Good Morning on this best day of the week Wednesday,

Bonds are flat. Too early to say that today’s sideways movement is the Summer doldrums, more likely that markets have been whipping back and forth and today with limited data and limited Fed speak, things are calmer. The chart pattern suggests another day or two of sideways action, which will lead us to Friday. The news coming out on Friday can have a big impact on the markets. Friday we will see the PCE numbers, Personal income and Personal spending, all of which relate to inflation. There is a lot of emotion around this topic and traders will be overly focused and may react strongly in either direction. This month, these numbers should show signs that inflation is peaking, or has peaked and that spending is also slowing. The current contrarian view (of which I am one) is that both GDP and Inflation have been caused by temporary revenge buying caused by people being stuck at home and having too much free money. The inflation side is due to all of the manufacturing companies scrambling to keep up with the revenge buying. As demand falls (and it could fall hard), the companies that have been in overdrive trying to produce, will find themselves with too much inventory and this will lead to decreasing prices in the coming months. While we MIGHT see another month or two of demand, it will not last much longer and has likely peaked. Meanwhile, we remain range bound in a tight range as we await Friday’s news.

If you are a contrarian too (or would like to be), the choice would be to float. If you like yesterday’s movement enough, it is a good day to lock.

I love Wednesdays for lots of reasons. One of those is the chart below. I have had several conversations about the added inventory to the market. It is true that more homes are listed. But that is one side of the equation. Yes, supply is important but when demand also increases, we haven’t gained anything. Below is a great example… more houses were listed but the available inventory went from .9 months to .8 months. We all know what happens to prices when there is more demand. Nationally, the average home price jumped by 24% year over year. That is not a typo. It is unfathomable. If you are expecting some price deflation, I do not know when you will get it.

And last, for anyone thinking the government will finally stop kicking the foreclosure can down the road, you would be wrong. Rep. Maxine Waters, Chairwoman of the House Financial Services Committee has sent a letter to the U.S. Department of Housing and Urban Development (HUD), U.S. Department of Agriculture (USDA), U.S. Department of Veterans Affairs (VA), Consumer Financial Protection Bureau (CFPB), and the Federal Housing Finance Agency (FHFA) requesting that these agencies extend their moratoria on foreclosures at least until the CFPB is able to finalize and implement its pandemic recovery mortgage servicing rule. The letter also calls on the CFPB to strengthen and finalize its mortgage servicing rule to better protect homeowners by ensuring they have an opportunity to finalize affordable loan modifications with their lender and prevent unnecessary foreclosures.

Please remain safe and healthy, make today great!