2024 Market Outlook: Rates, Jobs, and the Fed
Hello everyone. Welcome back to the Mortgage Rundown. Today we are going to talk about what’s happening with the capital markets.
For nearly three months in a row, interest rates have come down very quickly. The 5yr Treasury was nearly 5% in October and last week dipped all the way down to 3.8%. Will this trend continue or is the Fed getting a soft landing that could end up keeping rates higher for longer?
On the one hand, we have an economy still dealing with higher rates. Both home and auto financing has gotten very expensive and the impact of the higher rates is still working it’s way through the economy to slow inflation down even further. It appears that the Fed’s policy has had a huge impact on inflation, which is coming down very rapidly. On the other hand, the job market is incredibly strong and wage inflation is still persistent which is making the Fed’s job somewhat difficult.
While the last 90 days have brought a lot of welcome relief to mortgage rates and provided a lot of hope for the market in 2024, we should expect the next several months to be very bumpy. The market expects the Federal Reserve to drop rates almost six times this year, beginning sometime around May. But… the Fed has projected only three rate reductions in 2024 so it’s very possible the market might be getting ahead of itself this early into the year.
One thing does seem very clear: Rates most likely hit their peak last year and even though 2024 should be somewhat of a roller coaster as far as rates are concerned, the second half of the year is looking very promising.
That’s it everyone from the capital markets desk this week. Thank you all for watching and have a great day.
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