Expectations must meet up with reality, eventually.
That’s one key economic takeaway as we hit mid-year for 2024, according to one local expert.
Expectations can shift a market in the short term, but reality often will right the ship, the expert said. The expectation heading into 2024 was that borrowing rates would decrease, but the reality is there hasn’t been much of a shift. “The biggest change in the last six months is the lack of change,” said Anthony Smith, a financial advisor for HFG Trust in Kennewick. He’s has been in his current position since 2019.
It’s a story that has many in the Tri-Cities waiting to buy a home or make a large purchase that might require a loan.
A drop in the prime rate, or the interest rate banks use to set rates for different types of loans, could boost the economy by decreasing asset prices, such as stocks or real estate.
“It’s a rate that is followed by everyone because it’s a short-term rate that is the basis for prime lending,” Smith said. “If those rates are expected to go down, it’s cheaper to borrow, it’s cheaper to buy and finance things.”
Smith said that it’s not necessarily a bad thing that a stubborn prime rate has defied people’s expectations.
“The expectations for the (Federal Reserve) cutting (rates) have been dialed back a lot. We came into the year thinking inflation is under control. We haven’t seen it. We haven’t seen the cracks in the economy that would warrant that. There’s going to have to be some type of recession or hardship for the rates to go down,” he said.
The good news is that the economy hasn’t tanked. The bad news is that many are forced to face the reality that a rate decrease may not happen as soon as they’d like.
What can we expect for the second half of the year? One thing is for certain – and it happens every four years, but we’re not talking about the Olympics – it’s an election year. Some short-term changes in the market are to be expected.
“There will be volatility in the stock and bond market during the October and November months,” Smith said.