Timing the Market

Predicting interest rate movements can feel like chasing shadows. September’s 50 basis point rate cut shocked the media, and without a crystal ball, predicting the future direction of rates is nearly impossible. Most recently, the Fed cut rates an additional 25 basis points in November and is most likely to cut rates again on December 18th o 4.25% to 4.50%.

Opportunity in the Unknown

Since the recent 50 basis points rate cut shocked the media, anyone claiming to know the future direction of rates is likely a novice. The current Wall Street estimates reveal a staggering 225 basis point spread for potential outcomes over the next 14 months, underscoring the uncertainty. While some expert predict an additional 25 basis point reduction by the end of 2025, other foresee a more significant 225 basis point cut. With such a wide range of expectations, making investment decisions based on speculation can be risky.

Market opportunities can shift rapidly, and while investors wait, they might miss advantageous financing options. If there are concerns about rates, credit unions often offer favorable terms without prepayment penalties. However, while credit unions can be beneficial, they come with their own set of challenges. Their underwriting processes can be more stringent, requiring a thorough examination of global cash flow and a certain debt-to-income ratio threshold.

When rates eventually do decrease, property prices could increase. This reality reinforces the notion that property and deal selection are more critical for individual investors than macroeconomic conditions. While waiting for lower borrowing costs might seem prudent, it could result in missing out on favorable pricing patterns. If an investor identifies an asset they believe in, delaying a purchase for cheaper financing could backfires—especially since lower rates might lead to higher asset prices, ultimately resulting in borrowing more capital.

Additionally, there’s been an uptick in institutional activity since the last Fed meeting, indicating that savvy investors are already capitalizing on current market conditions rather than waiting for that “perfect” moment.

Conclusion

Instead of getting up in the uncertainty of future rates, investors should take a moment to assess their current financial situation. If the numbers make sense, there’s no reason to hesitate in moving forward with debt plans. Timing the market is a risky game; the smarter approach is to make informed decisions based on the here and now.