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Good afternoon,

Bad news is UBS estimates Americans could lose up to $400M this year from pickleball injuries.

Good news is they’ll once again hold the bag for the larger part of a country by saving that much with the Credit Suisse employees they’re about to lay off.

Let’s dive in.

Economy Heat Check

As of 6/28/2023 market close, unless otherwise stated.

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Expectations Reset

The Central Bank Support Group

The ECB Forum on Central Banking just ended, but central bank heads’ troubles seem to just be beginning. In their words. This year, it’s become central bankers’ support group on how their countries' good economies are bad for their jobs.

The Fed (US) is likely to continue raising interest rates despite slowing the pace of increases recently. That’s according (for the thousandth time) to Fed Chair, Jerome Powell, who restated that last year’s quick rate hikes haven’t shown their effects in slowing economic activity and inflation yet. Powell anticipates that core inflation, which excludes volatile food and energy prices, will not reach the Fed's 2% target until 2025.

Central bankers have raised interest rates rapidly to combat inflation, but their economies are stronger than billionaire sugar daddies withstanding the higher borrowing costs. In Europe, the European Central Bank (ECB) has also increased interest rates and plans further rate hikes. Unemployment is at record lows in the eurozone and near multi-decade lows in the UK, contributing to strong wage demands.

The Bank of England has raised its key interest rate more aggressively than other central banks to curb high inflation. Meanwhile, the Bank of Japan (BOJ) sees signs that inflation is heading towards its 2% target – but remains cautious about unwinding monetary easing. BOJ Governor Ueda sees wage increases as an indication that underlying inflation is still below target.

TL;DR - Central banks are still at ground zero between a rock and a hard place, navigating between potential economic slowdowns and the risk of higher-than-expected inflation.

Moneyball Meets Medicine

Pickleball injuries are set to cost Americans about $400M more than the current market value of Silicon Valley Bank. Your bonus allocation just got even smaller, because as expected, the majority of that increase in injuries and healthcare costs is coming from seniors. UBS estimates medical costs will range from $250 million to $500 million this year alone.

With the number of “athletes” expected to reach 22 million this year, pickleball's appeal lies in its accessibility and relative ease compared to other racquet sports. In other words, the sport’s lack of being a sport makes it pretty popular.

Your bonus may be going down, but your hours aren’t. Outpatient treatment will account for 80% of the estimated $377M in medical costs related to pickleball in 2023.

For attempted objectivity, a 2014 study on non-fatal consumer product injuries had sports and recreation as the leading category (30%, $269.5B annually). Bicycles ($38.9B) and football ($27.1B) took the cake.

Still to Come: Powell’s Core PCE

Powell is punching upwards in his fight against inflation. The Fed Chair’s favorite inflation gauge, Core PCE, drops tomorrow. Friday’s price metrics are projected to show inflation – especially when food and fuel are excluded – remained elevated in May.

The personal consumption expenditures price index (PCE), as well as the core rate, is still running well above the Fed’s 2% goal. Estimates anticipate core PCE rose 4.7% from a year ago, matching the prior month’s annual advance. On a monthly basis, the core measure is estimated to rise 0.4% for the fifth time in the last six months.

But Fed officials may take some comfort in a further softening of the overall price measure. The PCE price index is seen cooling to 3.8% from May 2022, marking the first sub-4% print in more than two years.

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