Good Monday AM,

Bond prices are weakening, and the yield on the ten-year is breaking above a downward trend line that would be best unbroken. The Mortgage Bonds are sitting on top of support, which is also on the upward channel line. Things are dicey here and tomorrow is CPI which can cause havoc in the markets. You know the drill, a hot CPI number will likely cause damage to bonds, and of course, vice versa. I am not a fan of floating into significant news events, and CPI is one of the more critical indicators we watch and will have a direct impact on what the Fed’s message is on Wednesday.

I love this graph..

It’s a great explainer on how each significant economic outcome will impact interest rates.. Of course it is only projections but it’s going to be pretty close to reality.

And if you weren’t already sure about the havoc in the bond market and its impact on interest rates:

US savings rates going down is not good for the economy. How will people buy goods with no money. Retail accounts for 70% of our GDP! Lower savings will lead to lower rates.

Speaking of GDP, Hosing is such an important component and leads the economy up and down. If housing were just flat, GDP would be over 2%…

As for trades ahead of the Fed meeting, retail and professional investors are divided. The top responses in the latest MLIV Pulse survey found that 37% of do-it-yourself investors believed owning US stocks is the best trade ahead of the rate decision, while 40% of institutional investors said it’s better to short them. I wouldn’t be betting on mom and pop here. Not only do they not have the investing expertise but they just don’t have the money to stay long…

Please remain safe and stay healthy, make today great.