Government Reopens: Investors await economic reports

Government reopens, investors await new economic data

Happy Friday from Local Mortgage!

Only 4 days of trading this week, and very little economic news, but we lost a little ground as we moved up to 5.99% for our very best 30-year fixed conventional scenario.

We gained a little ground early in the week on the ADP jobs report that showed net loss of around 11,000 jobs so far in November but both bond and stock markets weakened over the last 3 days with the announcement of the government reopening. A simple explanation would be that a further prolonged shutdown would have been more detrimental to economic growth.

It will be very interesting to see the impact of economic reports over the coming months. With the exception of one Consumer Price Index inflation report, no government economic data was released during the shutdown. It is expected that government agencies will soon announce the schedule for delayed reports based on how quickly data collection can catch up. A White House official said that missed key labor market and inflation reports for October may never come out. 

As difficult as the data blackout period has been for investors, Fed officials have struggled under even more pressure to navigate during the past six weeks. As Chair Powell made clear at the last Fed meeting, officials are divided about how to proceed. Signs of weakness in the labor market support additional loosening of monetary policy, but stubbornly elevated inflation levels favor holding steady. Attempting to prioritize these conflicting goals is difficult under any circumstances but doing it while flying blind with limited economic data is extremely challenging, to say the least. As a result, investors are nearly evenly split about whether the Fed will reduce the federal funds rate by another 25 basis points at the next meeting in December.

With the end of the government shutdown, investors will be waiting for the schedule of release of the government economic reports so for now, the main piece of information next week will be the release of the minutes from October’s Fed Meeting.

Hope everyone has a great weekend and thank you for reading.