“You look at the Fed wanting to raise rates; then you look at the Dow (Jones),” says Adam Stein, CEO of LoanTek. “My crystal ball is that we’re going to stay in a six-month range where we are either going to stay flat or drop a little.”
Like other veterans of the industry, Stein is interpreting China’s stock market plunge this week as a blip on the radar of world markets. But, it’s a blip that has consequences.
“As long as China is having to struggle, it is going to be a drag on our economy,” Stein told MPA, “and the Fed won’t be able to raise rates with that drag.”
It’s by no means proof-positive of a delay, but New York Fed President William Dudley said the prospect of a September rate hike "seems less compelling" than it was only weeks ago.
Yellen makes that decision known more than three weeks from now.
But for the moment, all eyes are on what China does next.
“The real question is whether China is going to continue to struggle, and if they do, you won’t be able to advance interest rates,” says Stein. “It is going to impact other sectors, and you are going to have to keep those rates flat.”
Originators are all but counting on an extended the low rate honeymoon after the stock market correction of the last two weeks and the ongoing uncertainty associated with the Chinese economy.