Here comes the perfect storm for rates. You may want to get your refinance application in today. Or lock your purchase loans as this may be a small window that may only last for the next month or so. Remember: the rates are priced for what we think is going to happen…not what is happening. So right now, we see doom and gloom for the economy, and it is making the rates drop. We see the fed lowering the rate. We see the trade war continuing. Consumer confidence is down. Manufacturing has slowed. Jobs reports are anticipated to be lower than expected. This is what is making up the perfect storm. It does not get any better than this for rates. How long will it last? Not sure, but it is here now.
The biggest issue dragging down manufacturing and the other factors of the economy is the trade war with China. This needs to be resolved for both nations best interests. However, I’m guessing it won’t. However, if there is any sign of hope for a possible agreement, then the market will improve and rates will jump up.
What is going on in the market:
Consumer confidence decreased to its lowest level of the year in August. What this means is that households are saving more than spending and are concerned on the economy’s future. This is a negative for the economy, but a positive for lower rates.
US Manufacturing came in lower than expected this week. This will hold off inflation and tells the Federal Reserve they need to lower rates. Our dollar is too strong right now and is dragging down manufacturing.
The trade war and manufacturing recession. Those factors are starting to permeate the economy at a time when companies are already struggling with a shrinking pool of qualified workers. The combination of forces has pushed down the median estimate for private payrolls to a gain of just 130,000 last month. That’s the weakest projection heading into a jobs report in seven years. If the labor market weakens at all, there’s no support from other sectors of the economy. This would lead the Fed to respond with aggressive cuts.
President Donald Trump blamed Federal Reserve Chairman Jerome Powell and his colleagues at the central bank for hurting manufacturing. “As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected,” Trump tweeted Tuesday October 1st 2019.