Even crunchier credit

Good morning my people —?one day till Friday! Phil Rosen here. This morning I'm thinking about how the words of certain individuals can change minds and change worlds.

That's especially true on Wall Street, and this week two of the preeminent voices sounded off about the crunching (crunchening? crunchy?) credit conditions in the US economy.

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1. Let's start with the CEO of Goldman Sachs, David Solomon.?He just issued a warning that inflation's not going down anytime soon, and?it's going to stay around ?longer than Americans — and the Fed — want.?

On an annual basis, inflation hovered at 4.9% in April, lower than its peak of 9.1% last year but still more than double the central bank's 2% goal.

"I sense that it's going to be stickier, it's come off its peak, but it's going to be stickier and more resilient which is why we're expecting that while the Fed may pause and will be data dependent, you might need to see higher rates to?ultimately control it some more ," he said during CNBC's CEO Council Panel Tuesday.

He's previously talked about the stubbornness of inflation, and?the challenge of getting it ?under control.?

If inflation stays as sticky as Solomon says, and if the Fed will have to raise interest rates more, that's going to tighten already-tight credit conditions.?

Naturally, Wall Street mogul Jamie Dimon of JPMorgan, who's no stranger to credit crunches and bank rescues, said that any further constricting in lending conditions will likely?come down hard on real estate .

Stress in the commercial real estate sector has already been mounting for months thanks to higher rates as well as work-from-home trends that have crushed demand for office buildings.

"I think everyone should be prepared for rates going higher from here," Dimon said on Monday.?

Remember, tight credit is among the factors that drive bankruptcies higher.?When smaller, weaker businesses can't afford to borrow money, it's more likely?they go belly-up .?

But as we've seen with Silicon Valley Bank and a handful of other financial institutions, trouble can easily hit companies that are?seemingly sound financially . That's part of what Solomon and Dimon are pointing to.?

According to RBA, repeat bankruptcies, or companies that have defaulted on their dues a second time or more, are nearing all-time highs, and they're growing at their?fastest pace since 2009 .

On this matter, "Dr. Doom" economist Nouriel Roubini said?there could be an "outright contraction" in the US economy ?during the second half of 2023.

All told, Bank of America strategists have estimated that a?prolonged credit crunch ?could end up catalyzing $1 trillion in corporate debt defaults.?

Have you felt any local effects of a credit crunch? Let us know in the comments.

In other news:

2.?These high-quality tech stocks are still trading at a discount, according to Morningstar.?Strategists listed 10 cheap, attractive names that make for good buys even after the sector's stunning rally to start the year.?See the list .

3. This portfolio manager runs three of the 10 best large-cap funds in the past year.?He broke down his surprisingly simple investing strategy —?and shared the four corners of the market where he's parking his cash now .

4. A stock chief from Invesco explained how he nailed its call on Meta in buying it before it doubled in price.?His team knew to buy the crumbling stock in 2022 just before it skyrocketed.?He also let us in on what he's looking to buy in 2023 .

5. Elon Musk's latest financial advice? Don't pour your life savings into Dogecoin.?He said at a Wall Street Journal conference in London that he?wouldn't recommend ?betting the farm on the meme token.?See Musk's best quotes from the wide-ranging interview .

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This newsletter was curated by Phil Rosen.