We don’t want to get too heavy and pound you with market thoughts, we know you’re getting enough of that from the “Market in Turmoil” like headlines, but we did want to give some explanations and let you know we are watching carefully as we have been on notice since December for a possible slowdown.
Look forward, not back
Economic reports such as today’s CPI (consumer price index) report is very much rearview looking, as such it’s sometime easy to forget that what’s most important is looking forward to what is going to happen next rather than backwards to what has happened. Yes it is much harder, and you do not know exactly what is going to happen … but you sure do not drive a vehicle looking continually in the rear view mirror – some humor on a dry subject… stay with me!
This is even more evident at the recent quick rise in interest rates, creating the headwinds to bonds. As noted here and again here in our posts (the second with even a special video) it’s highly likely and the probability is most that the headwinds for our fixed income investments are behind us. Once again looking forward, a slow down usually garners lower interest rates, exactly opposite to our slightly current and mostly rearview looking higher rates.
FOMC chaired by Powell gave and now takes
Over the past 18 months to two years the FOMC (Federal Open Market Committee) headed by Jerome Powell have taken very aggressive measures to stimulate the economy. Much of a stimulation, once the book is written may have over stimulated not only the economy but various asset prices. Their goal at this time is to slow inflation thereby doing a complete turnaround from their prior stance and taking away stimulus. This most likely will continue until they see evidence of slower inflation or lower employment.
Higher rates are their main instrument of choice:
The FOMC waits for the reports such as the CPI to confirm their decisions, making for a lag in decision making and possibly longer decision-making, but they will eventually get there….
Finally, capital markets are certainly looking forward hence the sluggishness as they begin to price in a slowdown in full force. Eventually it’s very likely the FOMC will begin to see these clues as well!
Have a Great “Forward Looking” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
$treet-¢ents 
Thoughts from Barry Habib, Housing and Mortgage expert, from this year‘s 2022 Mauldin SIC Investor Conference…
For those of you with a memory like an elephant, congratulations, you may recall that we have delightfully attended the Mauldin Strategic Investor Conference (SIC) virtually during lockdown for the past two years. As a side note, a conference that we had never attended before due to the duration and the timing … very near tax time!
Good news, once again this year the conference was virtual and we are happy to attend.
While there were 40+ speakers, more to come on others, we found the following expert and presentation very interesting, if not somewhat controversial.
Barry Habib, Mortgage and Residential Housing Expert
You may recognize Barry as he is a regular speaker on many of the financial channels among other and was a presenter at this year’s SIC conference.
Cutting to the chase, Barry expects a recession later this year or early 2023 and as such expects mortgage rates in particular to drop precipitously from their current 5 1/2% rate along with all rates of other asset types.
These expectations, (forecasts), are certainly more economic and financial market related, as such we will make note as predictions and check back sometimes next year.
Now, to Barry’s wheelhouse, what we are all interested in, the expectation of housing appreciation or depreciation!
Understanding that Barry comes from a residential and mortgage background, so let’s be transparent that there may be some innate biases, but his expectations are for mid to low single-digit housing appreciation for this year 2022.
This flies in the face of many forecasters due to the aforementioned slow down or R- word recession and more importantly the heightened interest rates of Mortgages currently.
In Barry’s defense, lack of supply and his expectations of a sharp reversal in mortgage rates will lend itself to this continued growth.
Heck if housing prices hold their values we would consider Barry’s prediction a win.
There will certainly be pockets of strength and weakness across the country…
We will be watching as it’s very easy to monitor and will let you know!
Barry …thanks very much for a fantastic presentation and for the information duly noted…
Have a Great “Housing Analysis and Forecast” Day!
John A. Kvale CFA, CFP
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Posted in Debt - Debt Management, Economy, Forecast, Interest Rates, Investing/Financial Planning, Market Comments
Tagged Barry Habib, Interest Rates, Mauldin, Mortgage Rates, Residential Housing, SIC Conference