(Interest)ing indeed. In my last few posts, I’ve cited some premature effects stemming from our looming interest rate increases — basically, outlining some of the market activity as we await the Federal Reserve’s interest rate hikes to try to quell inflation.

Well, the time is drawing near and tomorrow we shall see if all the rumors live up to all the worrying. What we know right now is that the Federal Reserve is ready to enact its most drastic steps in decades to ease inflation. By increasing rates, thereby making it more expensive to borrow, be it for a title loan, mortgage, or credit card purchase, the government is looking to decrease demand, drop prices, and, yes, end runaway inflation.

While many believe these increases will weaken the economy by worsening the financial situation for cash-strapped Americans, the Fed is under extreme pressure to act aggressively in the face of this unprecedented economy.

Tomorrow, we will likely see the Fed raise its benchmark short-term interest rate by half a percentage point — the highest rate increase since 2000. These half-percentage hikes will likely continue through each subsequent meeting in June and July. The idea is to ease our economy back to an ideal inflation metric.

It’s anyone’s guess as to how far the Fed will go with these hikes, but Wall Street is definitely going to Wall Street, and we will likely get seasick from the state of this week’s ticker trajectories. Some economists are even using the “R” word, as we await Wednesday’s meeting.

From CNBC:

“A recession at this stage is almost inevitable,” former Fed Vice-Chair Roger Ferguson told CNBC’s Squawk Box in a Monday interview. “It’s a witch’s brew, and the probability of a recession I think is unfortunately very, very high because their tool is crude and all they can control is aggregate demand.”

Talk about fire and brimstone. Let’s wait and see before putting our collective economic gears in panic mode. Remember, there are many things we can do to insulate ourselves from the whims of Wall Street. Think long-term, invest wisely, and don’t freak out even if they’re telling you the fiscal sky is literally falling.

More Non-REIT News to Know About

McDonald’s Wracks Brain Over What to Do in Russia

McDonald’s, or Макдоналдс as it’s known in the city on seven hills, plans to announce additional actions as it pertains to operations in Russia and Ukraine by the end of June.

The fast-food giant temporarily suspended operations in both countries at the end of February on the heels of Russia’s invasion of Ukraine. The company remained loyal to its labor base though, continuing to pay wages to the tune of $27 million throughout the spring.

These markets made up about 2% of the company’s overall income for 2021, but closing the eastern European locations obviously had a negative impact on its numbers in the first quarter (Q1) of this year.

With the Russian war raging on and no clear end in sight, it’s certainly a tough situation for American companies operating in the fray.

The World According to REITs

Ellington Residential Reports First Quarter

Another week, another Q1 earnings report. Today, we’ll take a look at Ellington Residential Mortgage (EARN).

Ellington Residential specializes in acquiring, investing in, and managing residential mortgage and real estate-related assets. Its portfolio is pretty much comprised of residential mortgage-backed securities — a term that likely strikes fear in all who survived the fallout of 2008 — but the principal and interest payments on all properties are guaranteed by the government in what’s called an agency RMBS.

In yesterday’s report, the company revealed a net loss of $17.5 million, core earnings of $3.9 million, and a book value of $10.14 per share. It’s also boasting a dividend yield of 10.9% based on Friday’s closing price of $8.78.

So, what’s affecting the numbers here? Allow me to bring it all back around.

President and CEO Laurence Penn said:

The first quarter was characterized by heightened volatility not seen since the COVID liquidity crisis, as the market reacted to revised expectations for the Federal Reserve, which signaled a faster interest rate hiking cycle and an accelerated pace of balance sheet runoff, as well as to rapidly rising inflation and geopolitical uncertainty. Interest rates soared and the yield curve flattened, with some parts of the yield curve inverting. Yield spreads in virtually every fixed income sector, including Agency RMBS, widened relative to U.S. Treasury securities and interest rate swaps.

 Tomorrow can’t come quick enough.