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Thoughts to Ponder and the Market Update September 19

Thoughts to Ponder and the Market Update September 19
September 19, 2016 abryant

interest-rates1

Thoughts to Ponder . . .

  • Stop texting me in the middle of texting you… now I have to change my text.
  • You know your driving is really terrible when your GPS says ‘After 300 feet, stop and let me out!’
  • Me and my bed are perfect for each other, but my alarm clock keeps trying to break us up.
  • I look to the future because that’s where I’m going to spend the rest of my life.
  • My imaginary friend thinks he has problems.

 

And now on to the Market Update . . .

 

If you ever needed a week that is set up for potential market volatility, next week is it.

  • With the FOMC announcement on interest rates on Wednesday, combined with four important housing market indicators being released on Monday, Tuesday, and Thursday, the makings for a crazy week is all set.

 

Experts continue to remain mixed on what the Fed is going to do with interest rates.

  • The irony of the speculation from a mortgage lending perspective is that the last time the Fed raised rates, mortgage rates declined.
  • Although that was likely an anomaly, there is always the possibility it can occur again if investors believe that a Fed increase will hurt the economy.
  • That would send bond prices tumbling and in effect mortgage rates would decline.
  • Odds are it won’t happen like that, but the possibility always exists.
  • Of course you understand that my commentary here is just speculation, the same as everyone else’s.

 

Mortgage rates continue to remain near historic lows.

  • Combined with the return to normal life in regard to end of summer vacations and kids getting back to school, mortgage application activity jumped.
  • The overall mortgage application index rose 4.2 percent.
  • Applications for purchases jumped 9.0 percent.
  • Refinances increased by 2.0 percent.
  • The mortgage activity from last week lifted the year-on-year gain of applications back up to 8 percent.
  • It was virtually flat from the same time last year prior to the last report.

 

What used to be a major influence on the markets, the EIA Petroleum report seems to have lost its influence on investors.

  • Oil prices have remained low and the volatility that we had seen in recent months appears to have subsided.
  • Going to the pump continues to be a nice treat with gas prices remaining low.

 

Wall Street and the stock markets have had some significant movement up and down related to speculation on what the Fed is going to do next week.

  • Many analysts and investors remain split on what they think the Fed will do.
  • No matter, what, even if the Fed moves rates up, it will only be by a very small amount.
  • Corporations have been riding the wave of borrowing money at virtually no cost, which does wonders for corporate profits.
  • Investors of course want the gravy train to keep going and raising interest rates can have a negative impact on profits and therefore impact stock prices.

 

Another factor that can have an impact on the Fed decision on raising rates is the latest producer price information.

  • Prices on the wholesale level continue to indicate that inflation is virtually non-existent.
  • One of the goals of the Fed is for inflation to normalize at a rate of around 2.0 percent.
  • Since the Great Recession inflation on both the wholesale and retail levels have been far below the Fed goal.

 

This week’s potential market moving reports are:

  • Monday September 19th – Housing Market Index
  • Tuesday September 20th – Housing Starts and FOMC Meeting Begins
  • Wednesday September 21st – MBA Mortgage Applications, FOMC Announcement and Forecast
  • Thursday September 22nd – Jobless Claims, FHFA Home Price Index, Existing Home Sales
  • Friday September 23td – PMI Manufacturing Index and Inflation Expectations