President Biden has returned from his trip to the Middle East, and it was hard not to notice some of the geo-political scenes from last week. On Wednesday, the President was exiting Air Force One in Israel as his first stop. Simultaneously, the U.S. Bureau of Labor Statistics released the June Consumer Price Index (CPI) figure. It came in very hot, 9.1 percent.
This is the inflation rate you have been hearing about on the news. At one time, the experts said it was “transitory,” another word for “temporary.” Now, it appears that inflation is hitting every area of our lives. As you know, the products we buy must be transported and the cost of transportation has gone up for truckers just as it has gone up for everyday drivers, like you and me.
Then, on Friday, he met with the royal family of Saudi Arabia. It was the visit most of the political class were waiting for. Prior to the 2020 election, the President said he intended to make Saudi Arabia a “pariah” due to death of a Jamal Khashoggi, Saudi critic and columnist of The Washington Post who was very critical of the Saudi government. He was allegedly assassinated at the Saudi consulate in Turkey at the request of the Saudi royal family. The President was criticized for fist-bumping the man who is said to order the killing, Prince Mohammed bin Salman.
But the pariah statement was before oil prices surged, and gas prices started to hit $5/gallon, and the President’s approval rating have also fallen. This past week, he went to ask them to raise oil production to help “global markets.” The United States is part of that global market.
Time will tell if he was successful, and if prices begin to drop.
Speaking of drop, they have been dropping already. So, what does that mean? Well, it’s more complicated than the price has fallen because of any new policy. The price of oil is figured for the future. The drop in oil, and, subsequently, gas prices is due to the prediction that there will be less need for oil in the future.
Why is that? Because the belief is that we are already in recession. We will officially find out whether the United States is in recession at the end of the month when the Advance Estimate for Gross Domestic Product (GDP) 2nd Quarter report covering April through June 2022 will be released by the U.S. Bureau of Economic Analysis. The first quarter real GDP decreased by 1.6 percent.
If we are in recession, the experts predict that there will be layoffs in the future while inflation is ongoing. So, money will be moving from one area to another, and that makes certain assets – particularly in rental property – more attractive.
– David Leiva