Homebuilder confidence rises, Fed cut on the horizon: Catalysts
On today's episode of Catalysts, Hosts Seana Smith and Madison Mills break down some of the biggest stories impacting markets (^DJI,^GSPC, ^IXIC), from the Federal Reserve's highly anticipated interest rate cut to the presidential election ahead. The Home Builder Confidence Index rose to 41 in September, up from August's reading of 39. The latest print from the National Association of Home Builders (NAHB) came in line with expectations as mortgage rates continue to cool to 19-month lows. Middleburg Communities chief economist Brad Case argues that rate cuts by the Federal Reserve won't fix the housing market's problems: "The basic problem with single-family, owner-occupied housing is just that it's way too expensive. It is overvalued to the extent that it was back in 2006 before house prices crashed." Not only does Case say he doesn't believe a rate cut will aid the housing market's woes, he says the Fed should not adjust policy at Wednesday's meeting. "I actually still think that there isn't really any reason to have any cut at all," he tells Yahoo Finance. As the Federal Reserve gears up to cut interest rates for the first time in four years, this market is pricing in the most aggressive rate-cutting cycle since the 2008 Financial Crisis. Meanwhile, the bond market (^TYX, ^TNX, ^FVX) is seeing a rally in the front end of the yield curve, which has historically been witnessed before economic downturns. WisdomTree head of fixed income strategy Kevin Flanagan does not believe a recession is on the horizon. However, he adds, "the bond market is trying to tell the Fed, that hey, if you don't go big, you're behind the curve already. You're going to continue to be behind the curve, and that we're going to have problems in 2025." S&P Global Ratings Global chief economist Paul Gruenwald tells Yahoo Finance he expects a 25-basis-point cut: “The data has been supportive of kind of a soft landing... It's not just the amount [of the cut] tomorrow that is largely priced in any way. It's the path, how fast is the Fed going to go and how long.” Meanwhile, Touchstone Investments global market strategist Crit Thomas says a 25-basis-point cut “would be a little bit of a disappointment for the markets” since a 50-basis-point cut is already priced in. He adds that it “would be like a small bump. And then we'll just continue from there." Americans are less than two months away from Election Day, with early voting set to begin soon in several states. The race between former President Donald Trump and Vice President Kamala Harris remains close and polarized. Tusk Venture Partners Founder and CEO Bradley Tusk spent years working in politics before becoming a venture capitalist. "I took one thing away from all of it," he explains. "Every policy output is the result of a political input. Every politician makes every decision solely based on the next election and nothing else." This post was written by Melanie Riehl
