Trending News and Market Wrap-Up for the Week Ending on 5/17/2024

?? Hotly Anticipated Inflation Data Keeps Hope Alive

As inflation remains a top concern for financial markets, the Consumer Price Index (CPI) report released this week played a crucial role in shaping market sentiment. Despite the results merely matching forecasts, both stocks and bonds improved sharply, highlighting the market's relief in the absence of further bad news.

To put it in perspective, inflation has been higher for longer than expected, making the lack of negative surprises welcome news. This week’s CPI report showed a slight improvement over the previous month, with the core month-over-month metric hitting its 0.3% forecast. This figure aligns with the average reading over the past 12 months, keeping the annual rate of core inflation well above the Fed's 2.0% target.

Key Highlights:

• Core Inflation: Needs to reach the 0.1-0.2% range month-over-month to achieve the 2.0% annual target.
• Fed’s Approach: The Fed may cut rates before hitting the 2.0% target if monthly data indicates a downward trend.
• Home Payment Inflation (OER): This metric, which accounts for a significant portion of inflation, has shown gradual trends and is closely monitored for signs of further cooling.

Owners' Equivalent Rent (OER)

OER had been moving in the right direction but recently stalled at elevated levels, causing confusion among market participants and Fed officials. Theories on what it will take for OER to progress include:

• Time: Gradual improvement over time.
• Housing Supply: Especially multi-family housing, which directly impacts rent prices.

Housing Supply Data

New data from the Census Bureau showed that multi-family residences were completed at one of the fastest paces in decades, although new construction projects are slowing down. This trend is mirrored in the broader housing market, with building permits and housing starts in a holding pattern while completions continue to rise.

Mortgage Rates

This week, mortgage rates ended significantly lower than last week, despite a slight push-back on Thursday and Friday. While rates have pulled back after a solid winning streak, long-term improvement hinges on significant moves in inflation data towards the Fed's 2% target.

Looking Ahead

The next big-ticket data release is scheduled for the first week of June. Until then, market movements are expected to be relatively stable, barring any unexpected news from the Fed. Multiple Fed speakers are scheduled, and the minutes from the most recent Fed meeting will be released, potentially causing market volatility.

Key Points to Watch:

• Inflation Data: Crucial for long-term market trends.
• Fed Communications: Potential impact on market sentiment.

As we navigate these complex market dynamics, my team and I are here to provide you with expert guidance and support. Whether you're considering a mortgage, looking to refinance, or need insights into the current market, we’re ready to help you make informed decisions.

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