Hi Friends!

It's an action-packed week with some of the year’s biggest events that could move the markets. From election results to the Federal Reserve's (Fed) decisions, a lot is unfolding that will directly impact bond markets and shape the outlook for mortgage rates as we move toward year-end.

Here’s a Look at Key Events This Week:

U.S. Presidential Election (Tuesday): With Election Day here, the market is watching closely for any potential shifts in economic policy. The election results can shape the Fed's future moves, particularly if they suggest changes in economic growth or inflation expectations. Investors will be asking, "Which candidate has a plan to keep inflation in check?" History shows that election outcomes can influence economic priorities, and this year is no exception.

ISM Non-Manufacturing PMI (Tuesday): This measure will reveal how the services sector is faring, which is key since services make up a large part of the U.S. economy. A strong or weak reading can drive bond yields, impacting mortgage rates.

Initial Jobless Claims (Thursday): The labor market is a major focus for the Fed. If jobless claims come in high, it could reinforce the need for rate cuts to keep the economy on track.

Fed Interest Rate Decision (Thursday): After a two-day meeting, the Fed’s interest rate decision will be the most closely watched event this week. Will the Fed cut rates, and how will they set the stage for future monetary policy? In election years, Fed decisions come with added layers of complexity, balancing economic conditions with political pressures.

University of Michigan Consumer Sentiment (Friday) This indicator will give us a peek into consumer confidence and spending expectations, both of which are essential for GDP growth. A surprise here could influence economic forecasts.

S&P 500 Earnings Reports: With about 15% of companies reporting, these earnings are worth watching. If results signal corporate resilience or weakness, this could shift market sentiment.

A Recap of Recent Economic Updates:

Job Growth Slows in October  

The Bureau of Labor Statistics (BLS) reported only 12,000 new jobs in October—well below the forecasted 113,000. Revisions for August and September also erased 112,000 jobs. While hurricanes may have affected these numbers, the BLS couldn’t measure the exact impact. The labor market showed signs of weakening, with the Household Survey reporting a notable 368,000 job losses. Although the unemployment rate remained at 4.1%, there’s more to it upon closer inspection.

While some see this slowdown as worrisome, it’s worth remembering that the average unemployment rate historically sits around 5.7%, meaning we’re still below the long-term average. A bit of easing could even support the case for further rate cuts, as a hot labor market can drive inflation.

Private Sector Job Growth and Wage Easing

The ADP report told a different story, showing a strong private-sector gain of 233,000 jobs, the best since July 2023. Small businesses saw minimal growth, adding just 4,000 jobs, while medium and large firms drove most of the hiring. Wages have also begun to moderate, helping curb wage-driven inflation, which the Fed will consider as it evaluates rate decisions.

Labor Weakness Reflected in JOLTS and Jobless Claims

The August JOLTS report showed 7.443 million job openings—a big drop from the 12 million peak in 2022. Meanwhile, the “quit rate,” a confidence measure, remained low. Initial Jobless Claims fell to 216,000, though continuing claims have been above 1.8 million for 21 weeks straight. This all points to a softening labor market and gives the Fed more reason to ease up on rates.

Inflation Progress in Consumer Spending

September’s Personal Consumption Expenditures (PCE) data brought good news with annual inflation easing to 2.1%. Core inflation held steady at 2.7%. Shelter costs, which drive much of inflation, are overstated due to lagging data.

Pending Home Sales Surge 

Pending home sales jumped 7.4% from August to September, reaching the highest point since March. This shows that buyers are ready to act when rates improve, driven by late-summer mortgage rate declines and more available inventory. If job stability holds and rates dip, we could see further sales growth.

Home Prices Reach New Highs

Home prices continue climbing, with both Case-Shiller and FHFA indices showing a 0.3% monthly increase from July to August and 4.2% year-over-year gains. Although the pace of appreciation has slowed, real estate remains a strong wealth-building asset.

GDP Growth Falls Short of Expectations

In the third quarter, the U.S. economy grew by 2.8%, just under the forecast. Growth was driven by consumer spending, exports, and government spending, though this figure may see adjustments in later reports. A slightly slower growth rate can support arguments for lower rates.

Looking Ahead: Fed Decision and Election Results Could Set the Tone*

This week, the Fed is widely expected to announce a 0.25% rate cut as inflation moves closer to their 2% target. The timing is delicate, coming just after the election, and the Fed is cautious to avoid any political influence in its decisions. The cut is largely expected, but questions remain about future rate paths and how potential changes in economic policies might impact those choices.

With consumer spending solid but job growth slowing, the Fed is assessing whether spending can sustain the labor market or if more rate cuts will be necessary to keep the economy on track. Recent data, including frequent job growth revisions, highlight the need for caution. The Fed is taking a long-term view and will wait to react to broader trends, especially as inflation shows signs of cooling. We’ll soon see how election outcomes might play into bond market reactions, especially since a bond rally typically brings mortgage rates down.

If you’re wondering how this might affect the real estate market or your own buying and selling plans, it’s a week to watch closely. Even with uncertainty, recent data shows that homebuying demand remains steady as buyers wait on inventory and rate relief.

As election results roll in and the Fed announces their decision, we’ll keep you posted on how this could shape mortgage trends and market conditions in the coming months. If you’re in the market or thinking about it, the choices you make now can position you well as new information unfolds.