Markets “In a Nutshell” for March 28, 2022
Investment Week at a Glance
Stocks finished higher for the week. The Dow Jones Industrial Average rose 0.30%, the S&P 500 was up 1.80%, and the NASDAQ rose 2.00%. Foreign stocks (MSCI EAFE) were also up, rising 0.30%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 2.48%. (Data source: Wall Street Journal)
Interest Rates Continue to Rise
Rates spiked last week as the market continues to try and adjust for the inflation we are seeing. The 10-year treasury is up 0.60% for the month of March and rose 0.30% just this last week. This is just the 5th time we have seen a weekly spike like that in the past decade. Even with this spike in the 10-year yield, we are still below the 20-year average by almost 0.50%. Although higher rates make it harder for the economy to grow, we still are historically at low rates and haven’t caused too much fear as of now. Some have worried this could lead to a recession but the last 3 recessions, excluding the pandemic, have occurred when the Fed policy rate was greater than 4% which we are nowhere near as we just moved from 0% to 0.25%.
Rising Rates and Economy
With rates now rising, mortgage rates have followed as the average 30-year mortgage rate is near 5%. At the end of 2020, the mortgage rate was nearly half of what we currently see. Although this increase in mortgage rates may take some heat off the housing market, there are still very few homes for sale as inventories are at 30-year lows. As rates continue to rise the hope is inflation will begin to cool down but not rise too much that it sends the economy into a recession. With rates increasing on their own some believe the market is doing the Fed’s job as many believe the Fed is behind on slowing inflation. The good news for the economy as a whole is that unemployment has continued to fall so we are in a good position for rates to rise as the economy is seen as strong.
What was the average 30-year mortgage rate at the beginning of 2020 before the Pandemic? (Scroll Down for Answer)
Have a Great Week!
3) 3.6% … Mortgage rates today are now more than 1% higher than that of pre-pandemic rates. A general rule of thumb is that for every 1% rise in mortgage rates, the buyer’s power decreases by 10%.