutting oil production. How will that affect me?
So what's going to happen to us in the US? How will this affect me, the teacher, the restaurant owner, the local contractor, the grocery shopper or the grocery owner, the average working folks, and the homeowners and renters in the community?
OPEC+, in reaction to the global downturn, OPEC+ decided to cut oil production; this move will not only hurt the average consumer at the gas pump but will increase costs across the board for products that use oil energy to manufacture and transport. Broader consumer goods prices will stay high or gradually rise due to this news, and keeps inflation high. Then the US Federal Reserve must increase rates progressively to respond to higher inflation. These higher rates will raise credit card rates, equity lines of credit, mortgages, business lines of credit, car loans, equipment, and most short-term capital credit rates. This will eat into the profits of consumers' paychecks and business owners. Pushing the consumer and business owner to reduce spending further deepens the recession we are heading towards (if we are not already).
I have heard some people say, "Short term interest rates aren't that bad." The Federal Reserve increased rates 3.00% in 6 months! In 6 Months! Never this fast since 50+ years ago. And I anticipate more rate hikes.
My guess rates will rise another 50-75pbs in November 2nd, then possibly another 25-50 during the next December Fed meeting before we end the 2022 year... that will make a total of about 4.00% rate increase in 2022. Feels like 1970s, smells like 1970s, sounds like 1970s... will it be like the 1970s?
Please email me for my forecast on future rate hikes, where I see the 10-year treasury in the coming months, and how the stock and real estate market will shift: AOFSanFrancisco@ArtofFin.com