Let’s dive right into the market updates as of late. This economic update will be a little longer since we’ve gotten a convergence of news that is worth noting.
Rates: It’s the second straight week of lowering rates. I’ve been paying attention to the pace that rates were rising, we were hoping for a taper and that’s exactly what we have received. It seems to have leveled off at 3.3%. Still a great rate, and the leveling off helps keep that shock out of the market. Overall, good news. Read a great article on the details HERE.
Jobless Claims: These have moved in the right direction. Jobless claims have hit a one-year low, which is huge for recovery. You may remember one of my fears is the “willfully unemployed,” but if this number continues to move in the proper direction, it means that will be less of an issue since people will be choosing to go back to work instead of stay on the subsidy. A big plus for recovery.
Retail Sales Numbers: This topic has been pretty baked in, but we also saw a bigger than the already expected big retail sales numbers. Some are saying the spike in retail sales is because of the stimulus, but I don’t really buy that (get it?). What this is really about is the world opening back up, so people are spending again.
In short: Jobless claims are down, retail sales are up, both key indicators for recovery. Another great article on this topic can be found HERE.
Inflation: CPI (Consumer Price Index) rose… a lot. Sure, it’s mostly because of gasoline prices, but I won’t unpack what’s going on in oil – it’s too much and oil and real estate are only loosely correlated. However, the summary is this: it got more expensive to buy things and that, ladies and gents, is called inflation. Some are saying this is the first step of many in inflationary pressures. You can flood the market with this much easy money and not have inflation, but we said that in 2008 and we never saw inflation. We still have historic unemployment, underemployment, and a beat-up GDP, so it’s not exactly the roaring 20’s over here. Personally, I think a little inflation is a good thing, it’s another sign of recovery, but we do have to pay close attention to this one. Read an informative article on this topic HERE.
Summary: More people are at work, more people are buying things, and inflation is starting to creep in. Now is when you’ll start to hear the Fed come off of that whole “no rate increase for a long time” language. They’ll start to hint at recovery and things that they’ll need to do to start to reduce the amount of stimulus they’re giving to the market. In 2008, this was the “taper” discussion. Without going too deep (too late?) they will taper off their support of the secondary mortgage market and then (maybe at the same time) start to raise rates. I am calling for a rate increase before the end of the year, but we shall see. Oh, and the market is going to go bananas today. The recovery is in full effect today, up 245 points at the time of this writing.
That’s a lot to unpack, but I have been looking at these for a few weeks and with receiving the jobless and retail sales numbers recently, it seemed like a good time to share an update on what’s floating around in my head (so take it with a grain of salt).