💸 Economy

People Are Getting More Worried About The Economy

New jobless claims unexpectedly jumped to the highest levels since last October. This report also isn’t showing the impact of recent employment cuts at the Federal government yet either.

Some are also concerned that DOGE’s layoffs of Federal employees and termination of government contracts could be a growing economic risk. Canceling or delaying contracts can have a ripple effect. That might result in layoffs at the contractors… and their suppliers… and companies that transport goods or provide supporting services for these contracts.

Most concerning of all is the Atlanta Fed’s updated economic forecast for Q1. In mid February they projected 2.3% growth for the US economy. Now, after the latest round of data, they expect it to shrink by 1.5% instead. JPMorgan is a bit more optimistic, expecting 1.5% growth. However, that’s down from their previous estimate of 2.25%.

There’s so much uncertainty right now, it seems to be affecting everyone and no one can tell exactly what’s going on. I would not be surprised to have some uneven numbers and news over the coming weeks. However, a trend of weakening economic expectations and rising inflation is a bad combination for most assets. Investors need to be keeping a close eye on both of these, as well as actions taken by the Federal Reserve and policy makers.

🏠 Real Estate

The residential real estate market has slowed to a crawl.

In January, sales of existing homes reached their lowest point ever. Sales are also down 5.2% when compared to January 2024 - which was also not a particularly great year.

The housing market is basically stuck as mortgage rates have remained high. Though, as people become more worried about the economy there has been some reduction in bond yields and the mortgage rates since January.

That’s a slippery slope though. As people become more worried about the economy and their jobs, they may be less inclined to take on a home purchase. So there’s a risk that these declines in mortgage rates will not meaningfully drive any more buying activity.

That leaves a lot of people in “wait and see” mode, which will keep the housing market moving slowly.

💡 Startups

DeepSeek continues to have an impact on the conversation around AI models. OpenAI recently debuted GPT-4.5 and the cost and efficiency of the model are a central part of the discussion. The new model is 15-30 times more expensive than previous 4o models without meaningful improvement in most measurable benchmarks.

As even the best-funded companies in the industry are struggling to keep the speed of innovation high and the cost of running models low, startups have shifted their strategies. Few companies are investing in building brand new LLM AI models. Instead they are contenting themselves with running one (or even multiple) of the leading models.

These companies are now competing to build the best user experience. With multiple “good enough” models to build on top of, AI has become another building block for them. The real value for them is in most effectively expanding the capabilities and efficiency of the user of the program.

🎵 Music Royalties

ASCAP is one of the largest performance rights organizations. They reported about $1.7B in distributions for Songwriters and Publishers in 2024. Domestic earnings for those groups increased 5.3% yearly. International royalties were up 6.8%.

That’s a bit short of the 7% CAGR (compound annual growth rate) they reported from 2014 - 2023. However, it’s still another year of solid growth for the music industry. A growing music industry and growing royalty payments are tailwinds for music royalty investors.

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Sources

Economy - CNBC, Forbes, Fortune

Real Estate - Reuters

Startups - Forbes, Ars Technica

Music Royalties - Billboard