21 Mar The Fed Reverses Course
Yesterday’s Fed announcement shows just how wrong the Fed’s December 2018 assessment was. Before December, the Fed was planning on raising short term interest rates two times in 2019. However, following the December meeting, they not only raised rates at that meeting by ¼%, they also increased the expected times rates would be increased in 2019 up to three. This move sent shocks through the market, and mortgage interest rates experienced upward pressure as investors started to price in a third rate hike in 2019. Fast forward to March 20th, 2019. Just yesterday, the Fed announced it is not anticipating any rate hikes in 2019. This crazy reversal is a vindication of what we have been saying all along and opens the path for mortgage interest rates to see better days going forward.
Yesterday’s news is not only good for mortgage interest rates, it is also a positive sign for the stock market. In an environment of increasing interest rates, that eats into corporate profits, which causes a headwind for stock prices. However, now corporations can predict more stability in their income statements and in knowing the cost to borrow capital for growth purposes. As a result, stocks are up significantly today, continuing their path towards all time high levels.
At this moment, there is no need to rush to lock. However, if you choose to float, do so carefully, as sentiment can reverse quickly.