Initial GDP Shows Growth

This morning’s Gross Domestic Product (GDP) report showed an initial reading of a 2.6% annualized growth rate in the 3rd quarter of 2022.

This will stall talks about the US economy currently being in a recession. However, the recent rate hikes by the Federal Reserve are adding significant pressure to current and future growth.

Most economists anticipate a formal recession to hit sometime in 2023, with many expecting this in the year’s first quarter.

Tomorrow is an important day, with the Consumer Price index report scheduled to be released in the morning. Although it is expected that the annualized rate of inflation will move higher, we expect to see that the monthly trend of inflation is moving lower.

If the trend of price movements is heading lower, that matters more than the annualized rate. What we are looking for is to see if the current economic environment is driving consumer prices lower. If so, it would suggest that the Fed rate hikes are helping to achieve the desired results.

Yesterday we showed a snapshot of the price of mortgage-backed securities being up against a ceiling of resistance. As indicated in the current chart, bond prices are now above that ceiling, which is now considered a support floor.

Unless we see an inflation report higher than the market anticipates, we can expect to see mortgage interest rates move lower. If you are able to stomach the risk, float into tomorrow’s report. If not, take advantage of the rate drop this nice move in the bond market has provided.