Read Our Mind

“The FOMC is of the mind to raise rates in March.” Fed Chair Jay Powell couldn’t have put it any plainer in his press conference today, making it abundantly clear that the Fed is going to move soon and fast on rates hikes. When asked if the Fed would raise rates at every subsequent meeting in 2022, he refused to rule out 7 rates hikes in 2022, saying that the FOMC would be “guided by the data.” To say that the press conference was hawkish would be an understatement, and the market reacted in kind, swap rates and Treasury yields gapping higher across the curve. 2-year rates climbed 13 basis points on the day to close at 1.15% while 10-year rates rose 10 bps to 1.86%.

Oil surges to seven-year high. Brent oil rose above $90 in trading today, the first time in seven-years it breached this mark. The oil markets have been rattled amid tensions in the Middle East after Yemeni rebels successfully attacked an industrial location outside of Abu Dhabi last week, and the rising conflict between Russia and Ukraine. The energy markets are already facing a crunch with rising demand as economies get back to a new normal post-Covid with conflicts within some of the world’s largest energy producers pushing prices higher on tight supply fears. The volatility in energy prices does not bode well in easing inflation fears later in 2022.

Housing demand ends 2021 on a high note, 2022 looks like more of the same. If you thought tight supply and historical rising prices would discourage would-be homebuyers to enter the market, December data would prove you wrong. Nothing seems to be abating demand for homes in the U.S. New U.S. home sales increased to a nine-month high in December with purchasing increasing 11.9% month-over-month. The spike in December could be attributed to buyers locking in low-interest rates before the Fed starts raising rates. However, yesterday’s Conference Board report, which showed consumer confidence dropped in January, showed home-buying plans for the next six-months rose to a record high.