Bulls, Bears & Basket

By basket we mean the basket of goods and services consumed by households, in other words, your expenditure every month.  And undoubtedly mortgage is the biggest financial burden in the basket for most households especially with escalating interest.  You may wonder what has mortgages got to do with stock market bulls and bears?  Just like most will not see the connection between using the services of a professional mortgage broker and your investments.  I submit to you the two are closely-linked.  Let me explain.

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Had you worked with us at the start of the year in 2022, when we started to warn clients of impending rate increases, you might have sold off all your positions in stocks and avoided the 25% market correction that’s still playing out right now.  Not only would you have locked down a cost of borrowing with 3-year fixed rate at 1.10% through our advice (for those out of lock-in), you would be having a stock-picking bonanza time now with many blue-chip, technology stocks and even REITs at bargain prices.

Not many understand. And even those who understood continue to underestimate the outsize impact of U.S. Fed action on both equities and bond prices ever since the GFC (great financial crisis) of 2008 when QE (quantitative easy or Fed printing money) started.  Being in the mortgage business since 2014, there’s one indicator we watch closely here at MortgageWise which has served us well in our advisory and rate forecast for clients.  QE has also caused this indicator we watch to become closely correlated to many important financial instruments and asset classes, including the direction of interest rates here in Singapore.  You have to work with us to find out what’s this indicator we watch and the secret to the accuracy of our forecast.

Who You Choose To Work With Is Important

So, do you simply work with a mortgage broker to compare rates? Or do you just reprice when your existing bank match the best rate out there?  Then I am afraid you will not benefit from the full suite of advisory from the team here at MortgageWise.  Or is it the vouchers or cashback offered by your property agent that tip the scale for you? Are you looking for a one-off transactional benefit or a whole profitable working relationship with someone who watches the Fed and interest cycle closely?  Be careful as you may just end up paying the cashback from your own pockets with wrong decisions made.  And these decisions go beyond just managing mortgage interest – it’s about the return on all your investments.  It’s tens of thousands of “cashback dollars” lost when you sell at the bottom and chase after false bear market rallies.  Who else watches Fed action more closely than us and cautions you ahead of market swings in both directions?  Your financial advisor? RM? Insurance agent? Robo-advisors or A.I. technology platforms? Certainly not your property agent.

When it comes to which broker to work with, choose wisely too. There are those who continue to peddle whatever is the lowest headline interest rate just to close deals, for example certain BOARD packages now. But they stopped short of telling you banks like to raise BOARD rates during quiet months like December when the whole town is away. Already we heard one bank has just jacked up its BOARD rate by 1.75%!

And even those who understood continue to underestimate the outsize impact of U.S. Fed action on both equities and bond prices ever since the GFC (great financial crisis) of 2008 when QE (quantitative easy or Fed printing money) started.

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Speaking of market swings, those who followed financial market news would hear of analysts on CNBC show  last month proclaiming that S&P500 has bottomed in the June low, only to be proven wrong again a month later.  From our perspective the market will not bottom until this indicator we watch starts to show a permanent reversal in trend.  And it’s all about Fed action.

When Will The Stock Market Hit Bottom?

Still doubtful?  To prove our point, let us give our prediction to that million-dollar question right here in this article – the next six months might be the most pivotal for investors as we are expecting our indicator to show a reversal in trend.  Just when the whole world is talking about “higher for longer” inflation and interest rate, inflection point might come all of a sudden.  Just like how it’s always darkest before the dawn.  First, expect more stock market routs ahead with bleakest economic news flow by Q1 2023 as Euro zone contracts in winter, more rate hikes from Fed, slow down in China, S&P 500 breaking below support levels, etc.  At its lowest point (all bad news), stock market will rebound before you know it. The market always get ahead of things, ahead of recessions, ahead of recovery, and ahead of the Fed!  Don’t miss this.

It’s always interesting to us to observe that even though mortgages form the biggest expenditure item for a household basket, most people don’t see the need to work with a mortgage professional.  Rather, they trust in their ability to source for and evaluate the best home loan packages in the most timely manner just before their lock-in ends.  Even if you can do all that well every time your mortgage comes up for review, remember the biggest value you can derive from working with a mortgage broker goes beyond comparing that mere 0.05-0.10% difference in rates between banks.

Knowing how your mortgages and investments are now intrinsically linked, does that change your decision if you like to work with a mortgage broker the next time round?  I certainly hope so.

The next six months might be the most pivotal for investors as we are expecting our indicator to turn the corner.

Compare Singapore home loan rates quick and fuss-free at MortgageWise.sg.  Work with the team who can bring value to you at all five levels including our expert viewpoints & forecasts which helps you to navigate interest rate cycle astutely be it for residential or commercial property loan. Work with us today and help support our social cause too!