Sell on the Rumor and Buy on the News!
The adage dates back to the 17th century. That’s what investors and traders did today after the market received the highest annual consumer inflation data since December 1981.
We are getting relief on the bond market: Mortgage Bonds soared after the numbers while the 10-year yield has fallen to 2.71% from the 2.83% seen overnight.
Consumer Priced Index came out today and it’s really a tale of two inflations. The headline number includes the food and energy prices – which as we know are very high right now. If we used that indicator, on a month-over-month basis we would see annualized inflation at 13%-14% which is unsustainable to say the least.
Taking out those food and energy prices, we get the core CPI number. That is coming in at 3.6% month-over-month which is good news and much more in line with where the Federal Reserve likes to see inflation. With this reading on core inflation, we can see things start to settle down. If that’s the case, the Fed will not have to do as much on their Fed Funds Rate to slow the economy down.
Right now, the 50-basis point increase on the Fed Funds Rate is at about an 80%. We expect that to happen at the next meeting. We continue to tell our clients, if you see a mortgage rate you like, lock it in.
The NFIB Small Business Optimism Index decreased in March and was the third consecutive month below the 48-year average of 98.
The NFIB says, “A majority of owners reported that inflation was the single most important problem in their business, up five points from February and the highest reading since the first quarter of 1981. Inflation has now replaced ‘labor quality’ as the number one problem.”
The market continues to be volatile but today was a good day for the markets.
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