As expected, market moving news was scarce last week, and markets were relatively boring. The primary source of volatility was Thursday’s release of additional details about the Senate tax plan, but this had just a minor net effect. Mortgage rates finished the week essentially the same.
On Thursday, the Senate released more information about its plans for tax overhaul. Of note, the Senate plan would delay a corporate tax cut until 2019. The House and the Senate now will work to reconcile their differences to come up with a plan that both will support. Investors will be keeping a close eye on progress on this front. In general, tax reform is expected to be inflationary and negative for mortgage rates. As a result, news indicating that the package will be larger or will go into effect sooner will be viewed as worse for mortgage rates, and vice versa.
Friday’s report on Consumer Sentiment revealed that consumers remain very optimistic about current and future economic conditions. Last month, the index reached the highest level since 2004. While it dropped a little this month to 97.8, this was still the second highest reading of the year. In October 2016, prior to the election, the index was at a level of just 87.2. With the stock market near record levels, the unemployment rate the lowest in decades, and hopes for tax cuts high, it makes sense that consumers are feeling good about the economy.
Looking ahead, Wednesday will be the big day with Retail Sales and the Consumer Price Index (CPI). Consumer spending accounts for about 70% of economic activity in the U.S., and the retail sales data is a key indicator. CPI is a widely followed monthly inflation report that looks at the price change for goods and services.
Please reach out if you have any questions in regards to this, or if there is anything we can do for you and your valued clients.
Thank you for your continued support, have a productive week.
SVP, Regional Manager
THE CRAWFORD TEAM
V.I.P. Mortgage, Inc.