Good Tuesday AM,

A little bit of data out today which was incidental and didn’t move markets much.

What moved markets, though, was yesterday’s Fed speak where both Williams and Bullard told markets they were getting ahead of themselves, and that the Fed still had a way to go hiking rates. I don’t know that will end up being true, but they certainly stomped on any rally in bonds and equities. Both sold off yesterday and are following that trend today. The pullback is also largely a consolidation ahead of lots of data starting tomorrow (ADP Payroll, GDP, PMI, Jolts, Fed Chair Powell speech, Challenger Job Cuts, Jobless claims, ISM, and the big daddy on Friday, the Jobs report). Lots of reasons to be cautious. If you are floating, be very careful because we are at crucial levels with huge news coming that can quickly change the tone of the market.

FHFA released the 2023 Conventional mortgage limits this am FHFA Announces Conforming Loan Limit Values for 2023 | Federal Housing Finance Agency. While the change does not go into effect until January, many lenders (like us) will allow for the new loan amounts immediately. The maximum home-mortgage loans eligible for backing by Fannie Mae and Freddie Mac will rise to $1,089,300 in high-cost markets, such as parts of California and New York, from $970,800 this year, the Federal Housing Finance Agency said Tuesday. For most parts of the country, loan limits will rise to $726,200 from a 2022 maximum of $647,200.

Also, according to FHFA, U.S. House Prices Rise 12.4 Percent over the Last Year; Up 0.1 Percent from the Second Quarter.

We are starting to see employment crack. Keep in mind, this is the last domino to fall when it comes to economic downturns (yup, housing and interest rates are always the first domino). U.S.-based employers announced 33,843 job cuts in October, up 13% from September and up 48% from a year earlier. October marked the highest number of announced layoffs since February 2021,

Yields on longer-term U.S. Treasuries have fallen further below those on short-term bonds than at any time in decades, a sign that investors think the Federal Reserve is close to winning its inflation battle regardless of the cost to economic activity. A scenario in which short-term yields exceed long-term yields is known on Wall Street as an inverted yield curve and is often seen as a red flag that a recession is looming. Yields on Treasuries largely reflect investors’ expectations for what short-term interest rates set by the Fed will average over the life of a bond. Longer-term yields are generally higher than shorter-term yields because investors want to guard against the risk of unexpected inflation and rate increases. At a basic level, an inverted curve means that investors are confident that short-term rates will be lower in the longer-term than they will be in the near-term. Typically that is because they think the Fed will need to slash borrowing costs to revive a faltering economy.

The rest of today is more of a potluck of stuff I’ve read that was interesting.  

• First American Financial Corp., Santa Ana, Calif., said house-buying power has declined by nearly $150,000 from a year ago, driven by higher interest rates. Think about what happens to prices once rates drop back into the 5’s and 4’s.
• $17.65 billion!!! That is the proceeds generated by U.S. initial public offerings in 2022 through the third quarter, down from $217.22 billion a year earlier. That tells the economic story. I assure you, more companies would be going public if they could raise the capital.

Ever wonder how much money were invested in the equity markets? I have. Looks like close to 70Trillion on the top ten exchanges.

Earth’s largest active volcano is erupting again. Hawaii’s Mauna Loa started spewing lava and ash Sunday night local time, after its longest quiet period on record. Its last eruption in 1984 lasted for around three weeks and didn’t cause any deaths, but some prior ones were deadly. Tell me you don’t want to see this?

And.. can we just let people make their own choices and be happy?

Please remain safe and stay healthy, make today great!