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Mosaic Asset Partners - Rates Are Likely To Stay Higher For Longer

January 12, 2024

The big news this week came from the red-hot CPI (consumer price index) data that was released on Thursday. The CPI increased to 0.3% in December and 3.4% from a year ago versus the estimates of 0.2% and 3.2% respectively. Core CPI (ex-food and energy) also rose on a year-over-year basis. The main culprit in the increase was from shelter costs. On an annual basis, shelter costs increased 6.2%, or about two-thirds of the rise in inflation. It has been widely expected that “rent” costs would move lower in 2024, as leases renew, but that has not been the case thus far. Mortgage demand also jumped to start the year by nearly 10%, even as the 30-year interest rate ticked slightly higher to an average of 6.81% from 6.76% in the last few weeks of 2023. Applications to refinance also jumped 19% higher from the previous week and were roughly 30% higher than the same week one year ago. As interest rates settle into a more sideways pattern with less risk to an upside move, buyers are gradually coming off the sidelines as inventory remains scarce and prices remain stubbornly strong. This is a perfect recipe for price stability and we will remain in a sellers’ market for a while in my view.

These data points could prove interesting as the Federal Reserve kicks off their 2024 meeting schedule for January 30/31st. There had been consensus building around the idea that the Fed could actually start to lower rates by the conclusion of their meeting in March. Based on numbers like this, that talk is cooling slightly for now. The mantra of “higher for longer,” which the Fed and its board members have been clearly stating, seems more plausible based on the current environment. The ongoing balancing act of keeping the consumer engaged while skirting the recessionary fear that seems to sit in the back of many of our minds, will continue to play on. I have said this many times before but will reiterate, the role the Fed plays in our economic world is vastly underestimated and underappreciated. Similar to our elected officials, you couldn’t pay me enough to sit in that role!

We had some interesting movement in our financial markets this week with the approval of cryptocurrency ETFs (exchange traded funds) as an investment vehicle by the SEC. This approval process has taken many years and has long been awaited by investors in the crypto industry. With the SEC finally giving the “go ahead” it would seem to lend more credibility to an already volatile asset class and paves the way for investors to utilize a new avenue to pursue other than owning these forms of currency outright. Like any new product or investment, crypto currencies carry their own levels of risk and as always, we would caution investors to consider those risks when evaluating these new ETFs for investment purposes. In any event, it does open a new door of possibilities for those who have shown an interest. Our financial markets, overall, took a more positive turn this week after starting off the year on a weaker note. With corporate earnings kicking off in earnest today and into next week, we are seeing a more cautious tone prevailing for now. Job layoffs are being announced in many sectors of the economy as companies continue to navigate the current environment and the Presidential primary process kicks off next week. A lot of news headlines to digest in the weeks ahead, but as always, we stand prepared to face them head on!

Have a wonderful weekend!

https://www.cnbc.com/2024/01/10/mortgage-demand-jumps-nearly-10percent-to-start-the-year-even-as-interest-rates-tick-up-again.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail

https://www.cnbc.com/2024/01/11/cpi-inflation-report-december-2023-consumer-prices-rose-0point3percent-in-december-higher-than-expected-pushing-the-annual-rate-to-3point4percent.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail

https://www.cnbc.com/2024/01/12/wholesale-prices-unexpectedly-fell-0point1percent-in-december-in-positive-inflation-sign.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail

https://www.cnbc.com/2024/01/11/coinbase-robinhood-shares-rise-as-bitcoin-etf-approval-adds-credibility-to-cryptocurrency-industry.html

Christopher E. Wasson, CFP®

President

 Mosaic Asset Partners, LLC

1122 Kenilworth Drive, Suite 310

Towson, MD  21204

410.821.0089         fax 410.821.5993

MosaicAssetPartners.com   

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Mosaic Asset Partners, LLC is not affiliated with Kestra IS or Kestra AS.  Investor Disclosures: https://www.kestrafinancial.com/disclosures

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.