Higher Mortgage Rates Reducing “Stimulus”, Effects of Rising Gas Prices on Consumers, War’s Impact on the Wheat Market

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Let’s dive in…

Rising house prices and falling or low interest rates act as a form of “stimulus” to homeowners as they refinance their mortgages. So far, higher debt levels haven’t caused any financial stress for households, but rising mortgage rates remove at least a portion of this stimulus going forward. Gas prices may not be as important to the economy as they were in the past, but they’re still a relatively large expense for those with lower incomes and one that most can’t avoid. Even as the Federal Reserve seeks to “normalize” monetary policy, real interest rates are likely to remain negative. Malls aren’t quite dead yet. While the focus is on the oil markets, the impacts to the wheat market from the war in Ukraine may be just as important.

1. Homeowners have taken advantage of higher house prices, even as rates begin to rise:

Source: The Daily Shot from 3/10/22

2. Despite the increase in debt, delinquency expectations remain low:

Source: Survey of Consumer Expectations, © 2013-22 Federal Reserve Bank of New York (FRBNY). The SCE data are available without charge at www.newyorkfed.org and may be used subject to license terms posted there. FRBNY disclaims any responsibility or legal liability for this analysis and interpretation of Survey of Consumer Expectations data.

3. Many tech and internet-based stocks have been feeding on the low-interest rate environment for years. Have rising interest rates changed the leadership of the stock markets?

Refinancing is no longer a form of “stimulus” to homeowners as mortgage rates rise

4. From oversupply to undersupply in less than two years, there’s little slack in the U.S. oil markets:

Source: The Daily Shot from 3/10/22

5. The impacts of higher gas prices are distributed unevenly:

Source: The Daily Shot from 3/10/22

6. Higher gas prices haven’t hurt demand for gasoline yet. As we noted in our recent blog, consumers may not have much ability to adjust their driving patterns:

Source: The Daily Shot from 3/10/22

7. With high inflation and a cautious Federal Reserve, real rates are likely to remain negative:

Source: The Daily Shot from 3/10/22

8. Perhaps malls aren’t dead yet…increased foot traffic is showing up positively in brick and mortal retail earnings:

Source: The Daily Shot from 3/10/22

9. A potential source of further instability:

Source: The Daily Shot from 3/10/22