May 2023 – Why the Fed is willing to tolerate economic damage

The Investment Environment

As we move through Q2, the data shows that households are running out of their pandemic savings. This is reflected in the drop in consumer spending through Q1, and we are off to a weak start in Q2 too.

The Federal Reserve continues to face a difficult trade-off: with inflation this persistent, the only way to get it back towards 2% is by generating a recession. And that’s why the Fed is willing to tolerate economic damage and financial cracks like the one we’ve seen again in the US banking sector. Markets have largely shrugged off the data and continue to price in one further hike next week and two rate cuts before the end of the year. However, given the persistence of inflation, we still believe hopes of rate cuts this year are misplaced.

On the horizon, the government's deadline to raise the debt ceiling is next in focus and could occur anytime between June and September. We'll be watching closely...

Last Month in Essential Realty Partners

All great things start with small beginnings – if you count 273k as a small beginning! That is the size of Essential’s acquisition pipeline – 597 properties containing 273k units.   

While patiently waiting for market pricing to reset, Essential has identified and is tracking these assets for potential acquisitions. Last month marked our initial direct marketing outreach to owners in our pipeline with priority outreach to owners with debt maturing in 2023. Get ready for big new during the 3rd and 4th quarter of this year!