4 MINUTES AGO, This is DEVASTATING news for the U.S.! with Clayton Morris

4 MINUTES AGO, This is DEVASTATING news for the U.S.! with Clayton Morris
Clayton Morris joins us to discuss what is going on with the U.S. economy in this breaking news update.
I have breaking news for you. The Federal Reserve has just decided to raise interest rates again by 0.25%. A little bit over a year ago, the Fed Fund's interest rate was at 0.25%. After today, the Fed Fund's interest rate has now increased from 5.0% to 5.25%. And we don't know if this is going to be the last one, the last increase in this economic cycle. In today's video, we're going to review why they decided to do what they did, the economic consequences, and what you and I can expect in the months ahead. So right now, the sectors of the economy that are more interest rate sensitive are hurting badly. They're feeling it. They're feeling it more quickly and more severely than other sectors. Now I'm going to tell you this. I'm going to tell you this. I want you to think about it. And please let me know if this makes sense to you. So I'm going to tell you about four sectors. So the first sector is real estate. So I just did a video covering housing. The volume of homes being bought and sold has plummeted. Real estate activity has fallen off a cliff. That's because of higher mortgage interest rates. So if you just think about it, if you own a home, if you own a home right now with a 3% mortgage interest rate, and you don't, in that situation, you're not going to want to sell your home. I mean, why would you? Why would you want to sell your home unless you really have to trade your 3% mortgage interest rate for a 6% rate? It just doesn't make sense. So there are less sellers. And as a buyer, higher interest rates makes your monthly payments ridiculously expensive. So therefore, there are less buyers as well. So the second one, look at the tech industry. So I'm referring more to the midsize and the smaller tech companies. So you know what these smaller tech companies do? They burn money. The majority of them have net losses. These companies, they promise to make money in the future. But with higher interest rates, their promise of future cash flows is less attractive. That's why tech companies, their stock prices and their valuations have been coming down. They've come off greatly from their peaks. So you can think of it like this. If your friend asks you for money, if they say, hey, can I please borrow some money from you? If inflation is close to zero and interest rates are at 0%, then you would be more open to the idea of lending your friend some money. But now the situation has changed. With this environment, with interest rates so high, you're going to be thinking, I don't know, why should I loan out my money for free? When I could just stick into a savings account, when you could just stick it into a CD and you can earn 5% interest. So it's the same thing with tech companies.

Discussed on the show:
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