The Future of Interest Rates and the Impact on Markets

The Weekly Recap

A coup in Russia lasted about 25 minutes, the US economy is way stronger than Wall Street thought when Q1 GDP was revised up from 1.3% to 2%, Real Estate investor Vornado is poised to invest over $1 Billion in the area around Penn Station, New York might ban non-competes, traders believe the bull market is only getting started, all 23 major American banks passed the Fed’s stress test, if you were flying this week you were probably delayed, three different IPO’s launched Thursday giving credence that the IPO market is coming back to life after Cava’s successful play, speaking of launching, Virgin Galactic successfully launched its first commercial spaceflight into orbit and Apple is preparing to release a new phone and watch that does the same exact thing your old phone and watch does in the Fall.

The Future of Interest Rates and the Impact on Markets

If you’re a big central bank nerd like I am, it was an exciting week when central bankers from the US, Europe, the UK and Japan all shared a stage for a panel that took place in Sintra, Portugal on Wednesday. The consensus from the head financial honchos of the biggest economies in the world is that a year ago, they all had a lot in common. They were all dealing with high inflation and were raising rates at an incredible pace in order to get it under control. Flash forward to this week and the new consensus is that tightening, even in the aggressive manner in which rates were rising globally, are taking longer than expected to bring inflation down to ideal targets.

Out of all the countries represented at the panel, the US is in the best position to avoid a recession but future policy may need to continue to be restrictive in order to achieve goals.

For the US and our interest rate market, the biggest takeaway came from Fed Chairman/Overlord Jerome Powell where he acknowledged the the central bank has not definitively decided to hold meetings ‘every other month’ versus every month which we are experiencing now, leaving July and September as potential months where interest rates could be raised again as we exist in the ‘hawkish pause’ that came from their June meeting.

With increased buyer activity in NYC, buyers have come to the realization that higher rates are now a part of life and are eager to find homes. Sellers continue to be in no rush to list if they are not experiencing a life event and will continue to wait for rates to fall.

Market Performance

Here are how some other indexes and asset classes have performed as of this mornings opening bell.

NYC Market Update

Here is a view of new inventory that has come onto the NYC market over the past week as well as newly signed contracts in Manhattan.

Mortgage Rate Update

Mortgage rates have hovered in the six to seven percent range for over six months and, despite affordability headwinds, homebuyers have adjusted and driven new home sales to its highest level in more than a year. New home sales have rebounded more robustly than the resale market due to a marginally greater supply of new construction. The improved demand has led to a firming of prices.

News You Can Use

• NYC Renters Could Be Spared Costly Broker Fees Under New City Council Bill NY Post

• First Quarter Economic Growth Was Actually 2%, Up From 1.3% First Reported in Major GDP Revision CNBC

• US Economy is A Lot Stronger than Wall Street Thought Yahoo Finance

• Forget the Cost of Living. What’s the Cost of Thriving in America? Wall Street Journal

• New York Could Become the Latest State to Ban Noncompetes Axios

• For Companies Sticking with Remote Work, the Rules for Success are Becoming Clear CNBC

• US Weekly Jobless Claims Post Biggest Drop in 20 Months As Economy Shows Stamina Reuters

• Janet Yellen Sees Bank Earnings Pressure, Mergers After March Crisis Wall Street Journal

• Where’s the Recession We Were Promised? Wall Street Journal

• A Reliable Indicator Says the Next Recession Might Be 3 Years Away Yahoo Finance

• US Business Activity Growth Slows in June but Services Keep Humming Along Reuters

• Economy at Critical Juncture In Inflation Fight: Central-Bank Body Reuters

• The New M&A Rules That Would Delay Million-Dollar Deals Bloomberg

• Tesla Charging Technology Put on Fast Track to Become US Standard Reuters

• Biden-McCarthy Deal Fails to Tame US Debt as Republicans Demand Cuts Bloomberg

• Virgin Galactic Completes First Commercial Flight to Space Reuters

• Apple Reportedly Plans New Apple Watch Ultra with iPhone 15 this Fall CNBC

The Deep Insight

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