This Week’s Market Reflection: Inspired by Guns N’ Roses – Patience

Patience is exactly what we need when dealing with our ever-erratic “Warriors of Wall Street,” whose market sentiment seems to shift as frequently as the wind.

This week offered a meaningful glimpse into the impact of tariffs on inflation. The core inflation figure for June rose by only 0.1% month-over-month—completely in line with expectations. Given that many of these tariffs fall within the 20% to 50%+ range, one could reasonably conclude that their inflationary impact—at least thus far—has been marginal. Initially, the bond market responded favorably, with the 10-year Treasury yield retreating in early trading. But in typical fashion, sentiment abruptly reversed without a clear catalyst, erasing gains and pushing yields higher than where they began.

Adding to the case for economic softening, retail sales came in at their lowest level in two years—a classic indicator of a slowing economy. When consumption falters, businesses experience lower revenue, demand weakens, and prices generally begin to fall. One would think this would bolster the case for falling yields and, by extension, lower mortgage rates.

However, the market’s reaction defied logic once again. Rather than interpreting the retail slowdown as an early sign of disinflation and economic cooling, the blame was placed—unbelievably—on wildfires in California. While California is a significant part of the U.S. economy, attributing a two-year retail sales low to regional wildfires stretches credulity.

Despite the mounting evidence of economic deceleration, our “warriors” continue to keep the 10-year Treasury yield elevated above the critical 4.40% level. While I believe there are undoubtedly intelligent minds on Wall Street, it appears we may need just a little patience before market consensus catches up with economic reality. Only then will we likely see downward pressure on Treasury yields—and with it, meaningful relief in mortgage rates.