02/28/2022
Hello to, all and I hope you are enjoying the freedom of NO MASK wearing! YAY! Although it took about 2 years for us to come out of this Pandemic, here we are with a smile on our faces!
The benefit from all of this is the fact rates dropped during this time and it will help millions of people for years to come!
For the other people that may not have taken advantage or felt like they could not due to qualifying reasons etc., please feel free to call me in confidence and we can look into your options, there are options!
• WE HAVE a BANK STATEMENT program for the Self-Employed applicants and everything in between!
NO TAX RETURNS ARE NEEDED!
We are a Brokerage and not a Depository Bank. We specialize in all products, even the ones that do not fit in the Bankers Box. We are Brokers which allows many more options, and it also allows us to shop around for you with $150+ approved lenders, and to be sure that you are in the right program with the best rate and terms that fit your specific needs!
That’s out of the little Bankers Box! 😊
A Look Into the Markets
Interest rates improved slightly this week in response to the Russian invasion of Ukraine. This story is evolving every moment and the current uncertainty is helping bonds and rates. Let's discuss what this all means for our economy and the Federal Reserve's actions.
"Communication breakdown, it's always the same" - Communication Breakdown by Led Zeppelin
1.) Safe-Haven Trade is On
When bad geopolitical events take place, like Russia attacking Ukraine, global funds seek the "safe-haven" of the US Dollar and Treasuries, with mortgage-backed securities (MBS) also seeing higher prices and lower yields.
All risk assets, like stocks and cryptocurrencies, are selling off with the proceeds being parked in cash and Treasuries.
We don't know how long the Russia/Ukraine war will last and we can only hope and pray for limited human toll and relative containment. As the story evolves, from minute to minute, it will move the financial markets. If the story worsens, we should expect rates to continue to track at or better than current levels. However, any signs of improvement in the situation would unwind some of the safe-haven trade causing rates to move back up.
It is worth noting, at the time of this writing, the improvement in rates has been quite modest given the magnitude of negative sentiment and uncertainty surrounding the invasion.
Let's hope the sanctions applied to Russia move the needle and help push the story in a positive direction.
2.) Further Pain at the Pump
Upon word of the invasion, oil prices hit $100 a barrel. This is awful for our economy. It will lead to another rise of gas at the pump and, just before the busy summer driving season. A Summer that is likely to be a bit more normal with Omicron and Covid moving behind us. There will be enormous pressure on our government to take measures to lower oil prices. If oil remains at or higher than current levels, it will hurt consumer spending which makes up two-thirds of our economy. Think about it – if people are putting more money in their tank or spending more to heat their home, it will come at the expense of other goods and services.
Oil is in everything, especially so in housing. It takes oil to build and deliver tons of materials. In the era where 7 out of 10 families are currently unable to qualify for a median-priced new home, sustained high oil will only exacerbate this problem.
Let's hope our government has a solution to provide meaningful and sustained relief, or we could experience an economic slowdown with higher prices – the very definition of stagflation.
3.) Fed Uncertainty Escalates Further
The Fed entered 2022, much like it did back in 2018, with a hawkish tone and a desire to raise rates several times. Back in 2018, the Fed raised rates three times which slowed the economy and hurt consumer sentiment.
Presently, the backdrop has gotten rather bleak. Consumer Sentiment is presently at an 11-yr low, and this is not factoring in the Russia/Ukraine war and Oil at $100. Additionally, financial conditions have already tightened, and small business sentiment has declined. These are not conditions in which the Federal Reserve wants to, nor can, hike rates multiple times.
The probability of a .50% rate hike has gone from 100% to just .15% in the span of the week. So, the Fed will hike rates next month by .25% to help fight consumer inflation, which is running at 7.5%.
What will the Fed do later this year? Will inflation rise further and force the Fed to do more? Can the Fed really do more? These are all big unanswered questions that will not be figured out until time passes. Until then, expect high volatility and push/pull market action between a safe-haven trade (good for rates) and high inflation (bad for rates).
Bottom line: This new Russian/Ukraine war changes everything. If you are considering a refinance or purchase transaction, now is the time when there is a lot of uncertainty. Upon better days ahead, we should expect somewhat higher rates.
Looking Ahead
Almost all economic reports take a back seat to the elephant in the room - Russia/Ukraine. So, we must track this story closely and see if the world response and sanctions help fix the problem or make things worse. Next week does bring the Jobs Report data, which is usually a big market mover but again, with Russia/Ukraine taking center stage, the market reaction may be somewhat muted.
