I have spoke about The economic effects of Trump’s policy in recent months a lot. The atmosphere that comes from the White House has been an urge for lower mortgage interest – Trump’s policy can, after all, shake off quite a bit in the market.
This situation is reminiscent of Trump’s first term when stock prices were taken a hit in 2018-2019. At the time, Trump often sent people out to reassure the media that everything was under control, even in the midst of the trade war chaos. In this subject I have studied various recent episodes of the Daily Podcast of the Housingwire, and to be honest, it seems to be quite par for the course for Trump and his unique approach to leadership at the moment. We did not see a recession in 2018 or 2019 and at the moment the bond market does not say that we will go into one.
Let’s look at the bond market
This Monday morning we observe the 10-year yield at 4.22% and we will withdraw from his year-to-date peak of 4.79% that we saw on January 14. It is an intriguing time in the bond market while some signs of a recession expect, I don’t think we are there. Since 2022 we have witnessed a pattern of growthers followed by lower interest rates.
If the return of 10 years is lower than 3.80%, this would indicate that the market expected a considerable economic weakness in 2025. However, we are not yet at that time. Last year the return decreased from 10 years to 3.63% when the labor data began to weaken, so that many Federal Reserve Walked behind and had to implement further cuts.
After that we experienced stronger economic data for a few months, resulting in rising bond returns. For the return of 10 years that now goes less than 3.80%, we should see much weaker labor economic data. Many people interpret the interview of President Trump and say he doesn’t know if we are going in a recession, that’s why the market pretends he is today.
In short, although the bond market does not yet signal alarm bells, it is a space that is worth looking.
Follow the labor data
In today’s podcast, editor -in -chief of Sarah Wheeler and I, I die into the recently released job report of Friday, where the implications and in which we are particularly interested, explored when we prepare for 2025. Take along if we unpack these insights and share our perspectives!
I also wrote some thoughts about the job report, zoom in on specific data points that shed light on the actual risks of a recession.
With regard to a possible decrease in mortgage interest, I have closely monitored the labor trends since 2022. For the mortgage interest that falls less than 6% – or even approaches that level – the bond market must anticipate a weakening economy. Moreover, if the labor market deteriorates, the Federal Reserve will probably lower interest rates. In this scenario, the mortgage interest rate would remain lower for a longer period, which will help with the demand for homes.
Conclusion
The financial markets buzz with activity and there is quite a bit of headline noise to look for – it has been a while since we saw the stock market so restless. Although the economic data seems to indicate an imminent recession, the bond market tells a different story – at least for now. However, the mortgage interest rate is lower again and this is something that the Economic Team wants from the White House.
Imagine that the return of 10 years today fell under 3.80%; That would completely change our discussion about what the bond market signals. But as it looks now, we have not yet reached that point. Historically, we have considerably seen the bond market because of the concern about the recession, only to bounce back stronger than before.
So although we are not yet in the Recession Labor -trigger phase, it is crucial to keep a close eye on all the labor data that comes to us. This week we get one of the most important indicators of the Federal Reserve: vacancies. Moreover, inflation reports are on the horizon! Let’s keep an eye on ourselves and see how this unfolds – it will be interesting!
