Ten-year Treasury yields bottomed at roughly 3.57% about two days before the Fed first cut its Fed Funds rate by 50 basis points on September 18th. The bad news, obviously, is that rates have backed up by 70 basis points since then. The good news is that our work has shown that this rise has been due more to expectations for stronger real growth rather than growing inflationary expectations.
Unfortunately, the rate cuts have not yielded any easing in the housing market as had been hoped. Mortgage rates have risen in tandem with the 10-year, mortgage applications have fallen, and homebuilding stocks have suffered. The bottleneck in the supply of affordable new homes is likely to continue as will upward pressure on inflation.
New policies on immigration may ease some pressure on the housing market but may put upward pressure on wages. The problem with social engineering on the part of a central bank or an Administration is that it often either requires pain to fix or even more social engineering to achieve the desired outcome. One hopes that the new Administration will rely more on the wisdom of free markets than on small groups of often unelected “experts.”
Source: Strategas
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments. Data provided by Refinitiv.
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Fortem Financial
(760) 206-8500
team@fortemfin.com
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