How High Will Rates Go?

The 10-Year US Treasury ended last week with a yield of 2.49%, up from 1.50% on January 1, 2022.  A 1% rise in 3 months is obviously very quick.

Market interest rates are certainly pricing in Federal Reserve rate hikes (way ahead of the actual occurrence), which is somewhat typical.  I have to wonder, will interest rates overshoot on the high side? If I have to guess, I would say yes!  This at some point, may make US Treasury Bonds an attractive opportunity.

I do feel for those younger couples who are now desiring to purchase their first home….  30-year mortgage rates have risen from 3% to just under 5% as of last Friday.  On a 400K mortgage, that’s an increase of approximately $456/monthI hope the solution won’t be for banks and mortgage lenders to lesson qualifying standards!!  That caused quite a mess a few years back!

Stock Markets Crawled Higher (last week)

Last week witnessed most major stock indexes rising with the S&P 500 rising 1.81%, the Dow Jones .31% and the Nasdaq up 1.99%Small caps bucked the trend, dropping (.38%).

The Bloomberg Aggregate Bond Index dropped (1.82%) last week and is now down (6.89%) so far in 2022.

Over the pond stocks rose slightly as foreign stocks moved up .20% and Emerging Market stocks up .23%.

Looking at Morningstar style box performance so far this year — value stocks are holding up much better than growth stocks.  The Large Value stock category is up .15% on average, with the counterpart Large Growth category down (9.50%).  Small Value is holding its own, down (1.40%). The deepest category in the red is Small Growth, off (13.00%) so far this year.  Being diversified among the Morningstar categories is prudent, as leadership often changes hands without any forewarning.  It’s certainly a good time to check on your portfolio diversification….  To arrange a consult, please call Ellen at 856-354-3200 ext. 205 or click here to schedule.

Jobs, Jobs, Jobs!

Last Thursday initial jobless claims were announced.  Last week the number hit a 50 YEAR LOW with only 187,000 new claims.  That’s on top of the current unemployment rate of 3.80%.

That sets us up for the monthly jobs data this week.  We’ll hear how many new jobs are available, and then we’ll hear how many new jobs were filled.  I’m certainly glad the unemployed are going back to work.  It’s about time!!!!

I can’t help but be somewhat concerned about the job market.  Worker attitudes have certainly changed over the last couple of years.  If companies see profits start to shrink due to rising costs and slower growth, the employment situation could turn around quickly.  Let’s hope Chairman Powell does in fact, execute a soft landing for our economy!!!!

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Paul Levin CFP®, ChFC®, RICP®

Retirement Income Certified Professional®