Friday Market Update for the Week of April 30th 2021

Happy Friday, Brian Manning here with the weekly update. My gosh it is so beautiful outside today. I will tell, you a nice spring day like today is when it’s tough to sit in an office but here we are, I hope someone is outside enjoying it.  Let’s see… Monday this week, pretty quiet news day, not much to talk about there.

Tuesday this week, we have some feedback from Case Shiller. So Case Shiller provides us info every month on home appreciation, just the housing market. And on a year to year basis, Case Shiller says our home appreciation is up 12%, which is a really high number, pretty unbelievable. You know, a lot of people asked, is this something that will continue? And I would have to say that, you know, potentially, if we see rates rise coming into the summer then it may slow appreciation down a little bit. I do think maybe 12% is slightly unobtainable, or unsustainable to hold forever, really wouldn’t be so bad to see it come down to like 5% or 6%, but it’s all coming down to inventory, there’s just lack of inventory right now so that’s really driving home appreciation.


Wednesday this week, we had Federal Reserve. So, the Federal Reserve is wrapping up their two day meeting and at the end of their two day meeting, every time the Fed president right now, Jerome Powell does a press conference. And he was talking about not raising rates, which you all expected and also not scaling back on their bond buying program. So right now, the Federal Reserve is buying a tremendous amount of mortgage backed securities and US treasuries and part of what they’re doing there is definitely keeping rates low right now. At some point in time, and I don’t know when, they will scale back, and it will have an impact on the markets, but right now, they are not stopping anytime soon.

Thursday this week, we got pending home sales. On a month-over-month basis, pending home sales are up 2%. You know, some analysts thought it was kind of a weak number, but the reality and exactly what we just talked about a second ago is that inventory is at an all time low. So I’m willing to bet that if there was more inventory out there, based on the demand we’re seeing with buyers that pending home sales, as in signed contracts would have increased, but 2% was the month-over-month basis.

Today, we get the PCE, that’s a personal consumption expenditure. So this is the Federal Reserve’s favorite gauge for measuring inflation. So the first thing we look at is the headline numbers. The headline number for inflation on a month-over-month basis was up 5/10%. On a year-over-year basis moved from 1.5% to 2.3% but we don’t really focus as much on the headline number, we really look more at the core rate. The reason why we look at the core rate is because it strips out volatile items such as food and energy costs. And also the core rate is really what the Federal Reserve has control over when they can move their fiscal policy and raise rates or lower rates, it’s the core rate that they focus on here, so on a month-over-month basis for the core rate, it was up 4/10% and on a year-over-year basis, we saw inflation move from 1.4% to 1.8%.

So the Federal Reserve for a long time, has always said that we want to keep kind of a cap on inflation at 2%. I mean, recently, Jerome Powell said they might let it run a little bit hot, but this reading today did not have a negative impact on the markets. Next month, though, is really going to be really important to see. So at the end of May, we’re going to get the inflationary readings for the month of April and the reading we’re going to get for the month of April is going to force the month of April reading from 2020 to drop off. Well, why that’s important is because the April reading in the month of 2020, due to everything being locked down was a negative 4/10% and if we happen to get a number like we got today, or it’s a positive 4/10th, that’s a change in inflation of 8/10%. And that would move our year-over-year inflation rate from 1.8% to 2.6%. So I’m not really sure what’s going to happen next month but we’ve been talking about this, it’s something we have to keep a close eye on, the inflationary readings right now did not really move the markets, everything’s looking really good, but next month might spook them a little bit. We’ll have to wait and see.

I’m around all weekend. If you have any questions let me know, I’d love to help you any way I can. Call me on my cell phone, text me. If you need a pre-approval done, updated numbers, whatever it is just reach out. Happy Friday. Hope you get to enjoy this beautiful spring weather.