The Jon Sanchez Show

9/16 - The economic and personal impact of a fed rate cut

9/16 - The Federal Reserve is poised to start cutting rates this Wednesday, and over time those cuts will ripple their way through the economy. Borrowers should pay less on their debt, savers will earn lower interest on their cash. But that is just the basics. We’ll explore many more areas of the economy that may be impacted with this first rate cut.

Duration:: 37m
Broadcast on:: 17 Sep 2024
Audio Format:: mp3

What's next? At Moss Adams, that question inspires us to help people and their businesses strategically define and claim their future. As one of America's leading accounting, consulting and wealth management firms, our collaborative approach creates solutions for your unique business needs. We leverage industry-focused insights with the collective technical resources of our firm to elevate your performance. Uncover opportunity and move upward at MossAtoms.com. Good Monday afternoon to you. Welcome to the John Sanchez Show on his talk, 780K, which is a pleasure to be with you. As you kicked off your week, hopefully your day is almost about done, ours is just beginning, not just kidding. One more hour to go. One more hour to go. But it is a great pleasure, always, to be with my co-host Jason Gonna Sanchez. Wealth management. Big J. Happy Monday to you. How you being? I'm doing okay. How are you doing? Very well, thank you. Very well, thank you. No complaints at all. Absolutely. Hey, how can we have complaints, Jason? We're finally going to be able to say on Wednesday, the Fed did this. Quarter percent, half a percent, at least we'll have that behind us for a while until, again, ten minutes after the rate decision and then we all start focusing on wins the next week. Give us the next one. Exactly. Right. A fickle, crying, spoiled brat of a market, for sure. It won't be enough, no matter what. It won't be enough. Oh, my goodness. Well, this is exactly what Jason and I are going to be focusing on this evening when we, or this afternoon, when we start going through our topic this evening or afternoon. So here we go. So we all know we've been saying it, you know, really almost on a daily basis for months upon months. We got that interest rate cut coming this Wednesday. Over time, of course, these rate cuts are written, being optimistic here, but there will be more rate cuts in my opinion than Jason's opinion, but let's assume that we are correct. These rate cuts are going to have a nice ripple effect through the economy. You as a borrower, you're going to pay less on your debt. Savers, well, you're going to earn less, of course, on your cash. But those are just the basics, right? You don't need us to tell you that. So what we're going to be doing this afternoon is we're going to explore many more areas of the economy that may be impacted with this first and then subsequent rate cuts. So the economic and personal impact of the Fed rate cut is our topic this afternoon. Jason, you and I have lived through a lot of rate increases, a lot of rate cuts, et cetera. How excited are you for this one? I'm sort of interested in the fact that this is theoretically a rate cut that's taking place while the economy is still humming along, right? And we're in a situation where Fed's cutting rates were, "Oh, my gosh, things look terrible. Blah, blah, blah. We need stimulus." This is just more a case. The analogy I was using last week was a marathon runner with the Fed keeping their hands around their neck versus someone being on the ground, right? It seems that an economy that may work even better once some of those restrictions on the economy breathing are released. And I think that is a positive overall. It's just more of the narrative, right? Recessions are more so just symptomatic of those who are living through them, not necessarily some thing that happens. That everyone feels a certain way, and that's what a recession is. Do consumers begin to feel that way at some point in the future? Time will tell, and then we'll know whether we've been through a recession or going through one or whatever, but this is the nice part that I am somewhat excited about it because of many of the positives, right? Odds are, if you're buying a house right now and you get a six or six and a quarter percent on your 30-year, it's pretty safe to think that you're refying in a year with a five and a quarter, right? That's even a calm, right? I would say, normally, as we've said, I use the two-year as a good barometer of where the market thinks that the Fed's terminal rate is, and that's three and a half percent, right? That's 175 basis points lower than where Fed funds are now. So, if you use that as a barometer, it's safe to say that you could be refinancing a mortgage if acquired now, you know, one percent to one and a half percent lower than it is. So, there's certainly some interesting parts to this as long as the economy continues to hold up. Absolutely. You had it right on the head. And just to give everybody a little perspective, something we'll discuss is, you know, just to give you a little reminder, the Fed raised rates 11 times starting in 2022, 11 times. So, think about that for just a second. And now we're finally starting to look at a rate cut cycle. I guess it's a better way to put it. And this is something, again, this tree has been very anxious. I know many of you have been very anxious. We talked about this with Corey into white in regards to the housing demand and to Jason's point. You know, I looked up the 30-year fixed mortgage, according to mortgage news daily. We're at 6-12 right now, Jason, 6-12 down to basis points for the day. And here we were, you know, well, in October, I'll just never forget, in October, I remember poor Dwight was, you know, crying the blues because we were just a couple basis points away from hitting 8%. I think it actually hit it intraday, but I don't think we ever closed there in this last cycle. So, you know, you just say the anticipation of the street and, i.e., the bond traders and so on and so forth, that a rate cut was going to happen. Yeah, it's already had a very solid effect in the housing side of things. And to your point, I think is a great point, you know, yeah, people are going to be looking at, okay, high fives, low sixes, depending upon if you, you know, buy some points and things like that. Yeah, you could be refinancing at pretty significant lower rates and, you know, maybe a year from now. So, this is just one of the many things we're going to be talking about. What is the catalyst to the economic rebound in excitement, both mentally and physically? When I say mentally, I mean, people, it's, you know, the data is, I'll share with you in a moment. The data is, you know, psychologically, hey, I don't want to mortgage at seven, but I'll definitely jump on it at six. And if I like it at six, I'm going to really love it at five, kind of these round numbers that people really like when it comes to a mortgage. But remember, as you'll learn tonight, obviously your credit cards are going to be impacted for the better. Auto loans, if you're a small business owner, you're floating rate loans and lines of credit and so on and so forth. So, it has a really, really significant ripple effect through the economy. Are we going to see a major impact with this first cut, especially if it's just a quarter percent? No. But again, the psychological side of it that, hey, we're on the beginning of a, of a interest rate cut cycle, and we'll kind of give you the streets elitist predictions as far as how many more cuts are anticipated between the rest of this year and next year. It can have a nice boost. And, you know, Jason, you said something that I had been thinking about, so I'm glad you brought it to the table. This, again, is a time period where things are not bad at all in the economy, but yet the Fed is beginning to cut this cycle or start this interest rate cut cycle. What's this going to mean? I mean, I think the Fed also, obviously they're going to cut rates. We all know that. But I think they're watching very closely because if they're not careful, there's so much pent up demand for housing and so on and so forth, that if this economy takes off because of the rate cuts, we may not be talking about further rate cuts next year. We may be talking about a rate increase if inflation starts to raise its ugly head. So this is, folks, we've never been. I want to emphasize one point with you. We have never been in this situation, exactly what Jason said, where the economy is strong, labor, you know, is doing very well, but yet the Fed starts cutting rates. So it's, it's anybody's guess, literally anybody's guess, including the Fed, what's going to happen, you know, going forward here. So it's, it's going to be interesting times. We find ourselves in very interesting. And I hate saying this just because it tends to press that paranoid narrative, but, you know, gold up 25% this year. Remember, gold was up in 2021. I believe 20 something percent. It basically sniffed out some of the inflation a year or two before it happened. Right. And that's what I'm at least reading. Where is this, you know, a telling you in two years or so that inflation is higher. You know, same thing for all the gold bugs out there too, you know, was talking to someone a bit earlier who was interested in it. And I say this is the type of commodity that you want to be buying when people hate it, not now when everyone's talking about it. Like this tends to be like when the smart money sells to you. But, you know, this is at least very much to your point. Is it foreshadowing a inflationary environment two years from now that could be out there, right? For all the reasons that we've talked about lower interest rates, you know, debt levels being an issue. And then obviously potentially a dollar weakening as a, you know, a byproduct of lower interest rates. I mean, obviously the debt problem is part of it. But obviously lower interest rates are also going to be something that will be weaker dollar wise. Let's throw Kamala Harris into the mix as far as a potential inflation problem, right? If A, she gets elected and B, some miraculous way that she gets through Congress, her two, you know, one of, or obviously she has many ideas. But to that standout one is, you know, $25,000 to people, first-time home buyers. My gosh, what will that do, the housing market? And then number two, $50,000 to start a business. Folks, those are, they sound great. A, they're not going to get done. B, if by some chance I'm wrong and they do get done. Yeah, you talk about inflation raising its ugly head, you better believe it. You better believe it. So let's throw in the political side of things as far as potential, you know, inflationary pressures in the future. Or tariffs, right? Or tariffs. There you go, good point. Cost prices to move higher too. Absolutely. Neither of these two came out with any staggering ways to fix the deficit, right? No, they didn't. No, they didn't. That's the scary part too. You know, tax cuts aren't going to fix the deficit last I checked. And aggressive spending and tax deductions isn't going to fix it either. So there's, you know, again, very much to your point could inflation be an issue in two years again. Which none of us want to see. Mm hmm. You better believe it. Okay. You made me look like an idiot the other day when I thought I had some breaking news and you'd already heard it before. So have you heard the news on Microsoft here in the last few minutes? No. Okay. If I had, I would say no. Okay. I was picking up and coming across the news wires right now. Microsoft just announced a dividend increase in the month of September. They're going to raise the quarterly dividend from 83 or 283 cents from 75 cents. So at 75 cents that currently is about a 0.70% yield. So a nice little deal boost doesn't sound real good on the percentage basis. But hey, every penny helps. Absolutely. They tend to do this in September each year. So little news there. All right. Very good. Massive buyback. You know, they're not gonna. Yes. And a 60. Massive for them. No, but everybody else. Yeah. 60 billion dollars of new stock repurchase on the buyback side. Yep. And stocks reacting nice on the after hours up $2.45, 0.57% for 33.79. Remember, that's a Dow component. So that and then we got that big news that hopefully we can touch on when we come back in regards to Intel. They, they got some nice news after hours also that we'll share and that stock's moving higher. All right. You know what our topic's going to be when we come back. We'll tell you what happened in this market. But first let's turn it over to Ben Mach. He is in the right now. Traffic center. Hey, Ben. Welcome back to the John Sanchez show on new stock 780KOH. That's what Jason got us. Sanchez wealth management. We finished with a gain of 228 today, 0.55% to a record close of 41,622. Now as I lost 92, 0.52% pullback at 17,592, SMP higher by 7, closing the day at 5,633. Pretty good day for oil up 2.2%, 7022 a barrel, a buck 80 pullback and gold, 2,608.90 and a three basis point decline on the senior treasury at a close of a 3.62% as we said. Just real quickly, Jason, I'm going to turn it over to you to give us our market review intel. The stock moving up nicely. Had a good day today. By the way, $1.25 gain, 6.36% close to 2091. Right now in the after hours, up another $1.75, 8.46% gain to 2,268. After the close, the company said they're going to, they sent out a note to employees, et cetera, that they're going to basically further separate their chip manufacturing and design operations as part of a new round of measures to weather one of the most significant crisis in the company's five decade history. Also, they're going to put a pause on factory projects in Germany and Poland for two years. They're going to put a manufacturing project in Malaysia on hold until the demand picks up. And so I just go on and on as far as cost-cutting measures, but I think the street got excited about separating the chip manufacturing and the design operations. No talk if they're going to, by separating if they plan on maybe a separate public offering or something for one of those, I doubt it, but obviously the street likes the news. Yeah. I mean, I think any reason to like until given the debt spiral it's been, it probably makes some sense. There was conversation about whether they've took any of the chips act money, et cetera, which I don't think they said they did, because people were worried about throwing good money at bad. But trying to increase the global foundries until some of the more domestic production will be, I think, a focus of either regime, be it Trump or Harris, just trying to bring more of those technology jobs back this way and until we'll get the benefit of the doubt. I wonder if it was a prearranged trade of some kind to get Amazon to go reach out to them and hug them just to get some of this stuff. Well, I'm a little confused too. I want to research this a bit further, because this morning, the stock was very nice on the pre-market, and the news behind it was they had received a $3.5 billion military contract. That was according to Bloomberg. But then I read further and went in to talk about that, back to your point, it was almost a $3.5 billion money from the chips act. I don't know yet, I want to research that further, so you bring up a good point there. That's good. Put it this way. It's a good time to be a semiconductor company. How about that? It's a good time. Yes. Definitely. All right, my friend, I'll turn it over to you. Let's give a nice market recap as you always do. Firewave. Yeah. I mean, financials led the way today. They've been underperforming quite a bit over the last week or two. They're nice to see a little bit of a bounce there. Some of the areas of the market, the equal weighted S&P, was up 0.7% today. Well, the S&P did finally near the end of the day, eke had a bit of a gain, but energy materials, utilities, right? We talk about this all the time, owning other parts of the market instead of just tech. That is healthy to see small caps, you know, about 4/10 of a per percent on the day. Concerning parts, staring at the yen back at that 140 level. We have not yet had 130 something, but it could happen at some point and cause concern again of wait, that yen is really starting to strengthen or through the levels that caused all the panic with the carry trade, you know, a month or so ago. But quiet markets, not surprised to see trading in a range, very much that gamma effect as each day goes by and nothing bad happens that it, you know, it creates a bit of buying in the market, but we will get that Fed decision on Wednesday that's going to be really the market mover, whether it ends up being sort of a sell the news or buy the news event could be a function of setup. If we're weak tomorrow into the numbers, then you could, you know, tomorrow and then through Wednesday, you could see a rally. If we're really strong into the results, so you could see the markets fade. But I think that it's going to be a little bit more of a range trade overall until we get a little bit of color from not only to the Reese, but release, but the dot plot ahead as to where people think rates are going. Odds are a percent lower by the end of the year. And then we'll go from there. But who knows? Maybe it's 25 bips at a time, but we're at what 60% probability now of a 50 basis point cut on Wednesday. Actually a little bit higher now, now 65% of a half a percent. Yeah, 65%. Yeah. It's amazing. Yeah, it's so amazing to your point how that has flip-flop right for months. I mean, up in just, I think last week is when it kind of flip-flop, meaning the odds were a quarter percent. And then some of the data that we received last week kind of changed the odds according to the CME FedWatch tool. And now again, more odds are favoring, like I said, 65% of a half a percent cut versus a quarter percent. So, and that number really shot up, by the way, last Friday, that number was only a 50% probability of a half a percent cut. And again, as I said, now 65%, now one thing that kind of helped things out didn't, I don't think influenced the FedWatch tool by any means, but I thought this was interesting too that Wall Street Journal had an article where, excuse me, Bloomberg had an article by former FOMC Vice Chair William Dudley calling for a half a percent decrease to the Fed funds rate. So, you know, whenever you get somebody and he's very, very well respected on the street and around the world, when he's calling for a half a percent, I think that kind of solidified things a little bit more too. So, I don't know, you know, as we'll discuss in tonight's topic, which again is the economic and personal impact of a Fed cut. It's almost scary, you know, normally Jason and I are very excited about going into a Fed cut, but this one is almost scary because we can make an argument as we have for months now how the street can react both positively and negatively to a quarter percent or a half a percent. So, let's kind of get warmed up and go into our topic, Jason, let's kind of start with that point. So, let's, I'll do the positive and you do the negative of a quarter percent. So, the positive is, huh, we finally got the first rate cut and the Fed's tiptoeing their way into further rate cuts. What's the name? Yeah, I think it was UBS or Bank of America, one of the two of them had a note out today, essentially saying damned if you do damned if you don't, right, where you cut 25 basis points. And, you know, you get, it's not enough, the Fed's going to be on watch for two whole months until post, you know, post the election before the next event, again, they could cut midway through, but, you know, they, now they've only done a little and we're so much more restrictive. But, you know, I think we're just doing the 25 right now, right? So, that would be the negative is there, there are two, they're not cutting enough given that things are starting to really decelerate and we've got a ton of time before they even speak again. Absolutely. That would be the negative right now. Yep. You got it. And you're going to have a lot of negatives on the half a percent. So, I'll go to the positive on the half a percent cut. Hey, the Fed's finally getting, you know, with their act, right, again, as Jason just alluded to, you've heard it a million times from us. Many on the street feel that the Fed is way behind the curve, you know, we've gone through the numbers, et cetera, Jason just did a, you know, the last segment, basically they're behind the curve. So, half a percent, hey, we can accelerate this economy, you know, not that we really need a lot, but we can accelerate this economy. And again, just get the ball rolling on these Fed rate cuts. But, Jason, your list is a lot longer than mine as far as a negative of a half a percent. Yeah. I mean, the negatives are, what does the Fed see that we don't? The pushback to that is the Fed by and large sees what we see, right? They're not out and have some special information, but they, you know, they're so behind the curve that they're worried that they need to do more than what had prior been implied is not just 25 basis points, but 50 basis points of cuts, you know, what's going on? Are they worried about some job issue? Are they worried about maybe some private credit or private equity issues where there's liquidity problems, you know, they could have just done 25 and now all of a sudden they're doing twice what they had sort of implied in prior meetings, concerned of, you know, potentially another shoot a drop. Right. Right. That's the biggest one. Absolutely. Okay. So when we get back, let's get down to this, the economic and personal impact of the Fed rate cut. How's this going to impact you? What areas of the economy, the markets, your financial life, we'll try to give you all those answers. But first, let's turn it over to Ben Mocke. He's got news, traffic and weather, hey, Ben. We're back to the John Sanchez Show on Newstalk 780K OH, it's with Jason Gump. We finished with a game of 228 on the Dow, the NASDAQ lost 92, the S&P, higher by a mere seven. All right. Let's get down to details of the pending, the pending, at least in our minds, the pending Fed interest rate cut this Wednesday. We're going to be discussing the economic and, most importantly, the personal impact that a Fed rate cut could have on you, your portfolio, your jobs, so on and so forth. So as we started the show off tonight, again, the street right now has about a 60% plus probability, 65 to be exact, at least as of right now, 65% probability of a half a basis point or half a rate cut, excuse me, half a percent rate cut or 50 basis points this Wednesday. Again, that has increased from 50% as of Friday. So definitely that's the odds favor. Okay. Now, what we're going to be discussing tonight is what really happens when the Fed begins to cut rates? We all know the basics, right? We know that, as I said earlier, you know, you as a borrower, you're going to be thrilled in many aspects, whether it's your credit card, auto loan, a mortgage, so on so forth, savers, a lot of retirees, they're going to be upset about it. I remember Jason Ben Bernanke when he was running the Fed and they had to cut rates and he literally in his press conference, apologized to seniors and real heavy duty CD savers saying, "I'm sorry, we're kind of forcing you into the stock market because we cut rates again." And that's something, of course, that's always on the mind. Jason and I have recommended very, very strongly to our clients and we've set it on the show also. If you are looking at a CD for some of your money at this particular point, nothing wrong with that, but we highly recommend that you get on the ball and you lock that in before Wednesday's rate cut. I mean, they've already started to come down pretty nicely, but after that rate cut, it's definitely going to happen, so keep that in mind. Now, Jason, I want to kind of begin the discussion in detail with a really interesting quote from the world-famous economist of Milton Friedman. See, Milton was speaking in front of Congress back in 1959 and it was in regards to interest rate cuts and he said something that I thought was very interesting. If you liken to an interest rate cut to Fed policy to quote, "A water tap that you turn on now," and then it only starts to run 6, 9, 12, 16 months from now, with that a genius quote. I mean, if you really think about it, people think, "Oh, there's going to be an immediate impact." Well, there is. You get the prime rate coming down and stuff, but the real economic impact is so far down the road. Yeah, that's what we've talked about quite a bit, right? There's a delay of 6 to 9 to 12 months for Fed changes to get into the real economy. If they cut rates by 25 basis points today, we're not going to run out tomorrow afternoon and hire a bunch of people. It just doesn't work that way. You need to see, "Hey, most like you'd said earlier, most people don't even notice it." And then down the road, another 25-bits happens and then someone says, "Hey, I'm going to refine my mortgage and this, that, and that creates a refinancing for Dwight," right? And then Dwight gets a little bit of a commission from that refinance that he then goes out and may spend that money to buy a computer for his business, and then this whole evolution of how that cash flow moves into the economy takes time. It doesn't happen immediately, so that's why it's a great quote. It takes time for these things to occur. Not out about it. And as we said also at the beginning of the show, if you missed it, keep in mind, when the Fed starts cutting interest rates, again, this Wednesday, the economy usually is in a world of hurt. As I said earlier, we've had 11 interest rate increases, since early 2022, we've had a lot of obviously pauses. So the street is very, very thirsty for this to begin happening, to quench their thirst. And so we don't have an economy as Jason alluded to at the beginning of the show. We don't have an economy that's in trouble, no matter what metric you look at, labor and so on and so forth. We're still doing just fine. So this is going to be, again, an unprecedented type of situation that we are going to experience on Wednesday. Now, let's move down to a quote by an economist that used to work for Jerome Powell. His name was John Faust, who earlier this year was the senior special advisor to Mr. Powell. And he said the following. He says, "We don't have a lot of examples of cutting in a healthy economy, and one that's not showing serious signs of distress." So that that was another great quote, Jason. Yeah, it is. It's somewhat new territory, right, especially on the back of very high inflation that came back by and large to the Fed's target yet. They didn't need to do it by destroying the economy, creating massive unemployment. Will it be stimulative as a negative? And that's, again, time will tell. Absolutely. Very atypical type of economic response we can expect. For example, the Fed isn't trying to turn around at rapidly deterring an economy, massive job losses, layoffs, businesses closing, and so on and so forth. It says not there. So that's why, again, there's no guidebook as to how the economy is going to react to this, or frankly, even the stock market. I think the stock market should be positive, but we don't know for sure. Now, let's get down to the ripple effect through the economy. Because, again, very obvious as I stated a moment ago, but I think there's a lot of areas that people may not be thinking about. Now, if we start to look at the borrowing side, you as the consumer, right, reduction of rates are going to make some of your borrowing costs, the borrowing portion of your life a little bit easier. Credit card rates, of course, which closely track the Fed's overnight rate, the Fed funds, as we call it, of course, those shall go down slightly. And I want to pause right there, Jason, and those that may not know when we talk about the Fed cutting rates, that's a good time to remind everybody what they're doing is they're reducing the Fed funds rate. Now, the Fed funds rate really has nothing to do with you or I, because we're not a bank. So Fed funds rate is the rate that banks charge one another to borrow money on a short-term basis. But, again, as you'll learn, there's ripple effects throughout the economy, so keep that in mind. So, okay, so rates start coming down, credit card rates, which, again, slowly or closely track the Fed funds rate, those should begin to move down. But remember, banks are very quick in lenders of credit card money, et cetera. They're very quick to raise your rates when the Fed funds rate goes up a little bit slower when it comes to cutting them. So don't expect to see, you know, an email when you awake on Thursday morning from your credit card company saying, "Hey, congratulations, we've dropped you from 30% down to 25%. Don't think that's going to happen." No, not that much. You small business owners may maybe, of course, have floating rate loans. You could see savings on the interest payments there, because, again, those are floating, so they adjust the price. Hey, if you're driving in sparks traffic. Thank you. Thank you. I know we're driving in sparks, no or not. Also, as we mentioned earlier, this is something to keep in mind. This is really anticipated to be the beginning of a number of future interest rate cuts. The futures market right now is showing that the Fed will cut its target range by a total of 1.25% or 125 basis points by the end of this year. Okay, so think about that for a second. 1.25%. Okay? Now, again, as Jason and I have mentioned many times, if this is done in quarter percent increments, what I'm going to say here, this is the case, as we said before we went to the show, this is or went to the break, this is the case why the Fed could drop him a quarter percent. Here's why. So if the streets anticipating 1.25% cut by the end of the year, so if they do 25 basis point or quarter percent increments, obviously that would be five interest rate cuts, but they don't have enough meetings left in the year, right? We have, what do we have? Let's see, Jason, we just get by October, right? We have November right after the election and then December. So theoretically, including this Wednesday, we only have three rate or three interest rate meetings left. So kind of do the math there. So if the streets anticipating 1.25, let's do the math, Jason. They cut by a half a percent this Wednesday, that leaves what, 75 basis points. So you do another half after the election and then a quarter percent in December and boom, then they're right there. If the street is right on its anticipation of 1.25%. And I think another negative to toss in there, too, is the Fed doesn't want to create any perception of favoring either candidate. Absolutely. Right? They cut 50 bips now. Does that help? There is already someone and so forth, right? Everything's a political thing at this point, unfortunately, you know, whether I choose Coca Pepsi, it's, you know, some agenda, but yeah, does that play into it? And I think a number of Fed heads have come out and I tend to believe them saying, look, we don't care. We don't look at that. It's not even part of our construct, but unfortunately, there's the, you know, we'll have our opinions on that one. All right, the next impact as we touched on briefly, the mortgage application side of things and the mortgage lending side of Jason gave a great analogy and we'll talk about this. People will start tackling their HELOC, the equity. Corey and Dwight have brought this up many times, but let's talk about the new mortgage application. You know, we get that data every Wednesday and let me tell you folks, it is amazing whenever there's a perception that the rates are, or in reality, rates have come down a little bit from the previous week. We see a big spike in the weekly mortgage applications. So you, the consumer, your very rate sensitive, obviously you're watching things closely. Again, if you get a quarter percent or a half a percent, we could see a huge spike in, uh, in mortgage applications. I mean, that's, that's highly anticipated. All right, we're going to pause on the mortgage side. Let's wrap things up with Ben Mocke is in the right now, traffic center, Ben. Welcome back to the John Sanchez show on his talks, 780 kwh, all right, we're talking to begin about the economic and personal impact of a Fed rate cut. So now let's get into back to the, actually back to the real estate side. So obviously the hope is mortgage rates overall come down. Remember, there's not a direct correlation. Mortgage companies do not follow the tenure treasury yield, you know, identically, of course, um, you know, once again, we close at a yield of 362 today on the, on the, uh, 10 year treasury note, um, 30 year mortgage, according to mortgage, nearly 612, right? That's the spread that mortgage companies make plus fees and so on and so forth. So they should come down. But remember, there's many other influences that, that will make mortgage rates go up or down. It's not just the Fed cutting rates. So should say a little impact, but again, just, it's more the perception of where things are going to go. But Jason, let's go to the other side of things and, and you know, this is very interesting. Um, and again, Corey and Dwight have brought this up, but many, many times, but I think I want to mention it one more time. The home equity side of things, the HELOCs, right? You mentioned beginning of the show. This could be an absolute boom for real estate, uh, or for, uh, mortgage lenders, right? And why? Listen to this data, folks. So I'm looking at a chart right now, so I'm going to give you approximations. But if I go to the year 2022, right when, when, uh, again, the Fed started cutting rates, we were sitting at approximately, and again, these are approximate numbers about, looks like about 22, $23 trillion, trillion, I'm saying 22 to 23 trillion in home equity. Right now, folks, we're at about 32 to $33 trillion in household equity. So think about that $10 trillion, I'm not talking billions, I'm talking trillions of dollars sitting out there and, you know, again, about a $10 trillion increase just in the last, you know, essentially four years. So the flip side to that is home equity lines of credit, they have dropped dramatically. They started to move up a little bit starting in 2022 and the Fed started raising rates. Number looks like about, uh, oh, I'm going to say about a little over 300 billion, about 302 billion. And now it's sitting at, uh, oh, probably looks like about, I don't know, 350, 360 billion. So you have a lot of money sitting in the equity of your home. If rates begin to fall, how long can you sit back and watch that piggy bank just continue to grow and not tap it? Well, most people are like, I need to get my hands on that money. Or whatever reason, maybe you're going to pay off debt, maybe you're going to invest in another business, maybe you're going to go buy another house, whatever it may be, you can unlock that. And again, that begins to stimulate the economy. Yeah. I mean, it definitely does that and or if things turn down and folks lose their jobs, then they'll have the ability potentially to tap some of that equity through home equity lines that may draw it out for the wrong reasons to, but also at least create more of a pillow for lack of a better term on the downside of something doesn't, in fact, happen because of the assets that I believe I saw 36 or 38% of all homes are mortgage free in the US. Like it's that high that so many people have paid off their mortgages, just given inflation, right? That's inflated the value of all assets, right? But it's pretty interesting to see that kind of a stat. It's also because of demographics and the millennials, rather the baby boomers being as big as they are right now, one would hope that they have paid off their house at this point. Exactly. Okay. Let's go to the next area, the ripple effect. Large companies. Well, I shouldn't say large. I'm going to say large, small, medium, whatever. And that is the business investment and equipment. Now let's go back a little bit, folks, when Trump was in office, remember we had got the tax cuts. Well, remember one of those big provisions or maybe you don't know if you're not a business owner, but those of us that are, we're very well aware of it. They accelerated the acquisition cost of businesses as far as how much you can ride off upfront instead of depreciating it as a reminder. Those provisions along with the other parts of his tax plan are set to sunset in the end of 2025. So that's why many in the business side are pushing for Trump to be reelected. Now, if let's put that political side behind us for just a moment, but let's just focus on business investments. Many people from farmers to construction companies buying trucks, you name it. Many are out there going, hey, guess what, if rates start to come down, I've had a pretty good year. I need to go spend some money to offset my income or hey, my business is growing. I need to go buy more trucks or I need that that new metal bending piece of equipment or new welders, whatever it is, if rates start to come down, they're going to go, this is the time that I need to do that. So Jason, we could see a huge boom in manufacturing in this country as far as manufacturing of construction equipment, et cetera, if these rates begin to consistently come down. Yeah, and that's a big part of it, right? They want to create money, create the ability for money to be cheaper for folks to access. The return on invested capital doesn't need to be quite as high in order for you to go take that risk to go hire that incremental employee or build that building. So that's why the Fed brings rates down as they're going to. Absolutely. And then lastly, wrap us up in 20 seconds, the currency market impact, right? This is another thing that happens. Yeah. I mean, the relative value of the dollar would go down if other interest rates are staying the same or going higher. So that could make the dollar go down, which tends to have a tailwind for the US stock market as well, just for our goods and services being more competitive than they were prior. Absolutely. Great job. All right. Well, now you know how the ripple effect of a steady interest rate cut cycle. So let's keep our fingers crossed. God bless. Have a good evening. This program was sponsored by Sanchez Wealth Management. The material in this program was intended as general information only and should not be taken as specific investment tax or legal advice. None of the information on this broadcast was intended to be a solicitation for the purchase or sale of any security. Further information is available by contacting john@sansheswealthmanagement.com or 775-800-1801. John Sanchez offers securities and advisory services through independent financial group LLC, a registered broker, dealer and investment advisor member FINRA SIPC. Securities offered only in states, John Sanchez is registered in. 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