Economy
Mortgage rates continue to climb, reaching the highest level of 2026 and topping 6.5% for the first time since last September. Rates had been falling since last May, bottoming just below 6% in late February, but have moved higher since the Iran war began and oil prices spiked. Longer-term borrowing rates, like 30-year mortgages, tend to move in-line with the moves in the 10-year US treasury bond rates. While incoming Fed Chair Kevin Warsh (who was sworn in this week) will head the committee in charge of setting interest rates at the extreme short end of the yield curve, the longer end of the yield curve is set by markets, driven by things like growth and inflation expectations and demand for "safe haven" assets.
Markets
The S&P 500 rose by 0.88% this week, securing an eighth straight week of gains. The highlight of the week came Wednesday afternoon when Nvidia reported on an incredible quarter. Now that all of the "Magnificent Seven" stocks have announced earnings, FactSetreported that earnings for the Mag 7 grew by 63.2% for the first quarter. That's the largest increase in five years and well above Wall Street analyst expectations. The other 493 companies that make up the S&P 500 may not be shooting the lights out like their larger counterparts, but they are, in aggregate, turning in great results nonetheless.
Sometimes higher interest rates can be a drag on stocks in the form of competition for yields. Conservative investors see more appeal in a "risk-free" 4.5% yield on treasuries than they do an occasionally volatile equity investment. However, it seems like stock investors don't really care about what's happened with interest rates recently. It's as if bond investors are trying to lure money out of equity markets with higher yields, but stock investors are shoving them off pointing at the incredible earnings growth numbers coming from these companies.
What We're Reading
- Stories vs Statistics- Ben Carlson
- Do the Math- Derek Hagen
Have a great weekend.
Dogwood Wealth Management