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Check Engine Soon

That’s the dashboard light no one likes to see. Occasionally it’s a simple malfunction and no big deal, but other times it’s a more ominous sign.

The check engine light came on in the services sector of the US economy last Friday. Namely, the ISM Services PMI clocked in at 49.6 for December, missing expectations, and dropping from 56.5 in November. Perhaps the more important shift was that it fell below 50 (considered the “neutral” reading), which indicates that services are now in contraction territory along with manufacturing.

In all prior recessions when this metric was tracked, Services PMI fell below 50 after the recessions had already begun. This is not a great sign for economic growth, but it could be a good sign for inflation.

Strong Winds on Bridge

After a high in February 2022, the goods component of inflation has been trending downward, falling materially in Q4. I would expect this trend to continue. And given the outrageously high readings in the first half of 2022, we may see outright deflation in goods CPI this year. A battle won, but not the war.

Inflation has also come down overall, but the services component has kept it propped up despite the cooling in goods. Services inflation includes things like shelter (a.k.a. housing, which I’ll cover in a minute), medical care, transportation, recreation, and education, among others. Until last week’s contractionary reading, many still pointed to the services sector as the bright spot that may get us across the economic bridge without much trouble.

Alas, trouble is in the air. Some of it won’t be so bad. In fact, I don’t think we’ll hear many complaints over airfare or hotel accommodations falling in price. But there’s another side to every coin: as services inflation comes down it may benefit consumers, but hurt the business providing said services as their revenue falls.

We are now in an environment I’d label as “pick your poison.” Prices may come down quite dramatically for things we spend money on everyday, and by the middle of this year we could find ourselves in a very different inflation situation than we were just 6 months before. But inflation doesn’t come down for no reason, it comes down because the demand/supply equation gets more in balance. If demand is falling, so is consumer spending. If demand and consumer spending are falling, so is corporate revenue. You’ll probably tire of hearing me say this, but I have to do it again: we can’t have it both ways.

One of the major components of the CPI chart above is shelter. I’ll stop short of describing the wonky way it’s measured in CPI because it’s not a direct read of home prices like you’d expect. In any event, home prices and rents remain quite elevated and can take an irritatingly long time to reflect what we already know…that activity has slowed. Mortgage activity has fallen 81% since the peak in early 2021, and it took a real dive last year with rising rates — down 67% since the end of 2021.

Even if it takes some time for slower mortgage activity to bake through the sector completely, this does point to a cooling trend in home prices and rents in 2023. But it also means anyone who bought homes at the top could see the value of said properties fall meaningfully from where they were at the time of purchase. Two steps forward, one step back.

Traction Control

As someone who learned how to drive in Wisconsin and spent 16 cold winters driving (not always successfully) through snowy, icy, and windy conditions, I’m all-too-familiar with traction control on a vehicle.

Unfortunately, I think it’s going to be necessary in the economy for a while. We wait with bated breath for Q4 earnings season to kick off, while the lagged effects of tighter financial conditions and reduced demand make their way into economic data.

Markets will no doubt cheer cooler inflation data, but we can’t declare victory until (and unless) we know we didn’t create a lot of employment, corporate, and economic casualties along the way. Keep your hands on the wheel at 10 & 2.

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser. Information about SoFi Wealth’s advisory operations, services, and fees is set forth in SoFi Wealth’s current Form ADV Part 2 (Brochure), a copy of which is available upon request and at www.adviserinfo.sec.gov. Liz Young Thomas is a Registered Representative of SoFi Securities and Investment Advisor Representative of SoFi Wealth. Her ADV 2B is available at www.sofi.com/legal/adv.
SOSS23011204

Now that the Secure 2.0 Act of 2022 has become law, what steps should HR professionals be taking? SoFi At Work breaks it down for you.

SAN FRANCISCO – SoFi Technologies, Inc. (NASDAQ: SOFI), the digital personal finance company, today announced plans to host a conference call to discuss financial and operating results for the fourth quarter and full year of 2022 on Monday, January 30, 2023, at 8 a.m. Eastern Time. SoFi also plans to release its fourth quarter and fiscal year 2022 results on the investor relations section of its website at https://investors.sofi.com at approximately 7 a.m. Eastern Time on Monday, January 30, 2023.

Full session details for the conference appearance are as follows:

CONFERENCE CALL DETAILS – TO DIAL IN BY PHONE

To pre-register for this call, please go to the following link (you will then receive your personal dial-in access details via email):
https://www.netroadshow.com/events/login?show=9715951b&confId=45768

WEBCAST DETAILS – AUDIO-ONLY

Use this link to access the audience view of the webcast:
https://events.q4inc.com/attendee/163556230

A replay of the webcast will be made available after the call on the Investor Relations page of the Company’s website at https://investors.sofi.com/overview/default.aspx

About SoFi

SoFi helps people achieve financial independence to realize their ambitions. Our products for borrowing, saving, spending, investing and protecting give our over 4.5 million members fast access to tools to get their money right. SoFi membership comes with the key essentials for getting ahead, including career advisors and connection to a thriving community of ambitious people. SoFi is also the naming rights partner of SoFi Stadium, home of the Los Angeles Chargers and the Los Angeles Rams. For more information, visit SoFi.com or download our iOS and Android apps.

Disclosures

Availability of Other Information About SoFi

Investors and others should note that we communicate with our investors and the public using our website (www.sofi.com), the investor relations website (https://investors.sofi.com), and on social media (Twitter and LinkedIn), including but not limited to investor presentations and investor fact sheets, Securities and Exchange Commission filings, press releases, public conference calls and webcasts. The information that SoFi posts on these channels and websites could be deemed to be material information. As a result, SoFi encourages investors, the media, and others interested in SoFi to review the information that is posted on these channels, including the investor relations website, on a regular basis. This list of channels may be updated from time to time on SoFi’s investor relations website and may include additional media channels. The contents of SoFi’s website or these channels, or any other website that may be accessed from its website or these channels, shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.

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⁴ 30-YEAR Payment Example: The payment for a 30-year term, loan amount $362000.00, Rate 5.875%, LTV 80% is $2141.00 for full Principal and Interest Payments with $6030.92 due at closing. The Annual Percentage Rate is 6.117%. No prepayment penalty. Payment shown does not include taxes and insurance. The actual payment amount will be greater. Interest rates and annual percentage rates (APRs) are for informational purposes only and are subject to change without notice.

⁵ 20-YEAR Payment Example: The payment for a 20-year term, loan amount $362000.00, Rate 5.750%, LTV 80% is $2542.00 for full Principal and Interest Payments with $6041.78 due at closing. The Annual Percentage Rate is 6.072%. No prepayment penalty. Payment shown does not include taxes and insurance. The actual payment amount will be greater. Interest rates and annual percentage rates (APRs) are for informational purposes only and are subject to change without notice.

⁶ 15-YEAR Payment Example: The payment for a 15-year term, loan amount $362000.00, Rate 5.125%, LTV 80% is $2886.00 for full Principal and Interest Payments with $4901.48 due at closing. The Annual Percentage Rate is 5.474%. No prepayment penalty. Payment shown does not include taxes and insurance. The actual payment amount will be greater. Interest rates and annual percentage rates (APRs) are for informational purposes only and are subject to change without notice.

⁷ 10-YEAR Payment Example: The payment for a 10-year term, loan amount $362000.00, Rate 5.250%, LTV 80% is $3884.00 for full Principal and Interest Payments with $5194.70 due at closing. The Annual Percentage Rate is 5.767%. No prepayment penalty. Payment shown does not include taxes and insurance. The actual payment amount will be greater. Interest rates and annual percentage rates (APRs) are for informational purposes only and are subject to change without notice.