Rocket Fuel Newsletter – 12/11/21
It was a big week in football as the Detroit Lions won their first game of the season. 🦁
At this point, the most probable Super Bowl matchup is Tom Brady’s Bucs vs. Belichick’s Patriots. 🏈
Tom Brady’s alma mater won their last B1G game of the season and are one game away from their first national title since #12 was the QB – 25 years ago. 〽️
Also from the University of Michigan – this month’s consumer sentiment index. 😃☹️
This week’s edition has consumer sentiment, savings rates and (of course) inflation data.
Fuel Up! 🚀
The Market
Figure 1.
Market Movers
- The Consumer Price Index showed inflation still elevated in November, but dropping slightly.
- The UMich Consumer Sentiment Index surprised to the upside, rebounding from last month’s drop due to inflation headlines.
- The United States and China continue to trade jabs – the trade war between the two largest economies was the main discussion topic pre-COVID.
The Big Picture With Bill George, Economist - Rocket Pro℠ TPO
The Wealth Effect: When the value of your assets (401k, House, Coinbase account) increases, you tend to spend more.
Remember, the entire goal of the Fed and congressional stimulus during the pandemic was not just to keep unemployed workers afloat, but to keep consumers swiping (or tapping) their credit cards.
During the kickoff week for holiday spending, the S&P 500 dropped 5% before rebounding on Monday.
During that same time, Bitcoin was down 25%.
How will that impact people’s outlook?
S&P 500 – Last 30 Days
Friday’s consumer sentiment report from the University of Michigan showed a big rebound from November’s sentiment (where the mood dropped due to persistent inflation).
This is a short sigh of relief, especially with the uncertainty of the omicron variant lurking and flu season underway. It’s also important to note that consumers are less confident about the future.
The personal savings rate has returned to normal as the extra fiscal stimulus in the system has wound down. Will people cut back their spending as the future is less rosy?
Next week on the 15th, we will get a peek at the retail sales report for November, but we won’t get the full picture on holiday spending until January.
Caffeinated Trends With Ryan Schoen, Senior Analyst – Rocket Mortgage®
#FedWatch
With the Fed’s last meeting of the year coming next week, let’s take a look at what investors are focused on:
1. Fed Report Card Shows An “A” On Employment And “D” On Inflation
The Fed’s most recent report card is not one to hang on the fridge at home just yet.
Monetary policy has provided ample support to ensure that everyone who wants a job in the U.S. economy can find one.
However, inflation remains stubbornly high, with all signs pointing to supply chain constraints continuing to wreak havoc on economists' initial forecasts that the Fed held as truth over the past year, bumping forecasts out to sometime in Q1 2022 when inflation finally (fingers crossed) starts to inflect down.
2. Retiring The “T” Word
After nearly a year of referring to inflation as “transitory,” last week JPow said he will retire the “T” word as inflation remains elevated.
He also reinforced his message that the central bank would keep inflation in check and said that officials should consider speeding up how quickly they withdraw policy support to combat inflation.
Another jump in prices in November propelled inflation up 6.88% from a year ago, the largest one-year increase since 1982.
3. Market Reaction
This sudden about-face on inflation and hawkish (i.e., aggressive) rhetoric from JPow has market participants increasingly betting that we will move away from the zero bound on the federal funds rate at the May 2022 Federal Open Market Committee (FOMC) meeting.
4. The Market Reaction Did Not End There
Additionally, Federal Funds Futures market participants are now pricing in three rate hikes throughout next year.
5. Should The Mortgage Market Worry?
Not initially. The federal funds rate will not instantly move 30-year mortgage rates higher.
The federal funds rate has an immediate impact on short end maturities of the yield curve (think 2 year), but the long end (think 10 year) will still take time to be influenced.
As of now, the longer end of the yield curve is still being weighed down by economic, geopolitical and COVID uncertainty, which is why mortgage rates have remained stable.
6. What This Means To The Mortgage Industry
A change in the federal funds rate ultimately means that we can expect changes in consumer interest rates for other kinds of debt (e.g., student loans, personal loans, credit cards, HELOCs, ARMs).
Those changes should push even more demand for cash-out refinances while continuing to accommodate purchase mortgage demand in 2022 as 30-year mortgage rates remain range bound.
What The Pros Are Reading
If you made it this far, you deserve a recap …
- Inflation is still hot – wait and see for 2022.
- All eyes on the last Fed meeting of 2022 next week.
- Consumers are feeling better, but still wary of the future.
December To Remember – Big Wins All Month Long!
We’re making it a December to Remember! Every day, we’re giving you big wins for your clients and your communities. Next week, look for five more new promotions to help you win more business! Visit our promotions page to see the previous day’s wins! Hop onto the portal to catch up on our previous videos! Short on time? Check out some of our promos below!
Day 1: Improved VA Pricing
We’ve improved base pricing by 50 bps on all VA products from December 1, 2021, to December 31, 2021, at 11:59 p.m. ET.
Day 3: Fixed Conventional And High-Balance Loan Promotion
20 bps off on 30-day locks for 30-year conventional and 30-year high balance loans from December 3, 2021, to December 31, 2021, at 11:59 p.m. ET
Day 6: 25 BPS Off All FHA Products
We’re giving all partners 25 bps off all FHA products, including popular Streamline loans, from December 8, 2021, to December 31, 2021, at 11:59 p.m. ET.