Bond yields flattened after a very tense week filled with heightened geopolitical tensions, as well as significant economic news. Rates dropped Wednesday after it was reported that Iran fired missiles at U.S.-occupied air bases in Iraq. Thankfully, no U.S. casualties were reported. The flight to safety was short-lived as the stock market rallied the day after the attack. Both the U.S. and Iran suggested that further escalations would be halted. Oil prices took a wild ride up and then quickly came back down as oversupply halted a surge in oil prices based on disruption fears surrounding the conflict.
On the economic front, weak manufacturing data was discounted due to the Phase One U.S. China trade deal being inked on January 15th. The all-important December jobs report was a bit lighter than expected, but overall not a terrible report. Unemployment remains at 3.5% and at a multi-decade low, and the U-6, or total employed, fell to 6.7%. The U.S. economy remains on solid footing and appears to be in what is often referred to as a “goldilocks” trend as the combination of low-interest rates, low unemployment, and low but stable economic growth increases our overall prosperity.
A surging stock market and low-interest rates should bode well for the coming spring home-buying season as potential homeowners feel flush. Inventory remains tight, but home builders are optimistic. With this in mind, we continue to advocate locking-in interest rates at these attractive levels. Many economic forecasts are factoring in higher inflation in the coming year, which would propel bond yields higher. Also, the overall global economy seems to be doing better and for now, any sign of a potential recession in 2020 has faded.
