Mortgage Rates Are Up, Stocks Are Down, And All Eyes Are On The Fed
Key Takeaways
- Mortgage rates have surged this week, with the 30-year fixed mortgage hitting 7.22% on Thursday
- The sudden increase comes as the economy shows signs of recovery from the recent downturn
- The stock market is down as Wall Street braces for Fed rate hikes
Mortgage rates hit their highest point since early November on Thursday, spooking both homeowners and potential buyers. When interest rates rise, mortgage rates tend to follow, and last week, the Federal Reserve signaled that the central bank may raise interest rates again.
A surprisingly strong employment report from ADP makes it even more likely we’ll see a hike from the Fed in July. Let’s take a look to see how big of a deal this really is.
With high interest rates, many investors are proceeding a little more conservatively. The Recession Resistance Kit from Q.ai allows you to do just that. Our AI looks at a huge amount of data and rebalances every week, to help protect your portfolio during tough times.
Download Q.ai today for access to AI-powered investment strategies.
What’s happening to housing?
For potential homebuyers, this surge in mortgage rates means increased monthly mortgage payments, potentially pricing some buyers out of the market and threatening affordability more broadly.
Existing homeowners will also feel the impact. Most homeowners currently have mortgages with interest rates below 4% or even below 3%. Anyone looking to refinance their mortgage is now faced with the prospect of higher monthly payments. Similarly, people who might have been considering a move now won’t want to give up their low rate to buy at a higher one.
So that’s the housing market. What’s going on with stocks?
Rising interest rates lead to consumer spending cuts and lower earnings. The anticipation of hikes next month caused stocks to tumble on Thursday: The S&P 500 was down about 0.8% and the Dow Jones fell over 350 points.
That’s the worst day for the Dow since May 2. During the first few minutes of trading this morning, the Dow Jones, S&P 500 and Nasdaq Composite all dipped about 0.1%.
Despite slipping stocks, analysts seem to be less worried about an imminent recession. Last fall, Bloomberg Economics predicted a recession by October but now says we’ll “narrowly dodge” one.
The bottom line
We’ll have to wait and see what happens in the coming weeks. There’s some cause for concern about mortgage rates and their overall impact on the housing market, as well as likely interest rate hikes and subsequent stock performance.
That said, experts seem to be backing off earlier predictions of a certain recession. So, we just might get by unscathed for now.
As always, it’s best to be ready for anything. Q.ai’s Recession Resistance Kit is designed to keep your portfolio resilient if a recession does hit.
Download Q.ai today for access to AI-powered investment strategies.
