Fed Makes it Official: Expect Higher Rates Starting in March… The Federal Reserve announced it intends to start raising interest rates at the March meeting and will end its bond buying at the same time.
What it means— The official Fed statement and Chair Powell’s comments afterward were a master class in providing details while maintaining ambiguity. Both confirmed what investors expected, that the central bankers will stop buying bonds in March and will start raising rates, but neither the statement nor Powell’s comments cleared up the biggest issue facing financial markets: When will the bankers start draining liquidity and by how much?
The Fed did not create inflation at the grocery store. Through stimulus spending and how we allocate our personal spending, the federal government and consumers did that. The Fed created asset inflation. Raising interest rates from zero to 1% won’t change stock prices much but destroying recently created dollars will. That makes the details about how the Fed intends to shrink its balance sheet very important. Until we get more details about this, expect the markets to be volatile and to trend lower.
December New Home Sales Up 12% Over November, but Down 14% From December 2020 … New-home sales jumped to an annualized rate of 811,000 units in December, well above the estimate of 757,000 units.
What it means— The jump in sales likely reflects buyers pulling forward demand as they face potentially higher mortgage rates in the months and years ahead. The median new home sale price fell a bit from November, but remains well above the median price in December 2020. The uptick in sales
led to falling supply, which dropped more than 9% for the month. With such strong demand during a typically quiet time of the year, we might see a bit of a slowdown this spring, but don’t expect it to last. As long as unemployment remains low, Millennials will be crowding into the housing market.
Fourth-Quarter GDP Jumps 6.9%… GDP increased at an annualized rate of 6.9% last quarter after expanding just 2.3% in the third quarter.
What it means— The gains were attributable to rising exports, rising inventory spending, and increased consumer spending. The auto sector played a big part by boosting expenditures to get more vehicles on dealer lots. The big increase surprised analysts and investors, who had revised their forecasts lower as the omicron variant spread. Stronger-than-expected GDP growth gave investors a shot of confidence in the face of earnings season and provided a positive boost after the hawkish Fed report.
Washington, D.C., City Government Enforces Indoor Mask Mandate on Strip Club Employees… D.C. authorities cited several strip clubs for failing to enforce the city’s indoor mask mandate by allowing employees, which includes strippers, to be mask-free. The report lists Archibald’s and other adult entertainment establishments as violators and notes that they were given verbal warnings.
Data supplied by HS Dent Research
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