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Friday Market Update for the Week of October 1st 2021

Happy Friday, Brian Manning here with the weekly update. Let’s get right to it. Monday this week, pretty quiet news day, not much to talk about there. Tuesday this week we had two Fed presidents, Kaplan and Rosengren stepping down, a little bit of controversy there because we have the Federal Reserve in the space of quantitative easing, right? They’re in this bond buying program, purchasing $120 billion a month of US Treasuries and mortgage backed securities, and then it gets discovered that we have these two fed presidents secretly making trades behind everyone’s back in regards to these mortgage backed securities and treasuries as well. So they had to step down, probably better off to see that happen.

Also, on Tuesday, we got Case Shiller. Case Shiller is kind of the gold standard for housing data in the US. And Case Shiller tells us that houses are appreciated at a rate of 20%. I think that was actually the highest number ever on record, it’s pretty ridiculous. A lot of talk about bubbles, what’s going to happen in the future. I mean, surely, if we just look at supply and demand, I would say we’re not in a bubble. When I look at the just exceptional amount of buyers that are out there in the marketplace, and how low and limited inventory is, it’s still just a rather significant imbalance in the marketplace. So we’re probably going to see this continual strong housing for quite a while. Wednesday this week, we got pending home sales. So expectations for the month of August was that pending home sales will be up 1%. Pending home sales were up 8%. So that was really a strong report and good to see.

Today, we get what’s called a PCE, that’s the Personal Consumption Expenditure. It is the Federal Reserve’s favorite gauge of inflation. Now, if we look at what’s called the core rate, so the core rate is this gauge of inflation that strips out volatile items such as food and energy. And on a month over month basis, we’re going to say that this is up 3/10%. On a year over year basis, right now it’s at 3.6%. So inflation itself has really held steady from last month to this month. But what happens is, on a monthly basis, the new monthly number that comes out removes the monthly number from last year, right? So if we look at this time last year, inflation was at 3/10%. We get our inflation number this time, it’s at 3/10% so it holds flat, but when you start looking into the next upcoming months, one month is at 1/10%, other month is at 0%, another month is 0%. So if we stay on this track of inflation, of an increase of 3/10% on a monthly basis, and we’re wiping away last year’s numbers on a month over month basis, by the time we get to January, we’re going to see inflation on the core rate at 4.2% to 4.3%. You know, it’s kind of crazy because Fed president Jerome Powell has been saying “Oh yeah, inflation is transitory, we’re going to see it go away” until this week, it was really the first time you could tell he was kind of not singing that same tune, and he really came out and said that inflation has been frustrating to him. So I’m not going to be surprised if we kind of see these numbers continually run up, especially putting into January of next year.

I’m around all weekend. If you have any questions, let me know. I’d love to help you in any way I can. Call me on my cell phone, text me. Happy Friday. Hope you have a wonderful weekend.

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