September 19th, 2022 - Market Update
Current position: Carefully Floating
Stocks and Mortgage Bonds are both lower to start the day.
The Atlanta Fed has reduced their Q3 GDP estimate once again from an increase of 1.3%, just 10 days ago, to just a 0.5% increase. This is down substantially from the 2.6% increase they were forecasting in August.
The Atlanta fed noted that inflationary pressures are decreasing due to supply chain improvements and lower sales.
This is the worst inflationary situation the United States has seen in 42 years. With the median age at 38, this means that more than half of our population was not alive for the last surge in inflation. When you consider that children don't feel the pinch of inflation like adults do, anyone under the age of 55 has never experienced a situation like this in their lifetime.
This week is an important week, highlighted by the Fed's 2-day meeting, where we fully expect them to hike the Fed Funds Rate 75bp. Additionally, Housing Starts and Permits, and Existing Home Sales reports will be released, as well as a 20-year Bond Auction.
Mortgage Bonds continue to move lower and seem to be reaching new lows on a daily basis. Bonds are deeply oversold from a momentum standpoint, and with this week's Fed hike, it could set up for a relief rally and reversal higher. It will be critical to see if the 10-Year stays beneath the 3.5% Level. A break above this level could mean treasury yields move higher than we've seen in a decade.
Carefully Floating while watching the ceiling on the 10-Year.
Source: MBS Highway
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