02/12/2025
I was wrong....Market update 2.12
Thanks, Jim!
I was wrong. I am eating a big ol’ slice of humble pie this morning without the eggs because they simply are not in the budget these days. Speaking of eggs, one of the components of the CPI reading is food at home costs. The increase in egg prices account for nearly 2/3rds of this increase. One little oblong object impacted this category by 2/3rds? That’s crazy. Stocks are down. More importantly as I wipe pie off my face, mortgage bonds are down which means mortgage rates are going up. I expected and was predicting starting this month we would start to see better inflation readings which would be our start toward lower rates and spring buying season. Spring buying season is coming, I am not so sure on lower mortgage rates because I can’t see through the mess I have on my face. I know I am not an oracle nor do I have a secret crystal ball in the corner of my office, but gosh dang it, I hate being wrong when it comes to this kind of thing. CPI popped higher and my frustration popped higher with it. Why? The shelter component did improve to 4.4% from 4.6% last month, but still way over real-time 1.5% everyone agrees on. If the 1.5% real-time shelter number was used, CPI would be 1.9%. Would the sky be falling? Nope. I suspect headlines would attribute the jump to the short-term jump in egg prices and that it would be very transitory. There would be chatter and concern about how tariffs would impact future readings, but today the fear is climbing that tariffs will continue to spike inflation. Nerves are raw. Budgets are tight. High inflation readings move the markets in the wrong way. We hate big red bars on the bond chart and that’s what we have right now. Gotta wait and see if we get a bounce after the knee-jerk reaction. If bonds keep sliding we have to lock.
