Watch This Before Rates Go Even Higher!

Hey folks, Dan Ferro here with your market update for October 22nd, 2024. So mortgage rates, they jumped, like I said yesterday. This is where we ended yesterday, 6.82. What are they gonna do today? Well, the big culprit from yesterday is I'm searching high and low. There's no economic data, there's nothing. And then I watched several videos and several interviews last night and this morning, and a lot of it's tying together. So here's basically what's going on in the background. How it's provable is right through here. There's no economic news. Like yesterday, US leaning indicators was negative three, went to negative five. That's not a reason for the bond market to just completely sell off. But then you had these people right here. Remember I said that? The Federal Reserve people, they're talking. And then again, today we got nothing out, but we have some Federal Reserve people talking. So the culprit now is right here. Four Fed policy favors more rate cuts, but differ on the pace. The next thing is the 10-year treasury above 4.2. Two years yields tops 4% as traders debate rate cut outlook. So what's the Federal Reserve gonna do? And then when you get over to here, it says stocks market today, Dow Jones slide as treasury yields hit highest level since July. So that's what we're seeing all over the media right now. So the problem is people just don't know what direction it's gonna go. And then you have, we start having the people coming out of the woodworks now. And what's this comment here? Paul Tudor Jones says market reckons coming after election spending, we're broke. So the deficit is playing a huge role. So let's lump all this together. You have a government right now, we don't know who's gonna be the president. We don't know who's gonna take it. Somebody gonna sweep both pieces of the government. So the House and the Senate. If it's a complete sweep, there's some major changes coming. But as long as a presidential candidate comes in and there's a split government, you're still gonna have just people just passing the torch along and nothing really getting done. So that's the outlook that a lot of people are thinking. So we have that to contend with right now. And then we have this to contend with right now. Okay, so you have all that. And then we have now what the Federal Reserve is gonna do. So now we have this election in the forefront, and then you're gonna hear people saying, well, the tariffs, they're gonna add problems to our cost of things. I can give my take on tariffs and I might bring that up to today's stock event. So we're having stock talk with Dan today at 2.30. So if you wanna join us, we're just gonna go through basics today. We're gonna talk about what is the stock market? What is a share of stock? How do you buy a share of stock? And what's a good investment strategy for new investors and how it's probably not individual stocks and how you're gonna invest. So join us today at two. I have that post coming up and it's on in my live tubes. But that's what we're seeing right now in the markets. So now the uncertainty comes back and you're gonna see right through here, the MBSs are up five. These were up 13 when I got here today. So there's huge volatility in the mix. So here's another interview. And this is another former Fed official right through here. And now he's some Dean or something at MIT. Let's get his take on the market because this is one of the last interviews I just watched. And he puts a lot of this into perspective. So let's get to this. And then we're gonna go and look at some other pieces of the segment. And then we're gonna also go over the CME FedWatch tool based on all the comments yesterday and the news out today, which is really nothing. Is the CME FedWatch tool telling us something about interest rates? Maybe not the next meeting, but down the road. So let's get to this interview and then we'll be right back. The end of the week, Fed officials will start their communications blackout period ahead of next month's interest rate decision. Joining us now, former Boston Fed President, Eric Rosengren. He's now a visiting scholar with MIT's Golub Center. Eric, it's good to see you. Listening to, let's just focus on what you just heard from San Francisco Fed President Daley. She seems to be saying that this very difficult line that the Fed is trying to follow, that they're being successful, that inflation seems like it's headed in the right direction, the price stability component of the dual mandate and labor market is doing pretty well too. So that's such a difficult needle to thread. Do you think the Fed is on the right track or are the troubles on? I think the Fed is on the right track right now. As you just pointed out, inflation has come down and while core PC inflation's at 2.7%, that's still higher than the 2% inflation target. As a result of oil prices being a bit soft, we have a total PCE number that's 2.2%. So that's pretty close to the 2% inflation target. And the unemployment rate is 4.1%. The committee, when it met in September, thought we would end the year at 4.4%. So the labor market already is doing better than the Fed expected at the last meeting. So I think it's well set up for a 25 basis point cut at each of the next two meetings. All these data points, unfortunately, are things that happened in the past. And if the Fed were to try to look ahead, they'd have to use market signals. And that's where I think maybe there's at least some eyebrows being raised about whether 50 basis points is necessary and whether we get another 125 or whatever it is. And I'm talking about the 10-year. The yield has gone up almost every day, Eric. Gold is hitting new highs. I don't know what that's saying. I mean, we are running a pretty large deficit again and we've got very high total debt. Stock market was down yesterday, but it's within a hair of an all-time high across the board in all of the assets. And you've got forecasts for GDP up at like 3%. What is the reason? How do we know that things aren't hotter than they should be to be cutting rates? I think that's exactly what basically people are thinking. It's like, okay, things aren't so bad. And I know a lot of you guys out there are gonna say, Dan, I'm having a tough time finding a job and so forth. But nationally, generally, the numbers look pretty darn good. We have a lot of people making additional monies. Look at the strike that's just ending. What was it? I think it's GM. And their workers are getting, I think, like a 25% pay increase. So I also brought in, I don't know if I still have it on the board here. Let's see, federal funds rate. No, that's the federal funds rate. But I do have other data. And we'll go over that at the closing bell. So let's get back to the interview. My apologies. Well, I mean, you have to rely on a forecast. One of the challenges of forecasting right now is we have an election coming up in early November and the fiscal policies that are being suggested by both candidates probably is fairly significant deficits going forward. And at least one of the candidates is highlighting significant increases in tariffs. Okay, he mentioned the tariffs. So let me bring this up. Here's my take on tariffs. And this is just my take, and you guys are probably gonna blast me down below. I grew up in a steel mill town. All my family worked in the steel mills. My uncles, my dad, my nephews, my cousins, my brother-in-laws, and even it was my destiny to do that as well, most likely. And then what happened is back in the 70s, in the late 70s, early 80s, China started dumping, just dumping steel on the United States. And it was bad steel, just bad steel. But people, you know, there was an article I read yesterday or not an article on Facebook. It was like, okay, you went home, you drove your car, which was made in Germany, to your work and you got, you know, you used your laptop made from Korea and sat in your furniture that was made from, you know, Japan or Taiwan. And we wonder why our prices of everything are going up and everybody wants higher wages and it's pushing the economy out of sync. Okay, so my gist is this. What China did was they were dumping steel on the U.S. and undercutting all the prices in the U.S. And China was, the Chinese government subsidizes the Chinese steel companies to do this. And the take is, let's put the U.S. manufacturers out of business. Okay, and they did. They were successful pretty much. All the big U.S. steel companies are virtually gone. There's many mills, they're starting to come back. And that's what happened. So short term, what the tariffs are going to do, they're going to raise prices dramatically on things. So here's what's happening. Let's say, for example, China has a glut of, right now, EV cars. So they can just completely dump those on our country. And it's good for the consumer, me and you, because we get great prices. But the problem is GM and our manufacturing here in the United States, they can't compete because you can't make a car that cheap. So what happens? The manufacturers are going to move to another country. So short term, it's bad for the U.S. Long term, we need the manufacturing sectors back. So that's my take on it. I lived it. I lived through it. Yes, will it increase our costs? Yes, because we won't be able to buy that cheap stuff from overseas. But if you're really for the U.S. and an American, you want the jobs to stay here. So you need to buy here. But everybody buys the cheapest stuff out there. So that's my take on tariffs. And that's just one little microcosm that I lived. But I can validate that when that happens, the tariffs will help. Long term, short term, it's going to be a blip in the radar. And this could add to the uncertainties in the market that we're seeing right now. So we'll continue with this. Makes it a little bit more difficult to forecast. You're right that ideally, you don't want to be looking at where we were a month ago, which is reflected in the current data. You want to actually estimate where you think the economy is going over the next six months. And I think some of the movement that you've seen in the bond market is in part reflecting people thinking a little bit more carefully about the fiscal policy implications. So highly stimulated fiscal policy means we don't need a stimulative monetary policy. So if you're anticipating significant cuts by the Fed, it's probably assuming that the economy continues the way it's been going, and that we don't have a very stimulative fiscal policy. If instead you start thinking fiscal policy is going to be very different, that brings some uncertainty into the market. And I think some of the market movements we've seen over the last week reflect that. Eric, just very quickly, we had Rohit Chopra from the CFPB on earlier talking about these open banking rules where- We're going to get off of that. They just started talking about some banking rules and sharing customers' data and stuff like that. So it's irrelevant to our data today. So that's basically the take. So that was kind of the final conclusion. I'm sitting here saying, yeah, the markets, this guy's brilliant. The markets are just, you know, again, you've got the election coming up. We just had the hurricane. So how many jobs are going to be disrupted? How much insurance is going to be disrupted in the Southeast from these hurricanes? You have strikes, Israel ready to bomb Iraq or Iran. So you have all these uncertainties around the world right now. And it's still amazing to me, you have stock prices or equity prices going up, but it's the uncertainties in the market right now. People are just like, we don't know what to do. And that's what's causing the big bumps right here in the way. So right now we have, when you joined me, the MBS market was up 15 and then it went down to 13, then eight, now we're at four. So basically the markets are just giving back what it got in so far this morning. So that's what we're seeing there on that stage. We'll go over to here. Here's the health of the economy. Like they were saying, if you look at this in general, you're probably giving the economy a thumbs up. Now let's get over to the CME FedWatch tool. What's it looking like now? Well, now there's a 10, almost 11% chance no rate cuts are coming. Okay, but there's still a 90% chance that there is a quarter percent cut coming. And that's showing this right here in the charts because the federal funds rate right now is in the range of 475 to 5%. And that can be validated right through this section, right through here. So the federal funds rate 475 to 5%. So that's where we are. In December, where are we supposed to be? Well, the consensus is telling us we're gonna be at 425 to four and a half. That means there's 50 base points cuts coming out of the mix, but they're in two increments, one in November and one in December. So that's what we're looking at right now for today. Folks, I do have a live event today. I'm gonna start teaching you guys how to invest. And a lot of people down below, they're like, Dan, I got no money. I'm broke. I don't know what to do. I can't afford this and I can't afford that. Let's change your mindset. Instead of sitting here and just pounding, this is bad and that's bad and this is bad. Let's educate you. Today, we're gonna talk about stocks and we're not gonna be real in depth. We're gonna talk about what is the stock market? How does it all work? How do companies go public and things like that? What is a stock and what exchanges can you go and buy them? And how do you really look at a stock to say, is that a good investment or not? So join me today at 2.30, love to have you. But if you're in the market to buy your first house or maybe looking to refinance at this time, we'd love to help you here at the Frio team. So my name is Dan Frio. I'm actually a mortgage loan officer licensed in all 50 states as well as Puerto Rico. So if you wanna find out more about me, visit my website at thereadupdate.com. If you're looking to buy a house, the first thing I need you to do is stick right here, the grant finder. It's gonna give you grants that we handpick, national grants right through here. There's three of them. And then if you live in the Chicagoland area, we have one for the Chicagoland and basically the surrounding areas for $10,000. So if you're making 85,000 and less and looking to buy that first house, check out that because it's a $10,000 grant to help you for your down payment and your closing costs. So check that out. But if you wanna just click the apply now button or feel free to give us a call, you can do that. Just scroll right down to the bottom of our website and it is right over here. Let me find the tab and you can find our 800 number right through here. So it's 844-775-5626, or you can reach me personally at dan3update.com. So thanks so much for watching guys. Please give me a thumbs up, subscribe if you haven't, and I'll see you back here at 2.30 today to learn a little bit more on how to invest. Take care, bye bye.