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Rates Above 3%? Inconceivable…

Mark’s Market Update – 10/28/2021

My name is Inigo Montoya…

Is it inconceivable that rates could climb? Well – no. Not when you look at the technicals.  

Look…we’ve had a great run, really we have. But, the simple truth is we’re starting to see things that will, arguably, start to spook the Fed and investors as a whole if they continue. 

GDP growth is tamer than expected but brisk. Consensus had it at 2.6% and it came in at 2.0%. However, the real number to be watching for is the Personal Consumption Expenditure report coming out tomorrow. Since it measures personal consumption by consumers and is a 12-month average, we’re going to see a month fall off that report from last year (middle of the pandemic last year – when everyone was hunkering down in fear) that was dragging down the average.  

This could mean that we could start seeing PCE growth at 4, even 5%, and that will make the Fed and investors take notice.  

Don’t be surprised, as a result, if we start to see interest rates in the mid 3’s to 3.75% by the end of the year. Right now – we’re cruising at 3.0% to 3.25%.  

Transitory Inflation. I don’t think this word means what the Fed thinks it means…

Cheers. Call me for your next buyer, when you’re ready to buy a home or refinance your current home.