Friday, March 25, 2022
Pre-market futures are up again this morning, and if they stay this way, it will extend the winning streak on the major indexes to three straight weeks. Last week’s quarter-point interest rate hike from the Fed erased multiple question marks from the near-term economic outlook, the U.S. labor force retains strength with weekly jobless claims not seen in over 50 years, the Covid pandemic continues to recede into past history, and Western allies at the G-7 conference are keeping the heat on Russia to bring an end to the war in Ukraine.
These are all good things to keep market indexes buoyant, and I’ll add another, which may not be getting the same amount of attention: we’re already seeing signs of inflation abating. The housing industry, which had been scorching hot ahead of what everyone knew would be a new environment of higher interest rates, is already beginning to see mortgage applications slowing notably.
That’s because mortgage rates, along with interest rates, are headed higher. This will put pressure on home prices, as higher price tags on homes are already keeping a significant portion of potential buyers on the sidelines. While there is no shortage of housing demand at present, some expectations are that we may be at cycle highs — and to attract new buyers to the housing market, prices will have to flatten, if not trend lower.
Why this matters to the overall economy is because of the sizable percentage of home-buying as a piece of the pie. Recall that, a couple years ago when the Fed tried to usher inflation into the market when it was staying stubbornly below 2%, a lot of the metrics at the time were citing flat housing prices then; only when the housing market caught a bid — prior to the surge in oil prices aggravated by Russia’s invasion of Ukraine, which, along with supply-chain issues post-pandemic have been the major focus for inflation concerns — did inflation prints start cranking higher.
After the opening bell this morning, we’ll see a couple new March reads on the domestic economy: the University of Michigan consumer sentiment survey and 5-year inflation expectations. Also Pending Home Sales for February will be released around the same time, so keep an eye on this space in the near term — while we may continue to see metrics indicate inflation at much-higher-than-optimum levels, keep an eye out for clues that runaway inflation is already on the wane.
For now, the Dow is +85 points, the Nasdaq is +30 and the S&P 500 is +12 points. A third-straight week higher would bring us closer to the first green month in the markets for 2022. Currently, the Dow is still -5% year to date, the S&P 500 is -5.8% and the Nasdaq is -10.3%. Notably off recent lows, for sure, but we’ve still got a ways to go.
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Markets Look for Third-Straight Week in the Green
Friday, March 25, 2022
Pre-market futures are up again this morning, and if they stay this way, it will extend the winning streak on the major indexes to three straight weeks. Last week’s quarter-point interest rate hike from the Fed erased multiple question marks from the near-term economic outlook, the U.S. labor force retains strength with weekly jobless claims not seen in over 50 years, the Covid pandemic continues to recede into past history, and Western allies at the G-7 conference are keeping the heat on Russia to bring an end to the war in Ukraine.
These are all good things to keep market indexes buoyant, and I’ll add another, which may not be getting the same amount of attention: we’re already seeing signs of inflation abating. The housing industry, which had been scorching hot ahead of what everyone knew would be a new environment of higher interest rates, is already beginning to see mortgage applications slowing notably.
That’s because mortgage rates, along with interest rates, are headed higher. This will put pressure on home prices, as higher price tags on homes are already keeping a significant portion of potential buyers on the sidelines. While there is no shortage of housing demand at present, some expectations are that we may be at cycle highs — and to attract new buyers to the housing market, prices will have to flatten, if not trend lower.
Why this matters to the overall economy is because of the sizable percentage of home-buying as a piece of the pie. Recall that, a couple years ago when the Fed tried to usher inflation into the market when it was staying stubbornly below 2%, a lot of the metrics at the time were citing flat housing prices then; only when the housing market caught a bid — prior to the surge in oil prices aggravated by Russia’s invasion of Ukraine, which, along with supply-chain issues post-pandemic have been the major focus for inflation concerns — did inflation prints start cranking higher.
After the opening bell this morning, we’ll see a couple new March reads on the domestic economy: the University of Michigan consumer sentiment survey and 5-year inflation expectations. Also Pending Home Sales for February will be released around the same time, so keep an eye on this space in the near term — while we may continue to see metrics indicate inflation at much-higher-than-optimum levels, keep an eye out for clues that runaway inflation is already on the wane.
For now, the Dow is +85 points, the Nasdaq is +30 and the S&P 500 is +12 points. A third-straight week higher would bring us closer to the first green month in the markets for 2022. Currently, the Dow is still -5% year to date, the S&P 500 is -5.8% and the Nasdaq is -10.3%. Notably off recent lows, for sure, but we’ve still got a ways to go.
Questions or comments about this article and/or its author? Click here>>