Market Commentary 6/5/20

The May jobs report reminds me of Warren Buffet’s comments a few weeks ago when he said, “Never bet against America.” Who would have thought that May saw 2.5 million jobs created versus estimates of an expected loss of 8.5 million? Wall Street certainly liked the number as equities exploded higher, as did bond yields. The jobs report came a day after the ECB scaled up its bond-buying and increased stimulus firepower in response to the economic stress sparked by Covid-19. The massive rally in markets is no surprise, given that interest rates are near zero or below zero in some countries, and the most powerful global central banks have pledged to buy debt at unlimited quantities. Risk assets such as equities and real estate should benefit greatly if the economic recovery charges on.  

The positive jobs report supports the V-shape recovery. We remain cautiously hopeful that the awesome May jobs report is a trend in the right direction, and we are cheering for better days to come. Earlier in the week was another positive signal: the ISM reported improvements in non-manufacturing and manufacturing activity.  

Bond market yields moved higher in response to the good economic news coupled with other evidence that the worst is behind us on the Covid-19. The improvement in jobs numbers data is positive for lenders and should help ease some temporary underwriting restrictions imposed due to the pandemic.  

Here at Insignia Mortgage, we are seeing significant demand for refinancing, and also a major uptick in purchase loan activity within the last three weeks. We are greatly encouraged by the inquiries as a further sign that sentiment has improved by a large margin since March.