Category: Economy

Even though Latinos are the second-largest ethnic group in the U.S., they’re underrepresented across many industries, including finance, which can have long-term effects on the ability to grow wealth.

A group of Latino-led and focused venture capital firms is looking to change that.

There are more than 62 million Hispanic or Latino people in the U.S., according to the 2020 Census. That’s nearly 19% of the total population, second only to non-Hispanic whites. They also represent one of the largest and fastest-growing sectors: In 2019, the total economic output of the group was $2.7 trillion, up from $1.7 trillion in 2010, according to a report from the Latino Donor Collaborative.

But in 2021, Latinos made up only 4% of large U.S. companies’ most senior executives, per a survey from the Hispanic Association on Corporate Responsibility. And a separate study in 2019 by the CFA Institute found that only 8% of workers in investment management firms were Latino compared to 9% Asian, 5% Black and 84% white.

Similarly, only 2% of venture capital professionals and partner-level professionals at institutional firms are Latino, a study from LatinxVC discovered.

“We’re trying to increase [Latino] venture capitalists within established venture organizations,” said Mariela Salas, the executive director of LatinxVC. “We’re also trying to retain those Latinos that are in institutional and smaller firms.”

Latinos also are less likely to have access to investing. Latino household wealth lags that of white counterparts, and only 26% of Hispanic households have access to an employer-sponsored 401(k) plan, compared to 37% of Black households and half of white ones, the Economic Policy Institute found.  

Lack of access to capital markets makes it harder for Latinos to build meaningful wealth. It also means they’re underrepresented as shareholders of companies if they aren’t holding stocks and that they’re not lending a proportional voice to investing decisions.

“We should be mindful of the connection of finance and the capital markets to the broader economy,” said Rodrigo Garcia, global chief financial officer of Talipot Holdings, an investment management group. “It’s always been a critical piece that we have representation in asset management, in the people who are making decisions on the purchases of stocks, bonds, venture capital private equity and more.”

There are several Latino-focused venture capital firms that are working on at least one piece of the puzzle: investing in their communities.

One of those firms is the Boston Impact Initiative, which just launched a $20 million fund focused on investing in entrepreneurs of color.

“We take the earliest risk, we’re funding the teeny-tiny startups that hopefully one day will grow into those companies that become publicly traded and become available in the retail finance sector,” said Betty Francisco, CEO of the Boston Impact Initiative. Those businesses include Synergy Contracting, a women-owned construction company, and Roundhead Brewing, the first Latino-owned craft brewery in Massachusetts.

Another group, Mendoza Ventures, was started in 2016 to address the lack of both women and Latinos writing checks to fund new companies. The Boston-based firm run by Adrian Mendoza has raised $10 million across two funds.

“We give the opportunity to first-time accredited investors, people of color and women to get access to venture capital,” Mendoza said. Accredited investors are individuals or entities that meet specific earned income, net worth or asset thresholds in order to invest in sophisticated or complex securities.

“The majority of wealth in America comes from [mergers and acquisitions] and that comes through venture capital and private equity, so why not be able to diversify on the other end?” Mendoza added.

To be sure, there has been some progress in the financial industry. In 2021, the number of Latino certified financial planners rose by 15% from the prior year. Still, of the overall class of professionals who passed the exam that year, only 2.7% identified as Latino.

Those in the industry see that there’s a benefit to having more people with diverse experiences in all areas of finance.

“You cannot replicate anyone’s lived experience,” said Marcela Pinilla, director of sustainable investing at Zevin Asset Management. She added that as a Latina in finance, she wants to bring more people of color into the industry.

From the perspective of the retail investors themselves, one of the most powerful things they can do is look at what they’re investing in and ask how many of those dollars are going to Latino fund managers, Latino-led funds or even companies with Hispanic leadership.

“I think just the simple question of ‘who is managing my money?'” is important, said Mendoza.

A combination of rising interest rates, high home values and limited inventory has been squeezing prospective homebuyers — and perhaps few know that as well as Juan Espinoza does.

The 23-year-old resident of Santa Ana, California, has been on a three-year search for a dwelling that’s within the family budget that includes the four in his own family — and his parents.

“We live in an apartment right now, just waiting for the market to come down a little bit,” Espinoza said. “We’ve been outbid so many times I’ve lost track of how many houses we saw.”

The family is facing two trends that have made the search especially difficult. The first is that home prices, even as they are beginning to cool, have jumped sharply in the past year. And the Espinozas have been searching in Orange County where the median home price was $987,950 during the third quarter, up 11% from the year-earlier period, according to ATTOM Data.

The second is that the Espinozas are among the millions of people with multiple generations residing under one roof. In March 2021, there were 59.7 million U.S. residents in that living arrangement, up from 14.5 million in 1971, according to Pew Research.

Mortgage rates have also surged as the Federal Reserve tightens monetary policy to curb inflationary pressures not seen in about 40 years. The rate on a 30-year fixed mortgage reached 6.66% on Oct. 6 according to Freddie Mac. It was 2.99% on Oct. 7, 2021.

“We’re going to make them homeowners, but the interest rates have gone up, and their purchasing power has gone down,” said Imelda Manzo, a Murrieta, California-based realtor who has been working on finding new housing for the Espinozas.

Families of color are more likely to share a home with multiple generations, Pew found. Roughly a quarter of Asian, Black and Hispanic Americans each lived in multigenerational households in 2021, compared to 13% of those who are white.

Residing with relatives can offer advantages: More family members residing under one roof means you can pool multiple streams of income, for instance. And in households with young children, grandparents can pitch in with child care.

“Latinos are more likely to live in multigenerational households,” said Gary Acosta, co-founder and CEO of the National Association of Hispanic Real Estate Professionals.

“But being a larger multigenerational family comes with complications if you’re trying to be a homeowner,” he said.

For instance, it can be harder for them to qualify for a mortgage, even if they bring multiple streams of income to the table. “The perception is that those aren’t permanent scenarios, so the instinct of the underwriter is to look at everything else more aggressively,” Acosta said.

Larger families also have needs to meet as they search for their dwellings, which make it hard to find the ideal home when inventory is tight. “It’s not just square footage, but do you have a yard, more bedrooms,” Acosta said. “You want more utility.”

“Work-at-home growth pushed homebuyers to the suburbs and toward homes with more utility, such as extra bedrooms that can be used as a home office,” Acosta said. Institutional buyers have also rushed into affordable neighborhoods to snap up homes, he added. Indeed, a May report from the National Association of Realtors found that in 2021 the institutional buyer market share rose in 84% of states, as well as in the District of Columbia.

For the Espinoza family, the ideal home would have at least three bedrooms, a backyard and proximity to employment and schools in Santa Ana.

These issues are also compounded by the fact that first-time homebuyers like the Espinozas have been facing fierce competition from all-cash buyers.

“We would get counteroffers,” said Manzo. “[Sellers] would ask for highest and best within a deadline.”

Aggressive bidders are also willing to up the ante to buy a home, including waiving inspections and appraisal contingencies, she said. And others just bring more cash to the table.

In one situation, the family lost their bid on a home to another buyer who was willing to pay $125,000 over asking, Manzo added.

As homeownership becomes increasingly unaffordable, different states are crafting legislation to address the problem.

Last year, Democratic California Gov. Gavin Newsom signed the California Housing Opportunity and More Efficiency Act into law. The measure streamlines the process for homeowners to split their residential lot or build a duplex onto their property.

The law also makes it easier for homeowners to build accessory dwelling units onto their property, said Acosta, which can also help accommodate multigenerational households.

“These additional units are typically called granny flats and can be used as an extra bedroom or it can be a small apartment inside of another property, so it increases density,” he said.

Another piece of proposed legislation in New Jersey would permit buyers bidding on foreclosed homes to make a down payment of 3.5%, provided they make that property their primary residence for at least seven years. Normally, buyers of these foreclosed properties would have to put down a deposit of 20%.

For the Espinoza family, the next steps are to wait for the market to cool sufficiently — and to keep an eye on interest rates, even as the Fed continues its policy-tightening regime.

“We’ve started to see some sellers are doing price reductions on their listing; they’re not selling the way they were six months ago,” Manzo said. “We’re in a waiting period right now, but we’ll continue to look and see what happens toward the end of the year.”

After two years of port congestions and container shortages, disruptions are now easing as Chinese exports slow in light of waning demand from Western economies and softer global economic conditions, logistics data shows.

Container freight rates, which soared to record prices at the height of the pandemic, have been falling rapidly and container shipments on routes between Asia and the U.S. have also plunged, data shows. 

“The retailers and the bigger buyers or shippers are more cautious about the outlook on demand and are ordering less,” logistics platform Container xChange CEO Christian Roeloffs said in an update on Wednesday.  

“On the other hand, the congestion is easing with vessel waiting times reducing, ports operating at less capacity, and the container turnaround times decreasing which ultimately, frees up the capacity in the market.”

The latest Drewry composite World Container Index — a key benchmark for container prices — is $3,689 per 40-foot container. That’s 64% lower than the same time last September after falling 32 weeks in a row, Drewry said in a recent update.  

The current index is much lower than record-high prices of over $10,000 during the height of the pandemic but still remains 160% higher than pre-pandemic rates of $1,420. 

According to Drewry, freight rates on major routes have also fallen. Costs for routes like Shanghai-Rotterdam and Shanghai-New York have fallen by up to 13%. 

The falling freight rates tie in with a “sharp drop” in container shipments that Nomura Bank has observed. 

Nomura, quoting data from U.S.-based Descartes Datamyne, said container shipments from Asia to the U.S. for all products except rubber products in September are down year on year.

“We assume that the sharp drop in container shipments largely reflects US retailers stopping orders and reducing inventories due to the risk of an economic slowdown,” Nomura analyst Masaharu Hirokane said in a note on Wednesday, adding that the bank has yet to see signs of a sharp fall in U.S. retail sales.

Port throughput around the world has also dropped. When Shanghai reopened after its recent lockdowns, port traffic volumes lifted but weren’t enough to offset the “wider downturn in port handling levels,” Drewry said. 

In Europe, sliding container prices and rates reflect declining consumer confidence, Container xChange said. 

“The European market is finding itself flooded with 40-foot high-cube containers. As a result, the region is experiencing a fall in the prices of these boxes,” Container xChange said. 

The trends in logistics and supply chains from the past two years have reversed, logistics companies said. During that period, container shortages were constant as a result of delays at ports affected by lockdowns and soaring demand.

But now, demand for containers is falling and so are their rates, Seacube Containers chief sales director Danny den Boer said at the Digital Container Summit held earlier this month. 

Idle time for containers is also on the rise, Sogese CEO Andrea Monti said at the same conference.   

“Containers are stacking up at a lot of import-led ports. Shippers are giving containers away just because containers are being stuck there,” said Container xChange account manager Gregoire van Strydonck at the conference. 

India’s Arcon Containers CEO Supal Shah said factories in China have stopped production for the foreseeable future. 

“We heard four months,” he said at the Digital Container Summit conference.

“The container depot space is full in China, Europe, India, Singapore and most parts of the world.”

Consumer spending was flat in September as prices moved sharply higher and the Federal Reserve implemented higher interest rates to slow the economy, according to government figures released Thursday.

Retail and food services sales were little changed for the month after rising 0.4% in August, according to the advance estimate from the Commerce Department. That was below the Dow Jones estimate for a 0.3% gain. Excluding autos, sales rose 0.1%, against an estimate for no change.

Considering that the retail sales numbers are not adjusted for inflation, the report shows that real spending across the range of sectors the report covers retreated for the month.

A Bureau of Labor Statistics report Thursday indicated that consumer prices rose 0.4% including all goods and services, and 0.6% when excluding food and energy.

Miscellaneous store retailers saw a decline of 2.5% for the month, while gasoline stations were off 1.4% as energy prices declined.

A slew of other sectors also posted drops, including sporting goods, hobby, books and music stores as well as furniture and home furnishing stores, both of which posted a -0.7% drop, while electronics and appliances were off 0.8% and motor vehicle and parts dealers fell 0.4%.

General merchandise store sales rose 0.7%. Gainers also included online stores, bars and restaurants, clothing retailers and health and personal care stores, all of which saw 0.5% increases.

While the gains for the month were muted, retail sales rose 8.2% from a year ago, matching the rise in the consumer price index. Shoppers remain generally flush with cash though there are indications of late that they are dipping into savings to make ends meet.

The Fed has enacted multiple interest rate hikes aimed at reducing inflation and bringing the economy back into balance. Markets expect the central bank to raise rates up to 1.5 percentage points more through the end of the year.

A separate report Thursday showed that import prices fell 1.2% in September, slightly more than the 1.1% estimate. Exports declined 0.8%.

Prices consumers pay for a wide variety of goods and services rose more than expected in September as inflation pressures continued to weigh on the U.S. economy.

The consumer price index increased 0.4% for the month, more than the 0.3% Dow Jones estimate, according to the Bureau of Labor Statistics. On a 12-month basis, so-called headline inflation was up 8.2%, off its peak around 9% in June but still hovering near the highest levels since the early 1980s.

Excluding volatile food and energy prices, core CPI was even higher for the month, accelerating 0.6% against the Dow Jones estimate for a 0.4% increase. Core inflation was up 6.6% from a year ago, the biggest 12-month gain since August 1982.

The report initially rattled financial markets, with stock market futures plunging and Treasury yields moving up as traders priced in likely more aggressive interest rate hikes ahead from the Federal Reserve. However, those earlier losses reversed in morning trading, and the Dow Jones Industrial Average rose more than 800 points by 1:30 p.m. ET.

“The Federal Reserve has made it very clear they’re committed to price stability, they’re committed to reducing the inflationary pressures,” said Michelle Meyer, chief U.S. economist at the Mastercard Economics Institute. “The more inflation comes in above expectations, the more they’re going to have to prove that commitment, which means higher interest rates and cooling in the underlying economy.”

Another large jump in food prices boosted the headline number. The food index rose 0.8% for the month, the same as August, and was up 11.2% from a year ago.

That increase helped offset a 2.1% decline in energy prices that included a 4.9% drop in gasoline. Energy prices have moved higher in October, with the price of regular gasoline at the pump nearly 20 cents higher than a month ago, according to AAA.

Closely watched shelter costs, which make up about one-third of CPI, rose 0.7% and are up 6.6% from a year ago. Transportation services also showed a big bump, increasing 1.9% on the month and 14.6% on an annual basis. Medical care services costs rose 1% in September.

The rising costs meant more bad news for workers, whose average hourly earnings declined 0.1% for the month on an inflation-adjusted basis and are off 3% from a year ago, according to a separate BLS release.

Inflation is rising despite aggressive Federal Reserve efforts to get price increases under control.

The central bank has raised benchmark interest rates 3 full percentage points since March. Thursday’s CPI data likely cements a fourth consecutive 0.75 percentage point hike when the Fed next meets Nov. 1-2, with traders assigning a 98% chance of that move.

The chances of a fifth straight hike three-quarter point hike also are rising, with futures pricing in a 62% probability following the inflation data.

Inflation rose despite pullbacks in some key areas that policymakers are watching.

For instance, used vehicle prices fell 1.1% and apparel posted a 0.3% decline. Egg prices even dropped, off 3.5% for the month though still up 30.5% from a year ago.

However, air fares rose after consecutive monthly declines, rising 0.8% for the month and up 42.9% from a year ago.

How much the higher prices have hurt consumers could be made clearer Friday, when the Commerce Department and Census Bureau release September’s retail sales report. The data, which is not adjusted for inflation, is expected to show a monthly increase of 0.3%, and no change when excluding auto sales.

Meyer, the Mastercard economist, said consumer spending remains solid despite the inflationary pressures.

“Inflation is able to run this hot in part because consumers have had very strong purchasing power,” she said. “Consumers are still spending through these inflation increases, and the challenge therefore is larger for the Fed to effectively be able to rebalance the economy.”

Falling housing prices eventually will work their way through to rents, which will lower the overall inflation numbers, Meyer added.

Consumer spending has held up in part because of leftover stimulus funds from Covid-related spending and a labor market that has been resilient even as the economy has slowed considerably. Nonfarm payrolls rose 263,000 in September and the unemployment rate fell to 3.5%, tied for the lowest since late-1969.

Jobless claims for the week ended Oct. 8 totaled 228,000, an increase of 9,000 from the week before, the Labor Department reported Thursday. That was just slightly ahead of the 225,000 estimate but still an indicator that layoffs are low.

Wholesale prices rose more than expected in September despite Federal Reserve efforts to control inflation, according to a report Wednesday from the Bureau of Labor Statistics.

The producer price index, a measure of prices that U.S. businesses get for the goods and services they produce, increased 0.4% for the month, compared with the Dow Jones estimate for a 0.2% gain. On a 12-month basis, PPI rose 8.5%, which was a slight deceleration from the 8.7% in August.

Excluding food, energy and trade services, the index increased 0.4% for the month and 5.6% from a year ago, the latter matching the August increase.

Food prices helped boost the increase in goods inflation, with a 1.2% monthly increase. Energy rose 0.7% after posting massive gains the previous two months.

Inflation has been the economy’s biggest issue over the past year as the cost of living is running near its highest level in more than 40 years.

The Fed has responded by raising rates five times this year for a total of 3 percentage points and is widely expected to implement a fourth consecutive 0.75 percentage point increase when it meets again in three weeks.

“Inflationary momentum has built up in the U.S. economy and will persist near-term, keeping the Fed hiking aggressively,” said Bill Adams, chief economist for Comerica Bank.

However, Wednesday’s data shows the Fed still has work to do. Indeed, Cleveland Fed President Loretta Mester on Tuesday said “there has been no progress on inflation.” Following the PPI release, traders priced in an 81.3% chance of a three-quarter point hike, the same as a day ago.

Stock market futures trimmed gains following the news, while Treasury yields were little changed on the session.

The PPI release comes a day ahead of the more closely watched consumer price index. The two differ in that PPI measures the prices received at the wholesale level while CPI gauges the prices that consumers pay.

Some two-thirds of the increase in PPI was attributed to a 0.4% gain in services, the BLS said. A big contributor to that increase was a 6.4% jump in prices received for traveler accommodation services.

Final demand goods prices also rose 0.4% on the month, pushed by a 15.7% advance in the index for fresh and dry vegetables.

Inflation expectations and the outlook for household spending growth fell sharply in September as the Federal Reserve’s rate increases take hold in the U.S. economy.

Consumers expect the inflation rate a year from now to be 5.4%, the lowest number in a year and a decline from 5.75% in August, according to the latest New York Fed Survey of Consumer Expectations.

That level peaked at 6.8% in June and has been coming down since as the central bank has instituted a series of rate hikes totaling 3 percentage points. Markets largely expect the Fed to continue raising rates until it brings inflation down to its long-run target of 2%.

While the near-term outlook for inflation was improving, respondents also indicated that they see household spending growth of 6% for the next year, a steep fall from August’s 7.8% projection. That’s the lowest level since January and the biggest one-month decline ever in a data series going back to June 2013.

Consumers have been somewhat constrained by price increases moving near their fastest level in more than 40 years. Personal consumption expenditures in inflation-adjusted dollars rose just 0.1% in August while the rate of savings growth is declining, according to the Bureau of Economic Analysis.

Respondents did put a slightly higher number on their outlook for three-year inflation, moving that forecast to 2.9%, up 0.1 percentage point from August. Median five-year expectations rose to 2.2%, an increase of 0.2 percentage point but much closer to the Fed’s goal.

Elsewhere in the survey, respondents said they expect home prices to increase by just 2%, the lowest reading since June 2020 and reflective of a slowing real estate market. Consumers see gas prices rising by half a percentage point, and food to surge by 6.9%, a full percentage point increase from August’s survey.

The numbers come as the central bank is looking to arrest a cost-of-living surge pushed by Covid pandemic-related factors such as supply chain clogs. Unprecedented levels of fiscal and monetary stimulus also coincided with the inflation surge. The Fed has pulled back on its efforts, raising rates and beginning to reduce the size of the bond portfolio on its mammoth $8.8 trillion balance sheet.

Clarification: This story has been updated to clarify that the rate of savings growth is declining.

JPMorgan Chase CEO Jamie Dimon said Monday that the U.S. should forge ahead in pumping more oil and gas to help alleviate the global energy crisis, likening the situation to a national security risk of war-level proportions.

Speaking to CNBC, Dimon dubbed the crisis “pretty predictable” — occurring as it has from Europe’s historic overdependence on Russian energy — and urged Western allies to support the U.S. in taking a lead role in international energy security.

“In my view, America should have been pumping more oil and gas and it should have been supported,” Dimon told CNBC’s Julianna Tatelbaum at the JPM Techstars conference in London.

“America needs to play a real leadership role. America is the swing producer, not Saudi Arabia. We should have gotten that right starting in March,” he continued, referring to the onset of the energy crisis following Russia’s invasion of Ukraine on Feb. 24.

Europe — once a major importer of Russian energy, relying on the country for up to 45% of its natural gas needs — has been at the forefront of that crisis; facing higher prices and dwindling supply as a result of sanctions levied against the Kremlin.

And while EU nations have hit targets to shore up gas supplies over the coming winter months, Dimon said leaders should now be looking ahead to future energy security concerns.

“We have a longer-term problem now, which is the world is not producing enough oil and gas to reduce coal, make the transition [to green energy], produce security for people,” he said.

“I would put it in the critical category. This should be treated almost as a matter of war at this point, nothing short of that,” he added.

Referring to the war in Ukraine more broadly, Dimon dubbed it an attack of similar magnitude to that of Pearl Harbor or the invasion of Czechoslovakia in 1968.

“It’s Pearl Harbor, it’s Czechoslovakia, and it’s really an attack on the Western world,” he said.

However, the CEO said it also presented an opportunity for the West to “get its act together” and defend its values in the face of autocratic regimes.

“The autocratic world thinks that the Western world is a little lazy and incompetent — and there’s a little bit of truth to that,” said Dimon.

“This is the chance to get our act together and to solidify the Western, free, democratic, capitalist, free people, free movements, freedom of speech, free religion for the next century,” he continued.

“Because if we don’t get this one right, that kind of chaos you can see around the world for the next 50 years.”

Ahead of the release of the latest consumer price index reading this week, Allianz Chief Economic Adviser Mohamed El-Erian told CBS’ “Face The Nation” Sunday that he predicts headline inflation “will probably come down to about 8%,” but that core inflation “is still going up.”

Core inflation is what measures the drivers of inflation and how broad they are, so El-Erian said an increase in core inflation means “we still have an inflation issue.”

Even if core inflation is still on the rise, however, El-Erian said it will eventually come down.

“The question is, does it come down with a slowdown in the economy or a major recession?” he said on “Face the Nation.”

The oil producer group OPEC+ announced its largest supply cut since 2020 on Wednesday, and El-Erian said this decision “does hurt the U.S.,” as it risks causing inflation to increase again. But he said the cut did not come as a surprise since the group is looking to protect oil prices in the face of declining demand.

“That’s what they do,” he said. “But it’s certainly not good news for the U.S. economy.”