Good Tuesday AM,

Stocks surged yesterday and put bonds under pressure but the data and market sentiment would only allow it to run so far. Today we are seeing the opposite. Stocks back under pressure and bond prices surging (rates improving). The 10-yr is down to 2.73% and could run to 2.67 without much in its way.

Data today was weak… the only things left on the news front (we know of) is Chairman Powell’s speech and a 2-yr Fed auction which should go well seeing how bonds are trading so far today.

New Home Sales 591K vs 750k expected (the problem here is that this is the low point during the pandemic.. all growth has evaporated)

Richmond Fed MFG -9 vs 14 expected

I am not a glass half empty guy, but I am a realist. I’m sharing a few slides to set the tone of where the market currently is and, well, you can read the tea leaves just as well as I can. The silver lining here is that as growth slows, rates will have to moderate and come down. That along with some additional inventory, should allow for some greater activity and sales.

Jobs are not going to be as plentiful moving forward as employers trim their payrolls and reduce their hiring plans to accommodate slow or negative growth.   

The positive spin is that inflation is moderating and more quickly than initially anticipated.

As the last 24 months of growth were fueled by government subsidies, we pulled three years of growth forward. Now the consumer is tapped out of savings. Where will growth come from? We need to rebuild the savings.

People buying on credit is not a positive sign for the economy. We are already seeing subprime accounts (consumers with lower credit scores) default at a higher and faster pace.

Last, to keep you updated on what changes may be coming…

A piece of legislation introduced in the Senate in mid-May could streamline the appraisal process for VA loans. The legislation would modernize the Department of Veteran Affairs’ appraisal requirements by allowing desktop appraisals, and in some circumstances, waving appraisals all together. All VA appraisals currently must be performed in-house. The Mortgage Bankers Association supports the legislation.

Please remain safe and healthy, make today great!