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Did you see the fish I caught?

5 · 16 · 22

Hey, it’s Mike Lynch with AmeriFirst financial and it’s time for Monday morning mortgage update for the week of may the 16th. I hope everybody had a fantastic weekend. I had a great weekend. I actually got to Gail and I got to have some time. Our kids. First time we’ve all been together in quite some time, took them out to Jack’s restaurant, check that off their list.

They’ve always wanted to do that cause we keep talking about it, but we’ve never taken them and spent some time. Adam link are my kids beautiful. Just feel so blessed in my heart to, to have such wonderful young adults that are great. Great citizens. So what did you do this weekend? I had a great week last week as well.

I was actually out of the office. Had a business trip to Miami and then Gail and I went down to Florida keys and check this out. I checked off a list, did some Tarpon fishing and some deep sea fishing out on the keys and check out that bad boy, 40 pounds took me 20 minutes to bring them in. I also caught a shark bigger.

Right? They all get bigger, but didn’t bring them in the boat. Just had a really, really great week and again, feeling so blessed to get away for a few days. So what’s happening in the market this week, let’s get down to business and what’s going to affect the market in the coming week. So last week we can have fed, raised that fed fund rate.

With the market, do gossip, stock market sold off like crazy S and P sold off. And also the rates went up, they went down, they went back up. We’re really ended the week last week and the week before with not much of a change in interest rates. We’re just in this flat trading channel and I’ll show you some charts towards the end of this video.

That’ll give you some perspective on where we are. So what are the three things we’re looking at this. Really inflation the fed and then economic data that’s coming out. So inflation. Gosh, we all know we’re in an inflationary period. Inflation is the highest it’s been in 40 years. We don’t really see any change to that.

Interestingly enough, though, the PPI producers price index, which is a key measure of inflation came out last week and the inflation number was actually lower than it was the month before. And so there’s some talk that gosh, inflation is peaking. Maybe this is a sign of. The fed raising this fed fund rate is, is working.

It’s not peaking, it’s just lower than it was, but it’s still 40 year high. I mean, we’ve got energy inflation, food, inflation, wage, inflation size inflation, your toilet papers costing the same, maybe more, but there’s less sheets on the role. So the, some other things that are really gonna move the needle with inflation this week, China, we know Shanghai has been locked down for for the last month because of some COVID fears.

And now there’s talk that they could open up in June. This could actually drive inflation up because Shang China’s a major, major user of energy and the energy prices have actually been a little lower, but if they start ramping up production and we start, they start doing what they’re supposed to do with stuff that they make, this could cause those energy prices to go up.

There’s also some indications that we’re in seeing some economic retraction and this is a sign that a recession’s coming, and this is really what, what the Fed’s doing by raising that fed funds. Which isn’t the mortgage rates, just the fed fund rate. That’s supposed to curb inflation. And so New York fed index came out today.

Manufacturing index showed manufacturing is down. Now. It is just New York, but it is a major, major manufacturing hub. But if it starts to reflect those numbers and some other areas around the country, this is a sign that. That we’re, we’re headed into this recessionary period. And also consumer confidence is down university of Michigan major or study that indicates consumer confidence every month.

And that’s a signal that a recession is coming is when we see that confidence number, go down some reports out that maybe there’s a 25% chance. We could see a recession in the company. 12 months. Now that numbers have really been five. We’ve been talking about this, you know, a recession is a normal economic cycle.

It’s actually not necessarily a bad thing, depending on how it starts. So is it a normal economic activity that, that we get into a recession or was it manipulated? And that’s how we got into recession. There’s some indications of some talk that we’re headed into this recession because the feds manipulating the numbers, they ignored recession.

And inflation last year, they re they ignored the numbers. Last year, they’re raising the fed funds rate to offset inflation, and they’re driving us into this recession. So the good thing about a recession is that the bonds typically do pretty well in a recession. We’ve talked about this and that means mortgage rates come down and that could really feed the supply and demand issues that we’re having in keep our demand up in the housing market.

So the second thing is the fed a lot of things. Members are speaking this week. And the fed raised the fed funds. 0.5% a little over a week ago. And there was some indication the beginning of this year that they were going to actually raise the fed fund rate six more times. Now they may not do it a half a point every time, maybe a quarter point an eighth of a point.

But now if we start to see some real pain in the economy, there’s some economists that are concerned. The fed doesn’t have the wherewithal to ride this out, to keep raising that fed fund rate so that they can really curb inflation. And so. As the fed members speak this week what is. Mindset.

Are they committed to really getting us out of the recession by raising that fed fund rate? Or are they going to back off and in the next couple of meetings? So really want to know if they’re going to stay the course again, the best way to combat inflation is to raise that fed fund rate. And China also may lower their fed fund rate, which means they’re possibly moving in or raise their fed fund rate, which means they’re possibly moving into that recessionary period as well.

There’s some indications there. So the third thing is that. A lot of housing data coming out this week and retail sales are coming out this week. Now retail sales is a really big indication of how consumers are spending their money. Obviously. Retail sales numbers have not about volume. How much people buy it’s about how much they spend.

And there was a study last week or a report last week that showed up debt is way up. People are charging more on their credit cards across the country. Now, are they charging more to pay off debt or are they charging more? Because they’re buying stuff and those retail sales are going to give us those numbers.

If those retail sell numbers are lower than expected, this is another indication that we’re heading into some economic retraction, recessionary period, et cetera, et cetera. So. Volatile week this week, we’re actually starting out the week floating. And we’re in some interesting trading patterns right now.

And this is a graph that shows the trading of mortgage backed securities in the bond market. And I’ve shown this before. The, as this graph moves down, that means money’s flowing out of the bond market and mortgage rates are going up. And this is a six month average we can see over the last six months.

Rates have gone up. We know that this is happening, but it’s interesting that we see these these periods where we get into this flat trading, right. Just depending on what’s happening in the market. And so we see rates go up and then it flattens out rates, go up, flatten out rates, go up, flatten out rates, go up flatten.

Et cetera. And now we’re seeing another flat trading channel. So what do we expect this week? We really expect rates not to move much. Maybe stay in that flat trading channel, even though we’ve had this volatility, as you can see at the bottom of the graph here over the last two weeks, we really haven’t seen rates change that much.

Maybe there’s a chance that we could see a little bit of an improvement, but the general consensus is we’re in a period where rates are going up. And this gives you some indication that this flat trading channel may hold this week. So cautiously floating, really watching the market. If we see any improvement, obviously we’ll float that if we see any volatility we’ll lock a rate in.

So thanks for listening. If you have any questions about rates, let me know if you know, somebody could benefit this video, please forward it to them. Have an awesome productive week and we’ll talk next week.

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