Market Says No
Happy Friday! Brian Manning here with your weekly update. Let’s get right to it—we have a lot to talk about because this week made zero sense on the surface, and I’m here to tell you why. We had a strong jobs week and rising oil, yet interest rates fell. So what’s actually happening, and what matters most? Let’s dive in and figure it out.
First, interest rates were whipsawed but ended up stable. Early in the week, we saw bond improvement and mortgage rates got better. By mid-week, a spike in oil prices put pressure on rates, leading to volatility by the end of the week. However, the bond market is holding its ground and interest rates actually improved. The bottom line is that rates did not blow out this week despite all the chaos.
Second, jobs data is all over the place. ADP reported 60,000 jobs and another private company reported 20,000, but the BLS claimed 178,000 jobs were created in March. The problem is that most of the growth is in healthcare and education, which is not the type of growth that indicates strong hiring across companies. Even more concerning, revisions to the prior month showed that job growth averaged only 20,000 per month. The headline numbers remain weak under the hood.
Third, unemployment signals are weakening. The primary issue is that people are dropping out of the job market; they aren’t being counted because they have been unemployed for so long that they are no longer included in the official rate. This does not show a strong economy, and that is the reality of the current job market.
Fourth, regarding consumer spending, retail sales came back slightly stronger than expected. However, this was before the spike in oil prices. Rising gas and food costs will leave consumers with less discretionary spending moving forward. Expect the pressure on the consumer to remain as costs continue to rise.
Fifth, oil remains the wild card. Prices jumped significantly this week, driven by conflict in the Middle East and general uncertainty. With no clear resolution yet, the consumer has no idea what is happening with prices. This creates two impacts: short-term inflationary pressure and a long-term slowing of the U.S. economy.
Finally, what is the market really saying? Despite the strong jobs report, the bond market did not believe it because rates did not spike like they normally would. That tells us the market is holding its ground. The labor market does not look as strong as possible, and consumer pressure is building. Markets are starting to see that and price it in. Volatility is not going away, and while underlying strength is there, everything is currently pointing toward an economic slowdown.
I’m around all weekend if you have any questions. I’m available seven days a week from 8:00 to 8:00. Realtors, we have an amazing new luncheon series called “Just List, Just Sell, Just Win.” We just did one yesterday in Boulder, we have another coming up in Loveland next week, and the following week we will be back in Denver. These are selling out, so secure your seat now. We’d love to see you there. Happy Friday and have a great day!
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