Waiting on the Fed

All eyes are on the Federal Reserve today, as markets wait to hear if they will be raising interest rates. With the announcement set for noon today MST, we will soon see. I continue to believe that the Fed will follow through on a ¼% rate hike, as they have clearly hinted of this coming in recent talks. I also believe that Fed Chairman Jerome Powell will lower the expectations of continued rate hikes in 2019, stating that decisions to hike will be based upon economic data as it is released. Personally, I’d like to see Jerome hold off on hiking this time. I believe the markets need time to balance out and that hiking today will just increase the odds of the Fed needing to lower rates in the future as we head into a recession.

After hitting the same floor of support, we have talked so much about in recent market updates, stocks once again bounced off this floor and are climbing higher in early morning trading. This is a significant floor that truly represents the bottom of a very long-term trading trend. If this floor is decisively broken, we could see a trend reversal, which could point to an early bear market indicator. A break below would also help provide a nice tail wind for mortgage bonds, helping to drive mortgage interest rates even lower. Today’s Fed announcement could influence which way markets head. So be on guard as we wait and see what happens.

Mortgage bonds are currently sitting just above their 200-day moving average. Although there is no rush to lock, we can expect to see an increased level of volatility following the Fed announcement. With a strong ceiling once again facing the bond market, I will maintain a locking bias.