Quote:
Originally Posted by 2000cs
There’s more to it, of course. The theory is that lowering interest rates makes business borrowing more cost effective, so expansion projects get funded. That implies hiring and supports wages. Mortgage rates dropping should result in more home sales, especially for new homes, helping builders and building suppliers.
Can’t ignore the political optics of the rate cut coming 6 weeks before Election Day (as if it was just a day anymore). I know the FED is supposed to be independent of politics, but it isn’t.
Port strike is tomorrow; if it is lengthy shortages and inflation will result. The longer it goes, the less transitory inflation will be. Rates will then have to go back up, and the economy will stagnate. The strike is a huge risk.
The impact on GDP of Helene will also matter, likely tick growth down for Q3 and maybe Q4. Recovery will help some, but again with a port strike recovery will be more expensive, slower and dampen the overall economic outcomes.
|
You are right in theory... but reality isn't shaking out that way. Mortgage rates have barely moved because the 10 year treasury was already priced in. Housing is at a stand still due to prices that are not manageable anymore and folks being locked in at massively lower rates than the going rate. Unemployment wont tick down because as another passionate poster mentioned, this is Covid excess... aside that, outsourcing and AI is picking up even more steam.
The port strike if it happens will bring about a lot of pain... i think before things really improve, we will get some stagnant growth, potentially inflation... which could then be followed by deflation to further reset things. I don't think employment will get better anytime soon, there are almost no companies posting solid results and wallstreet is tied strictly into tech firms it seems now which have some insane valuations... lowering the rates is simply an interim bandaid.