20 Dec Fed Hikes Panic Stock Investors
Yesterday’s Federal Reserve announcement provided the ¼% rate increase we planned on. Although this was anticipated, the market was looking for clues as to what 2019 has in store. Much to the stock markets’ dismay, they did get word that the Fed is planning on reducing the planned number of rate hikes from three down to two. The stock market was hoping the Fed would not hike rates at this meeting, and further hoped the Fed would state that they are only going to continue hiking if the economic data supported continued hikes. Rather, they said they are planning on hiking, without stating the hikes will be data dependent. This caused the stock market to take on additional losses, which has helped support lower mortgage interest rates.
With the US stock market getting hammered in recent weeks, many are wondering when the pain is going to stop. The hope now rests on the 50% Fibonacci Retracement, which is almost exactly where stocks are right now. In a general market, it isn’t uncommon to see up to a 50% loss before heading back up. Stock investors are currently hoping this will be the case for stock prices. Odds are that stocks will at least pause at this level and then make a move from there. We would generally expect stock prices to bounce higher at this point, so we need to be on guard for how that will impact mortgage interest rates in the near term.
Given the unknown direction of stocks, we will maintain our locking bias.