Jan-18-blog 2019

Market Commentary 1/18/19

The effects of the partial government shutdown

Interest rates are drifting higher as the damage caused by last month’s brutal volatility washes out and the focus returns back to earnings, the economy, global trade, and inflation.  

We will learn more about earnings in the coming weeks, but it has been a mixed bag so far. With respect to the economy, the U.S. economy remains strong, but across the pond, Europe’s economy appears to be slowing along with China. The global economic slowdown is a big concern and is partly responsible for the drop in interest rates that took hold late last year and continued into 2019. Counteractively, a slowing economy could be good for stocks as it will keep the Fed from raising rates.  

Secondly, the effects of the government shutdown (if it continues), will become a drag on future confidence readings and overall GDP if it’s not resolved soon. However, keep in mind, Wall Street loves political gridlock and the surge in the stock market is evidence of this.

Thirdly, there are rumors that the U.S. and China are working together on a trade deal. Stocks are higher on this news and bonds have sold off a touch as the risk of an all-out trade war subside.

Finally, inflation remains in check even with full employment here in the U.S. This is a big positive for bond yields along with the Fed clearly stating their intention to remain patient.  

With the recent upward trend in stocks, and, the 10-year Treasury Bond trading below 2.80% yield, we remain biased toward locking-in interest rates given recent events.   

Dec-28-blog

Market Commentary 12/28/18

After a gloomy start to the week, U.S. equities rallied significantly to the delight of traders and investors. While the equity markets are poised to close lower for the year, a strong rally on the day after Christmas stock rally and a follow up positive close took some risk off the table with respect to if “Mr. Market knew something the rest of us didn’t”. Part of the recent volatility can be attributed to year-end tax selling, but the violent moves appear to be the result computer-driven algorithmic trading. Volatility is usually a benefit to bonds, and given the strong economic data and low unemployment rates throughout the year, we are glad to report the 10-year Treasury is well under 2.82%. Around the developed world, interest rates remain accommodative as both China’s and Europe’s economy show signs of slowing. Whether or not a recession is on the horizon is debatable, but low rates appear to be needed to keep the global economy moving forward.

With inflation in check, a volatile stock market, the threat of ongoing trade tensions with China, as well as a partial government shutdown, we see interest rates remaining low for the first few months of the year. This reprieve in interest rates should be a boon for home buyers who were worried about rising interest rates and a slowing housing market. Banks are fighting hard for home loans and we look forward to helping our borrowers and referral partners in the coming year find the best loan they can.

Market Commentary – 6/26/15

Greece remains heavy on the minds of the global financial markets with no agreement as of Friday morning. There are rumors of a potential bridge loan being discussed, which would kick the can down the road a few months allowing more time for Greece and the EU to come to terms on Greece’s huge debt burden.

In the U.S., inflation remains mild. The personal consumption price index, the Federal Reserve’s preferred measure of inflation, rose .3% from April, which is the biggest rise in almost 2 years. If inflationary pressure build, this will be troubling for bonds.

Global bond yields continue to edge higher for many reasons. Here in the U.S., bonds were in the red Friday morning with the 10 year U.S. Treasury yield hovering around 2.48%.

With technical support levels broken, we are biased toward locking in loans.