Inflation is coming down?

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Hey, it’s Mike Lynch with AmeriFirst financial and it’s time for your Monday. Mortgage update for the week of may, the 23rd hope everybody had a fantastic weekend. It was rodeo weekend and reading whether it was beautiful. Let’s see what I do. I got out up to Mount Shasta, rode my mountain bike up at the gateway.

Trailhead. If you’ve never. Been up to that place. Great hiking, great views of Mount Shasta, obviously. But just a great trail system. So I encourage you to go check it out. All right. So what happened last week and what’s happening this week? So last week, really not much of a change the market, the bond market.

Improved head improved pricing and about 26 basis points, which means that rates should improve, but they didn’t, they were flat the same ended that they started. Let’s see, the manufacturing numbers were actually pretty bad which basically shows. Goods that are being produced and those numbers were way down, meaning businesses are producing less goods.

That actually should be good for pricing, but retail sales were way up and they were up for two reasons. Prices are up. So it showed the amount of sales the, the volume up, and then the, the actual purchase of goods consumers are out there buying stuff, and that’s really good for our economy.

Let’s see if that’ll stick. So those kind of offset each other and ended up being a, a flat week. So what are we looking at this week? We’re looking at three things, inflation the market, and then some, some data coming out. So let’s talk about inflation. You know, this is on and off, but it’s a, we’ve talked about this so many times, but it’s just.

That constant inflation is up. It’s the highest it’s ever been. Really isn’t going down. The federal reserve is hiking, the fed fund rate to fight inflation as their primary way of fighting that we’ve talked about this. And on Friday, the PCE, which is the personal consumption expenditure that report’s coming out Friday is the Fed’s favorite measure of inflation really guides what they are going to do or what they want to do that numbers coming out from.

And we expect it to be up now up by how much, who knows some even think it might be lower year over year from the same time last year. Does that mean that is the fed raising fed the fed rate is working. Is it lowering inflation? We’re not out of the woods yet? No. We all know that the fed raising that fed fund rate, which they’re going to do in June again, who knows how much.

They’re going to raise it. Hopefully they raise it by a half a point. There’s some indications that they’re going to raise it six more times this year we could see the fed fund rate be as high as high as three and a half percent by the end of this year. But is it working? If we see the PCE number flat or not high that much.

Is it working? We don’t know that. And think about this inflation or the, the remedies to offset. It doesn’t work overnight. It’s like taking medication. You’re not going to see the benefit of that. If you’re sick or you, you know, you go to the doctor and you get a antibiotic, you’re not gonna see the benefit of.

Immediately, it’s going to take some time to offset the effects of your infection. So the same thing with the fed, using these measures to offset inflation, it’s going to take some time to lower that inflation, which ultimately will lower those mortgage interest rates. Some indications we think is that inflation could peak in October.

And maybe we start to see rates come down by the end of the year. But who knows. And we also have that recession, a word that we’ve been talking about there’s a 25% increased chance of a recession with most experts as of last month. And that is up from less than 5% at the beginning of the year.

We think in recessions coming in the next 12, six to 18 months and in a recessionary period, we see these rates come down. So again, we’ll be looking at that PC number on Friday, the market, Hey, we closed in a bear market in the S and P 500, the standard and Poor’s 500 on Friday. And it was there for a little bit.

And then it ended up closing above 20% were less than 20%. So the S and P what is that? It features the top. Us 500 us trading companies and it’s represents 83% of the stock market value. The NASDAQ is already been in a bear market. It’s down 30% from the beginning of the year. And so what is a bear market?

A bear market is when a stocker index is down 20% of its high of its most recent high. And so. Historically a bear market, especially if we look at the S and P 500, historically a bear market is followed by more declines. So we’re not out of the woods yet. But more importantly, how does that bear market impact mortgage rates think about this?

If you have money, you’re going to generally put it in the safer bond market or the riskier stock market. And if you feel good about the economy, you feel good about how things are moving forward. Your job, your income, your savings. You’re typically gonna move that money into the risk, your stock market.

And this is your 401ks, your four, three, B’s your. Day traders, professional investors, you know, what have you and my money flows out of the bond market in the stock market. And if the bond market trading goes down, cause money’s flowing out because he economy is doing well. We see mortgage rates go up.

Okay. Conversely, if there is concern about the future and there’s concern about. Growth and about income and about savings and about where your next paycheck didn’t come from. Money would flow out of that stock market into the safer bond market. And we typically see increased trading in the stock market or the bond market stock market goes down and we typically see mortgage rates get better when bond money flows into that bond market.

So. If we’re seeing the stock market go down 20, 30%, you know, in some indexes why aren’t we seeing mortgage rates get better because of inflation? That was the number one thing that we talked about inflation is just hammering those mortgage interest rates. But if we see this trend continue, could it mean better rates?

Yeah, it could we’ll just, obviously we’re watching this on a regular basis. And then the third thing is data, a lot of data coming out this week new home sales, pending home sales, GDP, durable, good orders, whole bunch of stuff. But really the thing we’re focusing, focusing on is Friday with that PC report.

Now, remember it’s a short trading week for the bond market. They’re closed half a day on Friday, and then they will not be open on Monday because. Of labor day. So we won’t be giving a report Monday. Our report will come out on Tuesday of next week. So we’re starting on the week. Very, very carefully floating moving into a locking position.

If we see any changes, if you or somebody you’re working with or a client has any questions about the market and about locking their industry, please give me a call. If you know, somebody can benefit from this video, please forward it to them. Have an awesome, awesome week. And we’ll talk to you next week.



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