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Market Snapshot November 30, 2021

Good Tuesday AM,

The first place to start today is that he Federal Housing Finance Agency (FHFA) announced the conforming loan limits (CLLs) for mortgages to be acquired by Fannie Mae and Freddie Mac (the Enterprises) in 2022. In most of the U.S., the 2022 CLL for one-unit properties will be $647,200, an increase of $98,950 from $548,250 in 2021. Look for these changes to take effect by week’s end… 🙂

As for the markets, the bond whiplash continues. MBS was on a strong upward journey this morning, it was awesome watching price pierce through resistance and the downward trend line. Then Powell spoke and said they will discuss moving up their taper plans during the December meeting. This panicked the stock market which took it from green to RED and viciously dragged down the MBS prices. Things have since balanced a bit with mortgage bonds flat and the 10-yr at 1.44%. Tapering was priced into the market prior to this morning’s announcement, but the announcement caused undue panic. Today’s Chicago PMI and consumer confidence were weak (very), the economy is still fragile and will require lower rates. The issue at hand is inflation and I continue to believe it will subside when the supply chain is repaired. History suggests that this should happen in the coming months and not take as long as the market thinks. Remember, we have big news coming almost every day this week. If the market goes into these releases with a bearish attitude the news can trigger more selling, even if it is not bad news for bonds. Friday is the big daddy, the jobs report. Watch out for this…

And here is a good excerpt from the WSJ which explains why we have been seeing so few job claims and why unemployment keeps dropping. The issue is that in the first few years, 45% of new businesses fail so it wont be long before the unemployment landscape is normalized (truly unfortunately, as I believe strongly in entrepreneurship):

The pandemic has unleashed a historic burst in entrepreneurship and self-employment. Hundreds of thousands of Americans are striking out on their own as consultants, retailers and small-business owners. The move helps explain the ongoing shake-up in the world of work, with more people looking for flexibility, anxious about Covid exposure, upset about vaccine mandates or simply disenchanted with pre-pandemic office life. It is also aggravating labor shortages in some industries and adding pressure on companies to revamp their employment policies, Josh Mitchell and Kathryn Dill report.

Please remain safe and healthy, make today great.