Fed Holds Rates Steady: What “Higher for Longer” Means for Mortgages, Consumers & Big Tech Earnings

Let's bring in our good friend Ted Rossman.

He is now principal analyst at Bank R, a brand new title, but a name you know and love.

Thanks for being here as always.

Good to be here.

Thank you.

So, you know, Einstein and I were just talking.

There's a lot of headlines to go through for the Fred, the commentary, no dot plot for the FOMC today, but the fact that Jerome Powell is essentially saying, I'm not going anywhere.

I may not be chairman, but I'm going to have a voting seat here for the FOMC.

What did you file for Fed Day, Ted?

That was big news.

I didn't think he was going to give us too much on his future today.

But that will be notable, I think really the biggest takeaway from the Fed is they're in wait and see mode, and many believe that will continue throughout the rest of the year.

According to Fed Futures, CME FedWatch has about a 90% chance that rates are unchanged by the end of the year, actually a slightly greater chance they go up rather than down.

That was the main explanation for three of the four dissents today.

Those Fed officials don't necessarily want us to assume that the next move is going to be downward.

Yeah, that's right.

You're talking obviously.

Even Myron, first of all, he's the first of the 4 dissenters voting for a cut.

No big surprise.

That's the president's pick.

Then you've got regional Fed President Hammock of Cleveland, Kashkari of Minneapolis, Laurie Logan of Dallas.

They're trying to communicate something a little bit different.

What does all of that mean presumably for incoming Fed Chairman Kevin Warsh?

Well, he's definitely not going to have a slam dunk to lower rates.

I know that's what the president wants, but we have to remember this is a 12 member committee.

They take their job seriously.

The Fed wants to be independent.

I mean, how many?

Was independence mentioned during the press conference today.

What we need to get used to here as consumers and as investors is perhaps higher for longer.

That's having effects on the housing market, where the average 30-year fixed mortgage rate is around 6.4%.

The average credit card rate is still close to 20%.

Really across the financial spectrum, higher for longer could be the mandate here.

A lot of that comes back to the war impacts too.

I, I do feel like mortgage rates are about a half a point higher than they would.

If we didn't have the inflation impacts of the war, can you tell me a bit more about what you've tracked specifically for the 30-year fixed rate mortgage?

That's one of the top questions I get from people who say, great, interest rates are coming down.

What does that mean for my mortgage?

When can I expect that alleviation of pressure?

How do you approach that question?

6% is a psychological tipping point, and we got to around 6% back in February.

Some sources actually had it just below 6% for the first time in 3.5 years.

Now we're closer to 6.5%.

That half a point.

Is meaningful.

It has slowed the spring home buying season.

It will likely slow the market through the summer just because a lot of existing owners have rates in the 3s or 4s, and they're reluctant to put their homes on the market.

The first time buyer is price sensitive.

It makes a difference at 5.5 versus 6 versus 6.5.

Now you can still get rates in the mid to upper 5s if you have really good credit, if you shop around aggressively.

It's very important to do that.

I want to get your take.

On a lot of big tech earnings, even if it weren't Powell's last day and an FOMC, a Fed day, it's a huge day for tech earnings.

Microsoft, Amazon, Meta, Alphabet.

We get Apple tomorrow.

We're tracking capE spend.

We're tracking strength of the consumer despite the economic headwinds.

What are you looking for as some of the biggest, most important names that trade anywhere in the world are going to tell us what's under the hood in the next few hours, right?

Clearly these big tech names are going to have a big impact on the overall market.

I've been struck so.

So far this season that earnings have been very positive.

The banks were very positive, very upbeat about consumer spending.

Jerome Powell talked about it today too.

The consumer business fixed investment, he noted was strong.

I do feel like whether it's AI or whether it's other things, businesses are spending, consumers are spending too, and that's surprising.

These higher gas prices, they've dented the lower 20% or so of the income distribution, but not everybody else.

People are still.

Traveling, they're still going out to eat.

They're buying things online and at the mall.

Don't underestimate the consumer, right?

I feel like a lot of people are complaining about where prices are, but consumers are still spending.

Before I let you go, any final catalysts you're paying attention to you think market participants might benefit from paying a bit more attention to?

We do have PCE coming up in a few days.

I mean, Hard to believe that's going to fall below 3% just given all the impacts of higher oil and gas prices.

We could start to see that bleed.

Into other areas of retail and travel that could ultimately weigh on the consumer, but again, you know, don't underestimate the strength of this consumer spending.

The job market is still in pretty good shape and the market's still near record highs.

You wouldn't have thought that a few months ago, right, with oil nearing 120.

Yes, I think it's the first time I've seen you since we've closed above 7000 for the S&P 500.

So it's nice to have you here.

A longtime friend of ours, Ted Rossman, principal analyst at Bank.

Great, thanks for being here to kick things off.

You got it.

Thank you.