Who Referee’s World Trade? There is a Global mediator of sorts, the World Trade Organization, but it is essentially a lame duck. The US has been blocking it, and this goes back to the Obama administration. The WTO was founded by global agreement back in 1995 with the goal of having countries follow the same set of rules for trade. For a while the rules set out by the WTO were followed, but the US grew increasingly unsatisfied with the rules and felt like China was exploiting them as a ‘developing’ country. So, the US blocked reappointment of members of the appeals panel and by 2019 the WTO stopped functioning because it did not have enough members on the appeals panel to hear complaints. There was some talk of fixing this during Biden’s term, but it didn’t happen. Instead, other countries have been making their own separate pacts such as RCEP which links 15 countries including China, Japan, & South Korea. In December 2024 the EU and four South American countries signed a deal that they had been negotiating for 25 years. It looks like for the near future we will see a more ’90s era of trade with regional agreements instead of global ones.
Mortgage Rates improved this week and are at their best levels since September of 2024. Rates are up approximately 0.5% from this time last year.
Fed Update – the Fed met this week and kept the Fed Funds Rate the same, which was anticipated. They did announce that they are going to only let $5B per month of Treasuries to ‘runoff’ instead of the previous $20B. This means they will be buying back more Treasury bonds every month as their current holding term out which is favorable news for the bond market. The Fed also released their Summary of Economic Projections. The Fed is expecting the economy to slow, unemployed to rise marginally, and inflation to increase a bit (likely due to tariff impact). The Fed futures market is still pricing 3 rate cuts this year.
Home Sales – NAR released their Existing Home Sales report, which measures closing on existing homes (not counting new construction). The index rose 4.2% in February and sales are on pace to hit 4.26M this year. Inventory is up 17% year over year but remains well below pre-pandemic norms. There is 3.5 months of inventory which is lower than a more ‘balanced’ market of 4.6months. Homes are staying on the market an average of 42 days.
Retail Sales the Census reported that Retail Sales in February rose by 0.2% after a downward revision to January’s report. Core retail sales did rise 1% and this reading is considered the more important one.
Mortgage Applications to purchase homes were flat last week and are up 6% year over year. Refinance applications declined 13% last week but are up 70% year over year. Refinances make up 42% of all applications.