MARKET UPDATE
Rates jumped; here’s what we know.
After yesterday’s blood bath that again was based on NO FUNDAMENTALS. Factory orders came in lower than expected and the 10 yr and rates jumped.
Today, the Bears received some supporting data with ISM Services coming in materially higher than expected. There is also some underlying data within the report that are leading some people to think that we may see a jump in CPI next week (Wednesday) when released.
Tomorrow is going to be a carefully watched Jobless Claims weekly report.
Here is a quick write-up on this that may add some context:
This morning we have seen the higher-than-expected ISM figure weigh on the markets. The stronger than expected figures “cast doubt on benign inflation pricing” according to Bloomberg. When you dig further into the numbers, the prices paid component also came in higher than expected at 58.9 compared to 56.8 for July. As the report states, the services ISM figure has little correlation to personal expenditure on services, BUT the prices paid component does have a significant correlation to the service CPI.
I am a firm believer that debt and lack of savings will begin to cause a problem coming off the summer spending months. The jobs data is also misleading due to the seasonal adjustments and there are many people talking about that the 3.8% is MUCH lower than what it really is.
Again, I am not on the soft-landing side. People cannot just borrow forever and spending patterns from consumers are causing much of this. I believe when it begins to show the larger cracks, things will break shortly after that. I am under the belief we will 100% see high 5’s to low 6% rates by Q2 2024.
We will have to wait and see what next week’s CPI data reflects. We are replacing a .2 number (August 2022), which is still low, but not “0” like last month that was replaced that resulted in an increase in inflation YoY. October’s release is a .4 (September number) being replaced and then November’s release (October number) is .5 before it drops again in December’s release to .2%. These are HEADLINE not CORE. After this month, we have the numbers bring replaced to make material gains on the YoY inflation if today’s inflation numbers stay consistent.
Josh Erskine
Chief Executive Officer
CalCon Mutual Mortgage LLC dba OneTrust Home Loans
Yellowstone RE Holdings LLC
Yellowstone Global Investments LLC