Market Update - July 24th, 2023
Fed Meets Again - Expected to Increase Rates by 0.25%
Another Fed week is upon us! The Fed concludes their meeting on Wednesday with all indications pointing towards another 0.25% rate hike. You may be asking yourselves, “Why in the hell are they continuing to increase rates?!”. We must remember that the Fed Reserve has said from the onset that their rate hiking escapade would continue until inflation was conquered. The most recent inflation reports clearly show that the previous rate hikes have done a great job getting inflation back towards their target goal of 2%. However, the economy continues to be hot and resilient (which isn’t a good thing for inflation). As long as the economy shows no signs of slowing down, the Fed will persist in its rate hiking approach and sustain higher rates for longer. Don’t anticipate rate cuts from the Fed in the near future unless there’s a significant economic downturn.
Key Takeaway: Fed will indeed increase rates another 0.25% on Wednesday. We must reiterate to our clientele that this does not mean interest rates are increasing again 0.25%! In fact, mortgage rates should not be affected by this rate hike as it has already been priced into the market. What will move the market is if the Fed mentions another potential rate hike in the near future. If they signal additional rate hikes later this year, expect markets to react and rates to move higher this week. Conversely, if there is no mention of further rate increases, expect mortgage rates to improve, with the possibility of them declining to the high 6’s.
Another Action-packed Week Ahead!
Plenty of reports being released this week that could potentially affect interest rates. Here’s a breakdown of this week’s key events:
Consumer Confidence Data released on Tuesday – In June, the Consumer Confidence data increased to its highest level in almost 2 years due to the resilient labor market, hot housing, and the strong economy in general. If we see another solid report on Tuesday, this will be another signal that the Fed will likely continue to raise rates in an effort to slow demand and cool the overall economy.
Fed Rate Hike Decision on Wednesday – Again, it is widely expected that the Fed will raise rates by 0.25%. However, what really matters is the commentary that follows the meeting. We all need to pay close attention to whether the Fed will continue to indicate the need to raise rates in the future or if they will concede and signal an end to the rate hikes.
New Home Sales Data released on Wednesday – Last month’s new home sales reflected a 20% increase in sales from a year ago. If we see another blazin’ hot report, it will be more justification for the Fed to keep rates higher for longer.
PCE Inflation Report released on Friday – This is the Fed’s favorite inflation gauge and very well help determine the Fed’s next move. If the inflation reading turns out lower than anticipated, the Fed might consider pausing its rate hikes. Conversely, the same applies in the opposite scenario.
~20% of S&P 500 Companies Report Earnings Throughout Week – We all know the stock market has been on a tear this year. The S&P 500 alone is up almost 18% year-to-date. Roughly 20% of the S&P companies report earnings this week. Strong earnings will indicate the economy is chugging along and more rate hikes are in our future. However, if company earnings start to slow down, there might be a possibility of the Fed halting rate hikes in the near future.
Key Takeaway: Prepare for a potentially turbulent and unpredictable week ahead.
Instagram Posts from Last Week
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