rates fed: Rate Watch - Hopefully This Is The Bottom - 04/09/24 05:19 PM
Rates have ticked higher in the past week and have been in a recent uptrend. The jobs report that came in Friday showed more jobs added than expected. Although the unemployment rate was as expected at 3.8%, the strong jobs report was another signal that Fed intervention isn't needed just yet.
On top of that, Fed member Kashkari spooked markets by saying rate cuts may not be warranted this year if inflation does not come down. This was not what the markets wanted to hear on a Friday heading into the weekend. 
Kashkari is the number one hawk (one who advocates for tighter monetary … (4 comments)

rates fed: Rate Watch Follow Up - When Will The Fed Cut? - 04/01/24 02:23 PM
The first cut is the deepest
‍The Federal Reserve announced its latest interest rate decision to stand pat again. A consensus has been built around maintaining the status quo, with the majority of economists expecting Jay Powell & co. to keep rates at their 23-year high of 5.25-5.5%.
However, even if rates stay put, the Fed might give clues on when the all-important cut might come: a big deal for everyone who has a credit card, a mortgage, a student loan, or any other debt with a variable interest rate.
‍Waiting game
‍Battling inflation, the Fed embarked on a hiking cycle that's been unprecedented in modern times. As … (2 comments)

rates fed: Rate Watch For 4/1 No Fooling - 04/01/24 01:56 PM
The Fed's preferred inflation report, the PCE, was reported last Friday. Results were in line with expectations. The market is now betting on a June rate cut. I think June is one Fed meeting too early. 
We don't receive any inflation data this week but hear daily from Fed members (about 18 talks total) and get labor data. Below you can see the same chart as last week showing the Fed members' Hawkish/Dovish stances. 
Here is what's in store this weekMonday
Construction Spending ISM Manufacturing Fed Gov Cook Speaks Tuesday
Job Openings Fed Gov Bowman Speaks Cleveland Fed President Mester Speaks San Francisco Fed President Daly Speaks Wednesday
(0 comments)

rates fed: Rate Watch for the End of the First Quarter - 03/26/24 02:21 PM
As expected, the Fed kept rates unchanged last Wednesday. They reiterated a few things that instilled confidence in the markets. 
1. Inflation is continuing to come down. The markets liked hearing this from the Fed as we were coming off the heels of a few hotter-than-expected inflation reports.
2. We are at peak rates for this cycle. This leaves the Fed with the possibility of only pausing or cutting at future Fed meetings. 
3. We are still on pace for 3 rate cuts for 75 bps. The Fed let the markets know this is still the plan and the markets were happy to hear that. 
Rates have been propelled higher in recent … (2 comments)

rates fed: Rate Watch Opinions - 03/22/24 07:50 PM
March’s meeting of the Federal Open Market Committee (FOMC) came and went largely as expected on Wednesday, with the policy-setting body of the Federal Reserve again keeping its anchor rate unchanged at 5.25% to 5.5%.
It’s the fifth consecutive meeting that the central bank has held the benchmark rate steady at its highest level since 2001, in keeping with its well-documented “higher for longer” proclamation. Most Fed watchers aren’t expecting a rate cut until spring (Moody’s has the first decrease pegged for May, while Fannie Mae anticipates the initial reduction in June), and hotter-than-expected inflation data from the past couple of months … (2 comments)

rates fed: Hopeful Rate Watch for 3/11/24 - 03/11/24 11:41 AM
Rates are coming off their best week since the most recent CPI numbers came out a month ago. Jobs were weaker than expected and the unemployment rate came in 0.2% higher (at 3.9%) than expected. Remember, we are in a "celebrate the bad news" era so the Fed can "save" us sooner. 
Speaking of CPI (inflation on the consumer side), we get another report this Tuesday. The markets will be weighing it heavily as it comes before the March 20th Fed meeting. 
I expect this report to be better simply on the fact that the market expectations are more in line with the previous month's dataset. Last time, the expectations … (0 comments)

rates fed: Rate Watch To Finish First Quarter - 03/04/24 10:19 AM
Markets were on edge last week as they awaited the numbers from the PCE report. This is the Fed's preferred inflation data. The CPI numbers that came in a week earlier were higher than expectations (albeit they did continue their downtrend and expectations were rather aggressive) so the markets were justifiably nervous.
The PCE numbers came in exactly as expected. Remember, before the CPI report the market was betting on a 75% chance of a March Fed rate cut (I was never in this camp and expect the first one to come in the summer/closer to elections). The fact that the PCE numbers came in as expected gave the … (0 comments)

rates fed: Rate Watch For President's Week - 02/20/24 10:38 AM
Happy Tuesday!
 
Markets reacted harshly to the consumer-led inflation data which came out last Tuesday. The market was expecting a 2.9% YoY reading and inflation came in at 3.1%. Although it was higher than the market expectations, it came in 0.3% lower than the previous month's reading. So yes, inflation continued its downtrend, but the market expectations were just a little too ambitious. 
After Tuesday's news report came out, markets placed their bets that there would not be a March rate cut. I've been saying this for months. It is way too soon to start cutting, but markets like to get ahead of themselves by placing … (1 comments)

rates fed: February 12th Weekly Rate Watch - 02/12/24 02:18 PM
Fed Chairman Powell, during his speech after the Fed decided to keep rates unchanged, said how the Fed is looking for more confidence in inflation. What he's saying is that he wants to see the numbers continue coming down year over year, within expectations, and without any sudden jumps higher. 
I've pushed that statement further by saying that we need to see 3 months of continuous month-over-month (MoM) declines in inflation before the Fed makes any moves. However, we may be running out of time. I can see the Fed making its first round of cuts this summer. 
The Fed used to want to … (1 comments)

rates fed: Rate Watch 2/05/2024 - 02/05/24 12:22 PM
Last week the Fed decided to keep interest rates unchanged. During Chairman Powell's speech, he used language that took a March rate cut off the table. This shouldn't be a surprise as I've been saying a March cut is highly unlikely.
Powell kept saying that the Fed needs "more confidence" that inflation is heading lower. The Fed is very encouraged by recent data but needs consistency in the numbers.
My longtime readers know that I've been saying the same thing. I have always said that I wanted to see 3 consecutive months of month-over-month declines in inflation before celebrating. It sounds like Powell is in the … (0 comments)

rates fed: Rate Watch - We made it through January! - 01/29/24 03:24 PM
We have a very busy week and this issue may take a little longer than usual to cover it. 
The most important event to take place is the Fed meeting on interest rate policy. I, along with 97.9% of the market, believe that the Fed will have another pause on rate hikes (2.1% are voting for a 25bp cut). Since that is what the market is expecting, it is already priced into current interest rates. 
So the question isn't what is the Fed going to do Wednesday, but what are they going to do in the coming months? This is why the markets will be weighing every word … (3 comments)

rates fed: Rate Watch - Off and Running - 01/22/24 03:09 PM
Last week we saw some home builder data come in, better than expected. Housing starts, building permits, and homebuilder confidence were all higher than expectations. It seems that December's rate drop got the whole industry excited. 
In January we have seen a little bit of a snap back to reality. Remember, nothing runs forever without taking a breather. I said that as we climbed to above 5% on the 10-year yield and again with the massive drop afterward. 
The markets are still trying to figure out what the Fed will be doing after Chairman Powell's extremely dovish speech in December. 
On the one hand, … (0 comments)

rates fed: Rate Watch For The Short Week - 01/16/24 11:02 AM
Last week we saw inflation data come in slightly higher than expectations on some gauges and in line with others. Here is the data below. Core = excluding food and energy from the data calculations. The Fed prefers core measurements. 
CPI month over month increased by 0.3% when the market was expecting 0.2%. This was higher than the previous month's 0.1% increase. Core CPI MoM was unchanged and came in at expectations of 0.3%. CPI year over year increased by 3.4%, 0.2% higher than expectations and 0.3% higher than the previous month. Core CPI YoY came in at 3.9%, 0.1% above expectations but a 0.1% decrease … (2 comments)

rates fed: Rate Watch for Championship - Go Blue! - 01/08/24 11:00 AM
Last week labor numbers came out. There were more jobs added than expected (the labor market remains strong) and the unemployment rate for December remained unchanged at 3.7%. 
Here are the unemployment rates for the past 12 months given revisions (the revisions aren't out yet for December's numbers). There was only one revision in October. 

Mortgage rates used to move more on the release of labor data due to the Fed suggesting they wanted to see a weaker labor market before considering pausing rate hikes.However, during last month's meeting, Fed Chairman Powell told the markets that we can expect 3 rate cuts in 2024 for a … (1 comments)

rates fed: Rate Watch For The New Year - 01/04/24 08:03 AM

The markets started off the new year by taking a breather from the incredible run that ended 2023. Markets want to see the actual policy by the Fed (cuts) before getting too ahead of themselves. Remember, nothing sprints forever. No matter the direction of the trend, pauses are needed with retests (when they retest support/resistance areas). 
It is important to note how the first few days/weeks of January perform, with regards to markets. Many market participants believe that if January is a positive month, so does the rest of the year. 
It's not just a belief - it's called the January Barometer. Developed in 1972 … (1 comments)

rates fed: Rate Watch - Holiday Version - 12/18/23 02:05 PM

Inflation numbers came in last week and they all flirted with being in line with expectations, although PPI came in on the lower side. This continues the trend of lower year-over-year inflation. For me to declare victory in the battle, I want to see 3 consecutive month-over-month declines. We have yet to get that. 
The Fed kept rates unchanged, as expected. They used language such as "proceed cautiously," "prepared to hike more," and "data dependent,"...as expected. However, what caught markets off guard was Fed Chairman Powell's speech.
Powell dropped the hawk act and gave markets hope for 2024. He said how the Fed … (2 comments)

rates fed: Rate Watch - Progress Stalled - 12/11/23 03:27 PM
Labor market numbers came in last Friday and were stronger than expected. The economy added 199k jobs vs a 190k estimate. The unemployment rate came in at 3.7%, lower than the expected 3.9%. The markets entered a mini panic mode as the Fed has publicly stated multiple times that they would like to see more weakness in the labor markets.
The labor numbers put a damper on the fantastic run that mortgage rates were having. Today started with slightly higher rates too as the markets are waiting to see what the data holds.
This week is a big one. We have inflation (CPI and PPI) data and … (5 comments)

rates fed: Rate Watch - Welcome to December! - 12/06/23 09:57 AM
The economy has seen a continuous 3-week increase in mortgage applications. This is coming in off the heels of a few weeks of decreased interest rates. 
The market has placed their bets: The Fed is done with rate hikes. Also, the market believes that there is now an 18% chance of a rate cut in January with a total of 5-6 coming in 2024.
Now, I doubt we will see a rate cut next month or in the few months that follow. Any rate cut must be incredibly strategically designed. The Fed must consider many factors, but ultimately I believe it will be the balancing … (2 comments)

rates fed: Rate Watch For the Holiday - 11/20/23 03:52 PM
Markets are betting that the Fed is done with rate hikes. Before we get ahead of ourselves, they made the same sort of bet earlier in the year when a few banks went under. 
However, I  believe that the markets may be right this time for a few reasons. 
1. The economy does not have to be "cured" in order for rates to come back down. The Fed told us what they wanted to see: lower inflation and a weaker labor market. We are seeing both. 
After the recent Fed meeting where they announced another pause in rate hikes, the markets rejoiced and bet that hikes were done. Then, in … (3 comments)

rates fed: Rate Watch 11/13/2023 - 11/13/23 10:01 AM
We have an extremely busy week ahead of us. We hear from a lot of Fed members and receive two key inflation reports: the CPI and PPI.
Right now, the markets are expecting a CPI reading of 0.1% (down from 0.4% from the previous month) with a core (excluding food and energy) reading of 0.3%, unchanged from last month. They are expecting a year-over-year (YoY) change of 3.3%. These numbers will be released tomorrow.
This will be important inflation data as we head into the final Fed meeting of 2023 set to take place on December 13th. 
So far, inflation has been easing with some hiccup months, due to higher energy costs and a … (0 comments)

 
Matt Brady, One of San Diego's Best Equity Advisors (Watermark Capital)

Matt Brady

One of San Diego's Best Equity Advisors

Del Mar, CA

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