Good morning, everyone. As we embark on the first week of 2024, the focus shifts towards significant economic data releases. Today marks the unveiling of our comprehensive 2024 forecast, a result of extensive research and analysis. This forecast examines various critical factors in the market, offering deep insights into the economic landscape.
2024 Market Forecast
The 2024 forecast is the culmination of weeks of meticulous research, focusing on crucial factors like supply and demand, inflation, and housing market trends. We aimed to provide a more accurate picture for 2024, especially considering the challenges in predicting rates last year. The outlook for 2024 is positive, yet it warrants a thorough examination of our prepared detailed report.
Much of our forecast includes an in-depth analysis of the Fed’s balance sheet and its impact on mortgage rates. We have delved into topics like reverse repos and quantitative tightening, which have recently seen increased discussions in financial circles.
Remarks from Fed Officials
Dallas Fed President Lori Logan, although not a voting member this year, recently commented on the need to reconsider the pace of balance sheet reduction. Her remarks align with our analysis, suggesting potential actions by the Fed in slowing down quantitative tightening.
Oil Prices and Inflation Indicators
On the oil front, Saudi Arabia’s recent decision to cut oil prices in response to weakening demand could positively impact inflation. The Manheim Used Car Price Index also showed a decline in used car prices, contributing further to lower inflation expectations.
Upcoming Economic Data
This week is critical with the expected release of the Consumer Price Index (CPI) and Producer Price Index (PPI), providing insights into inflation trends. Additionally, the market will closely observe the 10-year note and 30-year bond auctions.
Technical Analysis of Treasury and Mortgage-Backed Securities
The current situation in Treasury yields is quite delicate. The 10-year Treasury yield is hovering around 4.04%, with a triple-layered ceiling potentially capping further increases. Unfortunately, an uptrend in yields has been established, which we are monitoring closely. This week’s CPI report could play a decisive role in breaking or reinforcing this trend.
Mortgage-backed securities are currently facing resistance but are supported by the 25-day moving average. This balance of forces will be crucial in determining their movement in the near term.
The outcomes of the CPI report and other data releases in the coming days will be critical in shaping our market strategies. Stay tuned for more updates, and we wish you a successful trading day ahead.
