Markets “In a Nutshell” for April 25, 2022
Investment Week at a Glance
Stocks finished lower for the week. The Dow Jones Industrial Average fell 1.90%, the S&P 500 was down 2.70%, and the NASDAQ fell 3.80%. Foreign stocks (MSCI EAFE) were up, rising 0.40%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 2.90%. (Data source: Wall Street Journal)
Although equities have had a rough start to the year being down more than 10%, the bond market has been in focus as interest rates continue to rise and crush bonds compared to what we have seen in recent history. Swings in the equity market are usual but the steep declines in the bond market are rare to see in such a short time span. This sharp decline is due to rates moving higher and the Fed is expected to continue to raise the Federal Funds rate in the coming months. Although many expected the Fed to raise rates, it is now becoming more apparent that they may have been too slow in raising rates and now will have to catch up. Some believe the bond market may be pricing in a recession in the near future even though many economic indicators would say otherwise.
Looking at the economy going forward, some worry a recession is on the horizon, however, the consumer is still in a strong position with over $2 trillion in savings and wage growth at 5%. Even though inflation is running higher than wage growth, the consumer still has a lot of spending power and debt payments for consumers are near 9% of disposable income which is near all-time lows. Housing prices are expected to cool off as mortgage rates continue to rise as interest rates have spiked. This will slow the inflation numbers down but could become an issue if prices were to fall too much. We are starting to see housing slow down as existing home sales fell 2.7% in March and mortgage applications have been declining as the consumer’s purchasing power has dropped as mortgage rates rise.
What is the current 30-year mortgage rate? (Scroll Down for Answer)
Have a Great Week!
4. 5.11%, Mortgage rates have rose dramatically in the past few months, just 6 months ago the average 30-year mortgage rate was under 3%. If rates continue to rise and home prices do not drop, more and more home buyers will be priced out of the market.