Exogenous Factors at Work…
October 10, 2026
I recently highlighted the unusual contrast of market averages near record highs and yet so many stocks trending down and sitting well below their 50-day moving average. It seemed odd since the economy continues to grow, employment reports have shown no cause for alarm, and consumer spending remains robust. Clearly some exogenous factors are weighing on the minds of investors and the action of stock prices. The cost of energy is surely one, the economy’s seeming overdependence on the AI boom is another. Recently, attention has focused on the increase, and level, of interest rates.
US Treasury bond rates indeed rose dramatically this year – 2-yr. up 37%, 5-yr. 36%, 10 yr. 27%. The 30-yr. fixed rate mortgage is up over 20% . Rising rates means the government has to pay more to service our ballooning national debt, corporate mergers and acquisitions which are often heavily dependent on borrowed capital become less attractive as the financing costs rise. Then there is the impact on the housing market.
During the Great Financial Crisis, the Federal Reserve repeatedly lowered interest rates until they finally hit 0% at the end of 2008. Then as the economy recovered, rates rose again until the onset of the Covid pandemic in March, 2020. The Federal Reserve again slashed rates to zero, drastically reducing borrowing costs across the banking system, pulling mortgage interest rates down as well. A variety of other factors also contributed and mortgage rates reached historic lows in early 2021 – the 30-yr. fixed rate hit an all-time low of 2.65%.
Those lower rates, initially welcomed by home buyers and refinancing homeowners, are now contributing to a housing market stagnation. People are much more reticent to sell and move as had previously been the case. Selling and giving up a low rate mortgage to buy elsewhere with a much more costly mortgage has proven to be very unappealing…a kind of golden handcuffs if you will.
What’s the point?. The point is that what many feel are high rates are, in fact, rates that are just beginning to approach historic norms. Younger people are so accustomed to unusually low rates that they feel those low rates are the norm which is hardly the case. Boomers and their parents would have expressed little concern for 7% mortgage rates. In fact, rates in general are hardly out of line with historical norms.
The speed at which rates have risen this year is a concern, particularly if it continues. The actual rates really should not be. The link below is to a recent NYT column by Jeff Sommer (whose writing and perspective I find generally very useful to consider). He discusses the current rates from a broader, less myopic view. It is a long term perspective that is worthwhile to keep in mind. Not very wonky, easily and quickly consumed, worth your time.
I generally like to offer something other than just financial commentary so this week, you are getting a twofer. Many of you are likely New Yorker readers or are at least familiar with the magazine, especially the many wonderful cartoons that grace its pages weekly. Have you ever wondered how they manage, week after week, to come up with so many cartoons and who are all those cartoonists? The link below is to a recent Stanford Magazine story about a couple of women alumna who set out become regular New Yorker cartoon contributors and what they had to endure to succeed. Along the way, the curtain is pulled back a little so you can learn how it all unfolds.