This Week’s Takeaways:
- Mortgage rates will likely end the year around where they are now – 6.25% – and a further drop next year to 5% would take the Fed buying mortgage-backed-securities like it did during the QE days.
- Professor Siegel is expecting a .25 bps rate cut tomorrow and two more by year-end. Disinflation is continuing, and there is no decisive tariff impact in the data.
- The dollar moves in long cycles and if the decline in value this year is the start of a ten-year bear pushed along by a Fed who thinks the dollar is overvalued, emerging markets may be a winner.
- International value stocks are outperforming growth stocks again, and are at a double-discount that should be attractive to investors.
- Things to Do This Weekend in Boston.
- Plus my latest book recommendation.
Bank of America: Path to 5% mortgage rates if ‘the Fed does MBS quantitative easing’ by ResiClub
Mortgage rates are primarily a function of the ten-year yield and a spread over that yield to price the loan. Rates are likely to stay near 6.25% according to Bank of America. To drop further, we’d need the spread to narrow from the Fed buying mortgage-backed-securities or the economy falters.
Dot Plot To Set the Tone by Professor Jeremy Siegel
Professor Siegel is expecting a .25 bps rate cut tomorrow and two more by year-end. Disinflation is continuing, and there is no decisive tariff impact in the data. Investors should focus on stocks over long-bonds as the Fed moves will be the dovish tilt investors are looking for and the economy needs.
Thanks, Stephen Miran. This Is Emerging Markets’ Decade Now. by Bloomberg
Trump’s economic advisor Stephen Miran who is joining the Federal Reserve Board has long considered the U.S. dollar problematically overvalued. The dollar is down about 10% YTD and historically it has gone through long cycles with bull and bear phases lasting a decade. If we’re at the start of secular bear trend, emerging markets could see a revival.
Resurgent International Value by Verdad
The value premium in international stocks had been absent for more than a decade, but with the recent surge in performance international value is now outpacing international growth going back five years by 11.6% per year. The bull story for these stocks is that they’re still trading at a “double-discount” (value is cheaper than growth and international is cheaper than U.S.)
Book Recommendation
The 5 Types of Wealth: A Transformative Guide to Design Your Dream Life by Sahil Bloom
Reject the default path, define your priorities, and achieve lasting happiness with this transformative guide to your dream life—a life centered around the five types of wealth.
