It’s certainly already been an interesting year for financial markets–especially for housing and interest rates. But most of what’s happened over the past 8 months could be thought of as the more predictable phase of the post-pandemic market cycle. It’s what happens next that’ll be more interesting. How could anyone say that the last 8 months have been predictable when rates have risen at the fastest pace in decades to the highest levels in more than 14 years? It’s true, the pace and the outright levels defied most predictions. But the predictable phenomenon was more of a general truth that we knew we’d contend with in late 2021. Here it is in a nutshell: The Fed shifted gears on bond buying in late 2021, announcing a gradual wind-down of new bond purchases to be followed by a series of rate hikes. This shift from the Fed was always likely to coincide with rising rates and lower stock prices. The only uncertainty was the size, speed, and staying power of the shift as the Fed attempted to strike a balance between combatting inflation without crippling the economy. June’s reading of the Consumer Price Index (CPI, a key government inflation report) was the only major curve ball of the year–generally thought to be a byproduct of the Ukraine War’s effect on commodities prices. It made for a rapid reassessment of the Fed’s rate hike outlook as seen in the chart below. The blue line is the market’s expectation of the Fed Funds Rate after the September meeting. Note the big leap in June. To be fair, July’s inflation report caused another jump, but it fell back quickly to the previous 2.875% range and has been there ever since.