561: Where Are Mortgage Rates Headed?

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A couple of weeks ago, I had Barry Habib on the podcast talking about where he believes interest rates and the economy may be headed over the next several years. Barry has been one of the more accurate voices in housing and mortgage finance during a period when many economists and market commentators have repeatedly gotten it wrong.

This week, I wanted to continue that discussion with mortgage industry veteran Rob Chrisman Chrisman Commentary because I think there’s a bigger lesson here for investors.

Right now, the stock market is near all-time highs again, and naturally, people want in. Investors are drawn toward momentum. They feel safer buying things that have already gone up.

At the exact same time, many areas of real estate—particularly multifamily—have already experienced massive repricing, with some assets trading 30–40% below peak valuations from just a few years ago.

And yet most investors are far more comfortable chasing expensive assets than buying discounted ones.

That’s the irony of investing.

As Warren Buffett famously said, “Be fearful when others are greedy and greedy when others are fearful.” Easy to say. Very hard to do.

Part of the reason this environment feels so confusing is because we are dealing with conflicting macroeconomic forces at the same time.

On one side, you have persistent inflation concerns, massive government deficits, Treasury issuance, geopolitical tensions, and uncertainty around Fed policy. All of those things can keep long-term interest rates elevated.

On the other side, there are growing signs of slowing geopolitical tensions easing over time. I suspect that once the Iran conflict is resolved, we may start to see rates come down as energy prices help quell inflationary pressures, alongside broader economic activity, weakening consumer confidence, and eventually perhaps even disinflationary pressure from technology and AI-driven productivity gains.

That’s why both Barry Habib and Rob Chrisman make an important point that many investors still misunderstand: mortgage rates are not simply controlled by the Federal Reserve.

Markets are constantly trying to price all of these competing forces in real time.

Rob does a great job explaining how mortgage-backed securities, Treasury markets, inflation expectations, labor data, and global capital flows all interact to determine where rates go next. He also explains why the ultra-low rates of 2020 and 2021 were likely an anomaly created by extraordinary Federal Reserve intervention—not necessarily something we should anchor to as “normal.”

The bigger question for investors is this:

Are today’s elevated rates temporary noise within a longer-term descending rate cycle? Or are we entering a structurally different environment altogether?

Because if rates ultimately move lower over the next several years, the assets currently under the most pressure today may eventually become the assets people wish they had bought when they were on sale.

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Transcript

Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at [email protected].

Historically, Warsh has been an inflation hawk. He would like to keep rates high. He’d like to keep policy relatively restrictive so that you avoid things like rampant inflation, runway demand, easy policy that, that can potentially creating hou- housing bubbles in certain metros or When he went before Congress and they’re, they’re grilling him, he’s going to say all the right things of I do think that there’s a bit of implicit understanding that he was appointed because he will try to usher in easier monetary policy that we’ve seen here.

But people forget

Welcome, everybody. This is Buck Joffrey with The Wealth Formula podcast. Uh, couple weeks ago, I had Barry Habib on the podcast talking about where he believes interest rates and the economy may be headed over the next several years. Uh, Barry’s been a, a very accurate voice in housing and mortgage finance during, you know, periods when a lot of economists and commenters have really gotten it all wrong.

And this week, we’re gonna get a little bit of different, uh, um, perspective, uh, with the mortgage industry veteran Rob Chrisman, because I think there’s a, a bigger lesson here for investors. Right now The stock market is near all-time highs again, and naturally, people want in, right? People follow froth.

Investors are drawn toward momentum. They feel safer when things have already gone up. I mean, it’s not the super rational thing, but it’s herd mentality, right? And at the ex-exact same time we’ve been talking about this, you know, you’ve got real estate assets trading at 30, 40% below peak valuations just a few years ago, and yet most investors are far more comfortable changing, uh, chasing the, uh, expensive stuff.

That’s the irony of investing, right? I mean, look, you go to the store, do you look for things on sale, or do you look for the things that are, you know, that are the most expensive on the rack? Well, normally people look on things on sale, but for some reason when it comes to investing, they don’t, and it probably has to do again with herd mentality and, you know, the whole Buffett quote about greed and, and, and being greedy when others are fear-fearful and all that stuff.

You know, part of the reason this environment feels so confusing is because we’re dealing with, uh, conflicting macroecon-economic forces, uh, at the same time. On the one side, you’ve got persistent inflation concerns, massive government deficits, uh, you know, treasury issuance, geopolitical tensions. It’s un-uncertainty around Fed policy, and all those things can keep long-term interest rates elevated.

But on the other side, there are signs of a slowing geopolitical tension between, especially in this Iran thing. This thing is not gonna last forever. Uh, you know, I, I anticipate that when it’s resolved, we’re gonna start to see rates come down as energy, uh, prices, you know, help quell inflationary pressures.

Um, and again, you’ve got that broader perspective of what’s happening with AI, right? That’s, uh, it’s… AI is massively deflationary. And anyway, so both, uh, Barry and Rob, uh, Rob Chrisman, who we’re interviewing today, make an important point that many investors still misunderstand, which is mortgage rates are not simply controlled by the Federal Reserve.

Uh, markets are constantly trying to price all these competing forces in all the time, and that’s what makes today’s conversation interesting. I think Rob does a really good job, uh, in this conversation of explaining how mortgage-backed securities, treasury markets, inflation expectations, labor data, all that stuff all interact to determine where rates go next.

He also explains why the, you know, ultra rates, uh, ultra low rates of the 2021 era are probably not coming back. I mean, cert-certainly not anytime soon, unless there’s like a other pandemic or something like that. But they will come down eventually to a certain amount, and that’s what we need to be, uh, cognizant about.

But how much? Well You know, I mean, listen, are elevated rates temporary noise, uh, within a long-term descending rate cycle, or are we entering a structurally different environment altogether? Y- you know, ultimately, those are the kinds of questions that we discuss on today’s show, uh, with Rob Chrisman, and we’ll have that show for you right after these messages.

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Welcome back to the show, everyone. Today, my guest on Wealth Formula podcast, Rob Chrisman. He is one of the most plugged-in voices in housing finance. With over four decades in mortgage banking, especially in capital markets, he is the founder of Widely Rad Chrisman Commentary, a daily briefing followed by industry professionals across lending, investing, and policy.

His work distills everything from rate movements to regulatory shifts into actionable insights for people operating inside the mortgage system. Welcome to the show, Rob. Thanks for having me. Excited to be here. So first question, um, you know, we’ve been a 40-year declining rate environment preceding, you know, before this thing that we’re in now.

What’s going on? Are we structurally in a different kind of place right now, or is this just another cycle?

I would say that… Trying to think about how to answer that, because historically, yes, over– since 1980, 1990, uh, rates have, rates have gradually trended down, and there’s a variety of reasons for that, whether that is the, the way that the servicing asset is structured, whether that is the efficiencies in originating a loan, whether that is the general lending environment landscape, whether that is the policy of the Federal Reserve, general monetary policy out there, financial conditions.

I, I, I started that answer from a macro lens. You can think about it from a more micro lens too, because obviously a couple years ago, rates were down below 3% or around 3%, and they’ve ticked back up to over 6%. And so, so when you ask that, it’s why I, I stalled there at the start a little bit because my mind goes, we are, in a sense, back to a nice equilibrium in the rate environment current, where QE4 from the Federal Reserve and, and easy monetary policy that lowered rates, all the, the purchases of mortgage-backed securities by the central bank, that’s not a normal environment.

Now, what we’re back to with rates around 6% or maybe a little higher, depending on product or depending on borrower characteristics, that’s a much more normal environment. And, and I, I think that we’re at the… You ask about kind of this, this normal, or is it, you know, different, different trends. What I would say is that we are in a normal environment currently.

And so people– The, the nice part where we are is that people have started to get a little shorter memory in terms of, “Hey, rates were so good a couple years ago.” It’s back to this sort of, “If I can get a rate around six, if I can get in a house, maybe rates drop an eighth or a quarter, that, that makes me feel a lot better about my monthly payment.”

We’ve reached a nice place. And for people that are still holding out hope of, of our rates going to go back down below five or below four, something like that, well, what would you like for it to get us there? Would you like a hantavirus outbreak? Would you like economic collapse? Would you like World War III?

Those are the type of things that could get us to a lower rate environment. I don’t think anybody particularly wants those. And I, I think for borrowers on the street going, “Ah, when am I going to get lower rates?” Well, the moment that rate’s lower, you’re going to start seeing bidding wars and price appreciation all over again.

And so net affordability isn’t necessarily going to improve even with lower rates. I think from the, the perspective of someone in the mortgage industry or people that work in the mortgage industry, it would be this is a much more sustainable environment. There’s- Yeah … there’s a decent amount of, of demand for loans out there.

I think the NBA’s latest forecasts are around $2.1 trillion this year. That’s a healthy market. Now, granted, yes, we saw $3 or $4 trillion back in 2021, 2022. That, that’s Uh, that’s a market where you essentially have compressed, uh, y- seven years of demand into one or two years. And so we’ve now evened out after that.

2023, 2024 were leaner years in the mortgage industry, and I think now we- we’ve kind of reset ourselves into, into what’s a normal market cycle. And so yes, historically speaking, rates have trended down over time. I don’t know if we’ll necessarily see them continue to trend down to where in 30 years rates are around 2.5% or 2%, that sort of thing.

Uh, but, but, uh, I, I think, uh, for, for most h- um, the average American homeowner out there, a rate between five and six or four and a half and 6.5%, they’re, they’re pretty happy with that, and that’s- Yeah … that’s something that, uh, you’ll see normal demand behavior. Um,

w- w- just so people kind of understand, I mean, you’re a mortgage rate guy.

What matters more right now in terms of any changes? Is it the Fed policy? Is it Treasury supply, demand, global capital flows? And, and, you know, I guess how do those all kind of come together to give us a mortgage rate?

Sure. So I g- I guess if you think about what is driving rates right now, it’s also what is driving the Federal Reserve’s calculus, and that is inflation and the labor market.

Those are the two big things out there. And obviously when you, when you hear about the, the conflict in the Middle East, the real reason that that drove rates up is through inflation fears over what’s going on in the Strait of Hormuz. Well, if fertilizer prices increase, well, the cost of crops is going to go up.

Well, if your gas re- oil reserves diminish, the price of gas is going to go up. How will that affect prices of other materials throughout the supply chain? That could drive rates up. The other side of what I was talking about there, the labor market, and, and if you think about the Fed’s dual mandate, they have a, a mandate for stable inflation around 2%, and they have a, they have a mandate for a, a healthy and robust labor market.

The labor market- I- it’s vacillated between the Fed’s more concerned about inflation. No, the Fed’s more concerned about the labor market. No, the Fed’s more… and so on and so forth. And so the labor market, there’s a lot of mixed signals out there. The April payrolls report printed at almost double expectations.

It was expected to come in around 60,000 jobs created. It came in, I think, 115,000 jobs were created in April according to the Bureau of Labor Statistics, which is a government agency. Job cuts are down from last year according to, to Challenger, Dre- Gray and Christmas. Uh, ADP employment remains relatively robust.

However, you hear these headlines of, “Oh, well, Amazon laid off 10,000 people. Oracle laid off 20,000 people. UPS laid off 20,000 people. Meta laid off 15,000 people.” And so there, there’s these competing narratives out there of what’s going to happen. And, and I say all that to get back to your original question about what drives rates.

Essentially, it’s a, it’s a supply and demand equation. Investors out there, ult- the ultimate investors in mortgage-backed securities or other assets, they have a choice where they can put their money, and they’re weighing what’s the risk of an asset versus what’s the return of an asset. Now, a riskier asset, you’ll demand a higher return, obviously, and so it’s, it’s a constant balance of what makes mortgage-backed security pricing attractive to buy at certain rate levels.

And if it’s not attractive, uh, at certain rate levels, well, the price needs to decrease, and in that case, rates go up. You know, rates and price have an inverse relationship. So-

How, how about in terms of the mechanics? Can you walk us through how mortgage rates actually get priced from, like, the secondary market back to the borrower and, like, some of the margins and inefficiencies?

Sure. So, so there’s, there’s constantly… Uh, well, actually, here, let me phrase it like this. If there’s a yield curve, and you think about a yield curve from an overnight rate that, like, the Federal Reserve sets all the way out to a 30-year mortgage, there’s a time value of money for those, and investors want to be rewarded for a longer time value of money.

And so in theory, you’d have an upward sloping yield curve. And so if there’s demand for a certain, uh, length duration instrument at a certain risk profile, the investor wants a certain return in this market. And so should those characteristics change, maybe the, the investor, uh, is okay with a, a lower return, or, uh, maybe the investor wants a higher return.

And so, so every day there’s fluctuations in the, the price and ultimately the yield of investments. And that, that’s obviously a very cursory explanation-

Sure …

of how it works. I, I could say, “Okay, well, the, you know, at a, a Treasury 10-year auction, the, uh, you know, high yield of the auction was 4.40%, and here’s the direct versus indirect bidders and the coverage ratio, and that, that made prices do, do this in direct response and move by this minutiae.

And then, uh, that was, that was used as a, you know, a barometer for extrapolating that out to what should… how should mortgage pricing move in correlation based on the risk profile of that.” So there’s, there’s all these- dynamics, which, uh, I think could get to an hour-long discussion of that. But it’s essentially, you know, there, there’s a If, if I’m a investor out there and I say, “Okay, I want to buy a, an investment that returns around 6 or 7%, I’m gonna look, do I look at corporate bonds?

Do I look at mortgages?” Okay, what’s the profile of all of these? And, and if one is more appealing than the other, well, the less appealing one needs to make itself more appealing. It needs to deliver a higher yield. And so it’s, it’s constantly in flux. And you could argue… Uh, I was talking to somebody recently who said, when it comes to what’s going on with inflation or the labor market or, or, or just the general global economy, the, the macro backdrop, however you wanna put it, bond traders are some of the best to sniff out inefficiencies.

Yeah. And so that’s why people look at the bond market for a general barometer of what’s going on, because, because there’s so much money moving every day that’s so exacting with supply and demand and granularity and, and the, the efficiencies of, of how money moves that, that things are priced very well and accurately.

And so when you see changes, it’s because there’s a reason for that. And I would add, too, just as a, a, a quick kind of a example, stepping back for a second. When people say, “Oh, the Fed’s going to cut rates, mortgage rates should come down,” well, that’s not necessarily the case because– Or when the Fed cuts rates, why didn’t mortgage rates come down?

It’s not necessarily the case because the expectation of future policy is already continuously baked into current markets.

Right.

And so do the Fed, if the Fed does something, well, that’s probably, probably already been expected. It’s when the Fed does unexpected things or it’s when certain events out there happen to influence future rate expectations that you’ll see that movement, and that just, that kind of steps back to give a little cursory example.

Just going back to your commentary about, um, you know, rates being sort of at a… I guess what you, what I was taking away is that y- they’re essentially at historical, relatively normal levels, although we perceive them as being higher because where we were at, right? Um, what do you make of, you know, the incoming Fed chair Warsh?

Uh, it’s a little confusing where he stands. He’s traditionally been more hawkish, but he’s had a narrative pretty, uh, you know, a pretty strong narrative that I think probably is contributing to his, uh, uh, placement in that position of, of rates, that he thinks that rates can and, and should be a lot lower.

I mean, obviously that was before the Iran thing.

Mm-hmm.

But what’s your take on that? What’s the-

Sure. Uh, my, my take, just to, to address the first part of what, what you started there, 6% rates are a pretty good deal for somebody out there when you think about, “Hey, well, a, a credit card’s 30%, or an auto loan is 10%, or a personal loan- Yeah

15%,” that, that sort of thing. And so, uh, I get the sense of why are rates so in the news now? Uh, I’ll get to the, the Fed chair in a second, but why are rates so in the news? Now, and I get, you know, even if rates were, were 12 or 15 or 18% in the ’80s, well, it was still a lot less of somebody’s mo- overall monthly income going toward a mortgage payment in a lot of senses.

And so now, sure, rates are better, but everybody’s so focused on it because I’m maxing out my debt-to-income ratio. God, I feel like there’s other affordability pressures. Everything’s so expensive in life that the housing payment has become such a burden on a lot of people, and everyone would like to own a house ’cause it’s a great way to generate generational wealth or, or build wealth for your family.

And so it’s, it’s become much more in the news cycle. It’s become a point of fixation for a lot of people. Now, as it pertains to the Fed, I would say you’re completely right that historically Warsh has been an inflation hawk. He’s been tough on inflation. When you say a hawk or tough on inflation, he would like to keep rates high.

He’d like to keep policy relatively restrictive so that you avoid things like rampant inflation, runway demand, easy policy that, that can, that can have negative effects like we saw with, uh, potentially creating hou- housing bubbles in certain metros or, uh, readjusting consumer expectations or re- the price of, price of everything now is, is so dang expensive.

Uh, anecdotally, for me, the price of everything now seems like it’s so dang expensive. Can of, can of soup’s expensive compared to what I think it should be. Going to a, a baseball game’s expensive versus what I think it should be or whatever you wanna say. And so with Warsh, when he went before Congress, and they’re, they’re grilling him, he’s going to say all the right things of, “I’m an inflation hawk historically.

No, I’m not a puppet for President Trump. No, no, I’m not going to just ease monetary policy.” Now, a little bit of that is a, a sideshow or a, a- Yeah … circus act if, if you want. And, um, uh, I, I do think that there’s a bit of implicit understanding that he was appointed because He will try to usher in easier monetary policy that we’ve seen here.

But people forget the voting committee of the Federal Reserve, a dozen members of… You know, it’s not like- Yeah … Federal Reserve Powell was the one s- keeping interest rates where they were, or keeping interest rate, keeping interest rates where they were unilaterally, or keeping interest rates where they were to spite President Trump.

It’s a committee that votes, and the committee has been very good at unanimously voting recently. Now, we’ve seen some dissent recently. I believe two meetings ago there was one dissent, and that was Trump’s appointee, Governor Stephen Moran. The most recent meeting, I believe there were three dissents on what it should be.

And so we’re starting to see a little more unrest within the Fed and, and you get into the, the structure of it where, well, if certain people term out and Trump starts appointing more governors, he can start to have control of it. And so I, I get the sense that the, the talk of what’s the Fed chair going to do is a little overblown because- Mm-hmm

they don’t act as some sort of, of dictator of short-term lending rates. It’s, it’s a full committee. And in general, the, the Fed is currently filled with economic technocrats. The, these aren’t– They’re not partisan people. Mm-hmm. They, they are economists for the large part, and they want what’s best for the, the overall economy in terms of steady growth, steady employment, without, without tipping things out of balance too much.

And so Uh, my thoughts on Warshaw, there, there’s been some other stuff that, that’s probably more important actually than what’s the, the overnight funding rate, what’s the Fed funds rate. And I would say one is the, the future guidance around the dot plot, how the Fed broadcasts its messaging, which like we said- Yeah.

He doesn’t

wanna do that anymore,

right? Yeah. Expecta- yep, expectations are a huge deal for, for how the Fed actually, you know, Fed’s actions impact rate markets, and so he wants to change that. And then also the structure of the Fed’s balance sheet and runoff, and are you actively investing runoff from Treasuries and mortgage-backed securities?

What’s the composition of the Fed’s balance sheet? Are you going to sell mortgage-backed securities, actively sell them? Which I don’t think would happen. I think if, if anything, the Fed would start buying mortgage-backed securities if you want, you know, if you have a very pro-Trump Fed chair, it’d be let’s buy a bunch of mortgage-backed securities and help drive rates down.

That’s a way that they could do it. And so I, I think the, the talk of what’s, is the Fed cutting rates, are they not cutting rates, it’s a little overblown. There’s some minutiae with their open market policy or operations that has a lot more impact, uh, and in some of the, the ways that they, they release future expectations that could have much more drastic impact on, on overall rates because the Fed just controls that overnight rate between banks.

It doesn’t control the rest of the yield curve, even though that, that can influence it.

Yeah. I’m just curious, you know, ’cause I think from Warshaw’s standpoint, his narrative is around AI, right? He, he believes that AI is inherently a deflationary, uh, force and that we need to be on top of that and looking at real numbers in real time as opposed to waiting longer periods of time as well.

Is there talk in your industry about the effects of, of AI?

There is, of course.

Yeah. Sure. Of course. But I’m curious, like, in terms of its effects on rates and all.

Sure, yeah. So the, the mortgage industry, the– Obviously there, there’s two sides of it. One is the consumer-facing side, that’s rates, and the other is len- you know, vendors and service providers and, and, uh, they also are important because the cost of those impacts the overall origination cost, impacts what borrowers can see in terms of rates.

If you can remove a bunch of friction from the process or a bunch of human cost from the process, well, you should be able to pass some of those savings on to the borrower ultimately, you, you would think. And so the, for years, the MBA’s origination cost has been o- in the five figures, and, and people have said, “Well, A- well, AI is going to drive it down.

Well, AI is going to drive it down.” And the, the… In practice, it’s, you know, if you add AI to a process and you don’t, and you’re actually adding a step or you’re not removing a step or there’s still a human in the loop, are you, you’re actually increasing cost in certain ways. And, and so when it comes to rates- Sure.

I, I do think, i-in my opinion, you will see gains in efficiency, transparency, granularity of pricing, and that can help drive some costs down. You’ll see some removal of friction in the origination process, and that could drive rates down. To this point, it hasn’t been some sort of cataclysmic shift to, “Oh, cool, are we starting to see AI, AI’s efficiencies really change things?”

Yeah. And then that’s kind of the, the overall answer I would give you.

Right.

Sure, you can hold out hope, but we haven’t seen it yet.

Just going back to the housing market again. Now, inventory’s actually, you know, still tight, um, despite, uh, these higher rates. So what do you think the real bottleneck is? Do you think people just waiting for rates to come down before they sell or, or, or, I mean, do- buy or, or…

I’m sorry, to sell because they’re locked into, um, great rates? And, and how do you see that all kind of- Sure … coming out?

There, there’s certainly the lock-in effect that we’ve been talking about for years at this point. And, and I do think that, as we kind of said earlier, the further you get away from that 2023, you know, I got a rate around 3% or even lower, the further you get from that, the more people are willing to move and readjust.

My mind also goes to there are product expansion offerings out there, whether that… We’ve seen the HELOC space proliferate, so people can take advantage of, of certain products. We’ve seen the DSCR space proliferate. Uh, in terms of people being able to, to move homes and get past that lock-in effect, I, I…

There’s been some chatter about maybe portable mortgages are a thing. Uh, I don’t see legs imminently with that. There’s, there’s too much shifting risk profile for the ultimate investor out there. It’s been floated for a long time. Nothing’s necessarily come of it. Uh, g- in general, like I started that answer, uh, I do think over time people will, will tire of, “God, well, my rate’s so good, I don’t wanna go to a different rate.”

It’s, “Hey, I’ve been an empty nester for a while. I don’t need a house with four bedrooms.” Or, “Oh, my family, I just had another child or two chi- we can’t be in this house anymore.” And so, uh, for, for lack of a better way of putting it, dang, you know, dang the rate. Like I, I f-forget the rate. I need to move on with my life here.

And so that should start to free up some inventory. Now, the whole other side of that is builders, and in the 2024 election cycle, there was this how do we increase building? Do we open up federal lands? Do we offer builder credits? Builders would like to build more, but obviously it’s, you know, material costs are so high and it, it’s not economically…

Uh, it doesn’t economically make sense for, for them to be building more and, and America’s been building a lot less than it should be in, in terms of, you know, historically If you look at historically from the ’60s, ’70s, ’80s, ’90s onto the, you know, pa- post-financial crisis, American builders are building a lot less.

And so question is, w-well, there’s two sides to this. There’s the people that are in existing, there’s existing homes, and there’s new homes. For existing homes, I think you’ll start to see more and more inventory free up as people get, you know, further away from the lower environment. When it comes to building homes, I don’t know what’s going to cause builders to start building a lot more.

And in a lot of cases, you know, we talk about this starter home or this very affordable home that helps people get their foot in the door. It’s not economically viable for builders to build those. They’re focused on, on higher-end homes ’cause that’s where more of the margin is for them. And so there could be a, a Hail Mary a little bit with, with midterms coming up of what sort of big swings at affordability does President Trump take to try and curry favor amongst voters?

What, what steps toward more affordability in general in the economy does he take? And, and some of that potentially could lower mortgage rates or incentivize building or incentivize immigration patterns. I’m, I’m not sure. You know, it’s… One thing, uh, regardless of the question you ask me, there’s a lot of factors with everything here.

It’s not just, oh, payrolls were really good last month. Well, mortgage rates should do this. Oh, the Fed did this with rates, so mortgage rates should do this. Oh, well, we, you know, people are, are locked in, uh, and so we’re not going to get home movement. Well, things are very metro-specific too. Like, there’s just so many factors constantly influencing all parts of the mortgage market that it’s, it’s hard to pinpoint any one thing.

You really need to take the macro narrative and events and, and data points into account when you think about what’s going on out there.

So obviously you’re plugged into this space every day. Um, when you think about, like, the headlines you’re following or the issues that are– have really got your attention, tell us about, like, what are you thinking about right now?

What are you writing about and that you think people should be paying attention to?

That’s a good question. Well, a myriad of– Every d- every single data point that I just threw out every single… No.

Sure.

Uh, what am I paying attention to? I’m paying attention to, at least from my background’s in, in capital markets, and so from a bond trader’s perspective, there’s key technical levels with, you know, the 10-year or 30-year.

The 10-year- Yeah … the question is will it break through this 4.5%? And if it does, it’s broken that technical level, and it’s a whole new ballgame. Now, most people think the 10-year will go back down to 4% rather than go up to 5%, but it’s, it’s been reaching these key technical levels where if it, it breaks through, then you could start to see big shifts, and assumptions will have to be recalculated.

Now, what’s, what’s driving that? The conflict in the Middle East.

Yeah. Inflation. The, you know, CPI. Well, because we had- we’d really hit, like we- I think we’d hit a three handle for a very short period

there. For a… Yeah. Yeah, yeah. And so you’ve, you’ve seen increased volatility. Now, traders don’t like volatility.

Yeah. There was a period of relative calm before the conflict in the Middle East, and, and now there’s a lot more volatility and uncertainty in the markets. A lot of this, a lot of what’s going on out there is currently uncertainty, and so I guess if I had to, to kind of put your question, you know, answer it to tie it into a bow for an answer, I, I would say what’s going to resolve certainty, or what’s going to resolve so that we get certainty out there?

Are we going to get a lasting ceasefire in the Middle East? Are we going to start seeing flows through the Strait of Hormuz again? Are we going to get the Fed chair confirmed and he’s going to make some changes where we have a better idea of what he’s going to do? Are we going to start seeing certain demand at Treasuries if tho- Treasury auctions if those events end?

Is the, the Fed going to be more clear about buying mortgage backs? There’s just a lot of uncertainty currently out there. How are the midterms going to shake out? Are the Democrats going to take control of the House or the Senate, and how will that impact, you know, uh, fiscal policy out there? That can change a lot of things.

There’s j- there’s a lot of uncertainty right now in the world, and so what I’m paying attention to, what- how are we seeing that either resolved or exacerbated- Yeah … and how is that impacting volatility when it comes to bond market movement?

Yeah. I mean, that’s, uh, I think that’s sort of the theme around the entire investing world right now.

I think everybody’s Well, except in the S&P 500 and everything where obviously there’s nothing but, uh, you know, uh, warm weather and, uh, sunny days when you see all-time highs all the time. But every- everywhere else, I think people are, are still really, you know, uncertainty is creating a lot of issues. Um, but, um-

I would, I would add to that, too, you know, if, if you wanna pay attention to certain data points, sure, payrolls are important, sure, CPI inflation is important.

But when I look at consumer spending and consumer sentiment, and y- consumer sentiment, the University of Michigan puts out a, a survey. Those include forward inflation expectations, which the Fed pays attention to, because if people think inflation is going to increase, they’re going to behave in a much different fashion than if they think inflation is going to decrease.

And you’ve seen recently consumer sentiment in general is at, like, all-time lows by a lot of metrics. So you see that, and then when- at what point is that going to infiltrate into consumer spending, discretionary spending, retail spending- Yeah … that drives the economy? And so those are kind of two to, to look out for as well.

Yeah. Fascinating stuff. Uh, Rob, w- where can people, um, where, you know, read your stuff and, and learn more about what you do?

I appreciate you asking that. Chrismancommentary.com, C-H-R-I-S-M-A-N commentary.com. You can subscribe there. We have a whole media platform. We have a, a daily email, which is kind of the front page of the mortgage industry.

We have a daily podcast. We have daily video shows on a variety of subjects germane to the mortgage industry. We have thought leadership writing from, from luminaries around the industry. The CEO of PennyMac, David Spector, just wrote an article last week for us. There’s some really good stuff on there, whether it’s kind of hearing high-level voices or niche articles on, on specific parts of the lending process.

Yeah, chrismancommentary.com and, and you can go from there.

Thanks so much for being on the show today.

Yeah, really appreciate it. Thank you for having me.

You make a lot of money but are still worried about retirement. Maybe you didn’t start earning until your 30s, and now you’re trying to catch up.

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The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealthformulabanking.com. Welcome back to the show, everyone. Hope you enjoyed it. I’m gonna just say it again. I am, you know, personally still convinced of descending rate environment once this Iran thing just goes away.

I have to say that I’m, uh, I have been on board with a lot of the, the Trump administration’s, uh, policies, um, in the last few years, but I still cannot figure out why we ever went into Iran. I really can’t. And things were every day coming down. Uh, if you looked at trueflation numbers, all that, everything was coming down to where we wanted it, and Kevin Warsh was coming in there talking about how he wanted to lower rates a lot.

I still think all that’s gonna happen, but it’s literally just put this wrench, you know, into the whole cycle. So it’s a little disappointing, but I still think that the, in the big picture, uh, we’re gonna end up with lower rates in eighteen to twenty-four months. So anyway, that is it for me this week on Wealth Formula Podcast.

This is Buck Joffrey signing off. If you want to learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheelwright and Ken McElroy. Visit wealthformularoadmap.com.