Wednesday's Scoop: Waiting 🌤️

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Here’s what you need to know today to inform your work, spending, and investments…

1. Surging mortgage rates stalled home buying.

2. Policymakers aren’t ready to cut interest rates yet.

3. Another 150,000 Americans will have their student loans forgiven.

Inflation Rate: +3.1% (YoY), +0.3% (MoM)
^{Policymakers aim for 2% YoY inflation.}

Policymakers aren’t eager to make borrowing less expensive. Newly released minutes from the Federal Reserve’s last meeting revealed little inclination for cutting interest rates that currently sit at the highest level in over 20 years. They believe inflation is largely under control but want to see it stay low for a little longer before they’re ready to stop restricting the economy. Living costs have increased by 3.1% in the past year, which is still higher than policymakers’ 2% annual inflation target but much lower than the peak of the past few years.

President Biden will forgive $1.2 billion of student loan debt for another 150,000 borrowers. The relief will go to Americans on income-driven repayment plans or the Biden Administration’s new Saving on a Valuable Education (SAVE) plan, basically anyone not making a high income. After the President’s sweeping action to wipe out student debt broadly was blocked by the Supreme Court, the administration went on to cancel more debt by rewriting the existing repayment structures. People on these programs that set required payments as a percentage of the borrower’s income have historically had their debt forgiven after 20 or 25 years of consistent payments. The new plan shortens that timeline and forgives borrowers who have made payments for ten years. Under this strategy, the administration has already forgiven $138 billion for 3.9 million borrowers.

30yr Mortgage Rate: 7.1%
^{That’s up from 6.6% a year ago. (MBA)}
Median Home Price: $382,600
^{That’s up from $367K a year ago. (NAR)}

Surging mortgage rates stalled home buying last week. The Mortgage Bankers Association reported the average 30-year fixed-rate mortgage surged past 7% for the first time in months as a pickup in inflation sent long-term interest rates higher. Mortgage applications plunged 10% in a week, indicating buyers are avoiding purchases, unable to afford the current rates and inflated home prices. Existing homeowners are also less likely to refinance, shrinking home supply.

The Market: ⬆️ +0.1%
S&P 500: 4,981.80
1Mo: +3% | 1Yr: +25% | 5Yr: +78%

The market drifted sideways today as investors held their breath to see whether Nvidia would live up to the hype and keep the AI dreams alive. Spoiler alert: it did. The AI chipmaker has been the bellwether for the AI boom and the fuel for the recent market rally. Blowout sales and profits confirmed that there is indeed a tech revolution underway.