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Bank of America survey finds widespread fear of stagflation

Chuck Burton


Bank of America survey finds widespread fear of stagflation

Investor fears of stagflation are at the highest since the 2008 financial crisis, while global growth optimism has sunk to a record low, according to Bank of America Corp.’s monthly fund manager survey. Global profit expectations also dropped to 2008 levels, with BofA strategists noting that prior troughs in earnings expectations occurred during other major Wall Street crises, such as the Lehman Brothers bankruptcy and the bursting of the dotcom bubble. BofA’s survey, which included 266 participants with $747 billion under management in the week through June 10, ended before the US inflation data on Friday “shattered” hopes of the Federal Reserve pausing its aggressive cycle of rate hikes, according to strategists led by Michael Hartnett. The results ― including 73 percent of respondents expecting a weaker economy in the next 12 months, the lowest since the survey started in 1994 ― provide insight into fund manager allocations and sentiment right before the S&P 500 collapsed into a bear market on Monday as surging US inflation fueled fears of sharper Fed action. ― BLOOMBERG NEWS



Coinbase to lay off 18 percent of its workforce amid downturn

Coinbase Global Inc. announced Tuesday it will lay off 18 percent of its workforce in another sign of a worsening crypto downturn that’s shaved off hundreds of millions of the total cryptocurrency market value. The United States’ biggest crypto exchange is following in the footsteps of other cryptocurrency-related businesses that have recently cut staff, including rival exchange Gemini Trust Co. and lender BlockFi Inc., both of which cited the arrival of a crypto winter — a prolonged downturn — as the reason for the layoffs. Coinbase had hired aggressively in recent years, with its workforce ballooning by about 1,200 employees this year. The company plans to lay off roughly that amount, ending the current quarter with about 5,000 employees. Until recently, the company didn’t acknowledge the arrival of a crypto winter, even though its shares have been dropping since it went public more than a year ago. They are down nearly 80 percent year to date, according to Bloomberg data. Laid off employees will receive a minimum of 3.5 months of severance, plus two weeks for every year of employment. ― BLOOMBERG NEWS



Ford puts a hold on Mustang Mach-E sales over safety issue

Ford Motor Co. has told dealers to temporarily halt sales of the Mustang Mach-E over a potential safety defect, a setback for the carmaker as it tries to fortify its position as a leader in electric vehicles. The automaker is recalling 48,924 Mach-Es from the 2021 and 2022 model years made at Ford’s plant in Cuautitlan, Mexico, a spokesperson for the company said Tuesday. Ford submitted the recall to the National Highway Traffic Safety Administration, which didn’t immediately respond to a request for comment. The issue involves the possible overheating of high-voltage battery main contactors, which can cause vehicles to lose power while in motion or fail to start. The defect is being corrected with a software update that owners can receive over the air or by going to their dealer, Ford said. It added that there are no open investigations with NHTSA. ― BLOOMBERG NEWS


AT&T may raise mobile plan prices for the second time

AT&T, facing higher costs than expected due to inflation, may have to raise mobile-service prices again, according to chief financial officer Pascal Desroches. Only weeks have passed since AT&T hiked rates by $6 per line and $12 for family plans in May. Wireless rival Verizon Communications said Friday that it was raising monthly service charges by $6 a line and $12 for limited data family plans starting in July. The largest US carrier has already added a $1.35 service charge to all mobile phone customers as an economic adjustment. With the inflationary backdrop, Verizon and AT&T are raising prices on what they consider outdated plans in the hopes that customers will opt for higher-priced unlimited offers. The move is also designed to spur more 5G adoption among consumers who have been largely ambivalent about the faster connections. AT&T’s Desroches offered a brighter outlook for the second half of the year. Despite rising costs, AT&T sees some lower expenses as it completes the shutdown of its 3G networks. The company is also getting some benefit from more roaming revenue. ― BLOOMBERG NEWS



Researcher says airline bookings dip as fares keep rising

Airline fares have jumped 47 percent since January and remain higher than they were before the pandemic, which could be leading to a slowdown in the number of seats airlines can sell. Bookings for flights within the United States fell 2.3 percent in May compared with April, research firm Adobe Digital Insights said Tuesday. The value of those sales rose 6 percent, however, to $8.3 billion, because of price increases. Prices for US flights in May were 30 percent higher than the same month in 2019 — the fourth straight month in which fares topped pre-pandemic levels. May prices were up 6 percent over April, according to Adobe, which based numbers on transactions at six of the largest 10 US airlines. Airline officials say demand for travel is strong after two years of the pandemic. As for the prices, they say they need to raise fares to cover surging jet fuel prices. The number of air travelers in the United States has rebounded to nearly 90 percent of 2019 levels, according to government figures. International travel has lagged domestic travel, but it could get a boost from the Biden administration’s decision to end the requirement to show a negative test for COVID-19 before flying to the United States. United Airlines said Monday that searches for international trips increased 7 percent in the three days after the administration announced it would drop the testing requirement. The airline said many of the searches were for summer travel to Europe, Mexico, and the Caribbean. ― ASSOCIATED PRESS



Compass and Redfin to cut workforces amid US housing slowdown

Real estate brokerages Compass Inc. and Redfin Corp. are cutting their workforces as rising interest rates cool a US housing market that reached a frenzy during the pandemic. Compass will lay off about 10 percent of its workforce while Redfin will cut about 6 percent, the companies said in regulatory filings Tuesday. For Compass, those cuts total about 450 employees and will contribute to an estimated $21.5 million to $23 million in costs before taxes in the second quarter, the company said. Redfin said it expects to cut about 470 employees and estimates that severance and other costs will total $9.5 million to $10.5 million. The cutbacks come as the Federal Reserve’s efforts to tamp down inflation push mortgage rates higher, cooling home purchases. Redfin chief executive Glenn Kelman noted that demand in May was 17 percent below the company’s expectations. Compass’s personnel cutbacks are part of a broader retrenchment by the real estate brokerage, which includes a planned pause in geographic expansion and merger-and-acquisition activity. The company is also expecting to consolidate some offices as a way to cut costs. Compass was cofounded in 2012 by Robert Reffkin, a former Goldman Sachs Group Inc. banker who sought to build a tech-enabled real estate brokerage. The company grew rapidly, often acquiring existing brokerages as a means of expanding, and using generous incentives to recruit top-performing agents. ― BLOOMBERG NEWS