Market Commentary 12/11/20

Much to the delight of borrowers, unprecedented levels of quantitive easing by central banks have pushed yields to zero or below in response to the global pandemic. This has helped many larger businesses and qualified households to recapitalize their balance sheets and lower monthly debt service. Residential single-family homes have also been a great asset class to own or borrow against as prices across the country have risen. Retail, office, and hospitality assets in major cities have been less fortunate. With news today that the FDA has approved the Covid-19 vaccines, it will be interesting to see how these industries shake out. So many small business owners are on the brink of failure. Government stimulus will be needed to keep these businesses going until the vaccine makes its way through our society. 

However, with so much money sloshing around, the riskiest assets have soared partly due to the Robinhood investing class moving their favorite stocks higher, partly due to safer assets such as government-guaranteed bonds, high-quality corporate bonds, and CD’s offering paltry interest rates. Equities do feel expensive but nothing says that stocks can’t move higher. TINA (“There Is No Alternative”) comes to mind as investors, pension administrators, and hedge funds need to put money to work somewhere. A quote from Warren Buffet is apropos in today’s market, “Price is what you pay, value is what you get.”

No one thought housing would be as robust as it has been back in the dark days of March of 2020. A quick response by the Fed and Treasury (amongst other central banks) drove interest rates down and helped many potential home buyers needing more space or working remotely move off the sidelines and into new homes. Loan volume has been intense as banks and non-banks price aggressively try to win business. Our local community banks and credit unions, which are where Insignia Mortgage places our more complex loans, have worked hand in hand with our borrowers to facilitate successful transactions. Our lenders are offering attractive rates and terms for our self-employed borrowers, real estate investors, and foreign nationals. Interest-only and cashout loans are readily available.    

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