📉 The Market is Broken 📉

The Fed's recent actions seem to have backfired. Despite cutting rates by 50 bps in September, we’re seeing unexpected market reactions. Here’s a quick breakdown:

🔶 Interest Rates Surge:

The 10-year note yield has jumped by 60 bps in a month, now above 4.20%, and the average 30-year mortgage is nearing 7.0%—the highest since July.

🔶 Mortgage Demand Collapse: Mortgage rates have soared from 6.1% to 6.8% in just four weeks, with demand hitting its lowest since the 1990s.

🔶 Rising Inflation: Core CPI inflation hit 3.3% in September, its first increase since March 2023, while unemployment dropped as the U.S. added 254,000 jobs—contradicting the Fed’s expectations.

🔶 Rate Cuts Priced-Out: Markets no longer expect more rate cuts this year, with a 33% chance that we see no cuts at all in 2024.

📅 November is Critical: The upcoming election, Fed meeting, and labor/inflation data will be pivotal. The Fed needs to tread carefully to avoid stagflation, a damaging scenario seen in the 1970s.

Gradual rate cuts are the answer—not aggressive 50 bps moves.

#MarketUpdate #FedPolicy #InterestRates #STAGFLATION #Inflation