“This is what is sounds like when doves cry.” (Prince) We heard “doves cry” this week, when Fed Chairman Jerome Powell spoke in NYC on Wednesday. Doves are people who offer peaceful polices, so upon Mr. Powell’s soothing speech both Stocks and Bonds moved nicely higher, with home loan rates hitting their best levels in nearly two months.
Some of Mr. Powell’s market-comforting words included:
- We know that moving too fast (hiking rates) will risk expansion
- It may take a year or more to fully realize the effects of hikes
- The Fed doesn’t see “dangerous excesses” in the stock market
- The policy rate (Fed Funds Rate) is “just below” neutral
The Fed is still very likely to raise the Fed Funds Rate in December, but the markets took the speech as signs the Fed will not hike rates three times in 2019, which was the Fed”s own forecast. Fed Fund Futures, which represent market opinion on the future of the Fed Funds Rate now suggest there will be only one rate hike in 2019. The incoming data and more specifically, inflation, will determine whether we see more hikes in 2019. Bottom line — the present low inflationary environment and slower global growth is helping keep home loan rates historically low.
Things won’t slow down as the final month of 2018 begins with what could be another wild week of market moving reports including the all-important November Jobs Report on Friday.
But before all that takes place, on Monday morning the markets will react to what happnes over the weekend at the G-20 Meeting, a group of 20 nations that meet regularly to discuss international financial policy and promote stability.
President Trump and President Xi Jinping from China will meet Saturday night. The markets are on edge over the ongoing trade dispute — if a deal is made, stocks may celebrate at the expense of bonds. The opposite is true.
Key economic reports to watch this week:
- The national ISM Manufacturing Index will be released on Monday followed by the ISM Service Index on Wednesday.
- The first of two key labor market reports will be released on Wednesday with the ADP Private Payrolls Report.
- On Friday, the granddaddy of all economic reports will be released, the November Jobs Report that includes Non-Farm Payrolls, the Unemployment Rate and Hourly Earnings.
If you or someone you know has any questions about home loan rates, please give me a call. I’d be happy to help.