So the Fed decided to pause the rate hikes but left the door open for future increases. Snaps a streak of 10 consecutive meetings where rates had increased. Inflation has dropped to 4 % year over year after hitting 9% in May 2022, the highest in decades. Everyone happy with egg prices now?
The move is bound to impact CD and savings rates. It will be harder to get the juicy rates we have been seeing. Shop around for the best rates and you won't find them at the big banks. Won't affect mortgage rates since those are more closely tied to the 10 year Treasury yield. I doubt mortgage rates will drop as investor continue to price in a recession.
HOUSING:
Powell says housing "is putting in a bottom and maybe rising" but he didn't say if he is talking about prices or activity ( which is very slow). I wouldn't take that as a forecast as Fed chairs don't go around making housing forecasts more a summary of what has been going on.
Powell: "I do think we'll see rents and house prices filtering into housing services inflation, and I don't see them coming up quickly. I see them wandering around at a low level."
The only thing raising rates has done for housing is filter out the speculators and flippers but it can't make houses for sale ( inventory ) magically appear. That's what's causing prices to slow down, but not break.
I really thought the rise in rates would cause widespread layoffs which would cause the laid off folks to sell their house. But this economy is fucking amazing with the continued record breaking job creations. Every single jobs report for months now has blown expectations out of the water. Incredible. I helped a 23 year old with financing to buy a house last month. The guy works for Edison as a line man. He is One of the 5 guys you see on the side of the road on a Sunday standing around watching one other guy work on a utility pole. Dude makes $230,000 a year. Most of it on overtime. His house payment is almost $6,000 a month for a basic house in Whittier. Not even in a good area of Whittier. How can this be?
I think Powell was too slow in attacking inflation and now is stopping the rate hikes too soon to solve the problem. What's the point of raising rates and then pausing but warning hikes will come in the future? I don't understand that. Keep up the rate hikes and rip off the band aid.
The American Association Of Individual Investors survey back in October showed over 61% were negative on the market. That high level of bearishness corresponded nicely to a market bottom in the 3500 area in the S&P 500 at that time setting up a good buying opportunity.
Then you had the recent turmoil in the banking industry which again pushed AAII sentiment into elevated bearish territory. This has proven to be a big positive for the market because they’re usually wrong.
As of mid May investors had moved over 5.3 trillion into cash equivalents. Love it I’ve been all in for some time now. Glad you’re in too.
This fed meeting was the toughest to predict as far as what they were going to do with interest rates. It became clear about 2 weeks ago when all info was pointing to a pause. I will bet a good amount the fed will raise in July AND sept now. If I had to take a guess I’d say 3 more rate hikes before the end of 2023, but two for sure. I’m also hearing some economists say they see possible rate CUTS but the end of this year, followed up by a few realtors predicting mortgage rates cuts before Christmas 🤣 🤣
Renting an apartment in Dana or San Diego can be 3k to 4k a month. Not even fancy. Incredible
Good post. S&P 500 currently at 4411. A tremendous run since last October.