We’re seeing a nice rally in the bond market and this is due to stocks off a bit and that’s because ECB (European Central Bank which is their equivalent to our Fed) left their rates unchanged today and they’re more than likely going to keep their rates unchanged for 2019 just like our Fed. Reasons cited were lower growth and tame inflation which again is similar to what our Fed has said about the US economy.
Now think about what has gone on with our markets since just this past October when stocks were at their all time highs and rates were looking to go up at least 4 more times in the next year but then stocks started to tank and mortgage rates and bond/treasury yields also fell (10 year going from 3.26% to as low as 2.60% in just a couple of months!!.
Then the Feds announced their lower growth and tame inflation outlook along with taking off the table any interest rates hikes. Trade negotiations looked promising with China along with a potential pact with North Korea regarding their nuclear weapons so stocks took off again and mortgage rates went up although still holding on to most of their gains.
Now the reverse is starting to happen so do you see a common thread here?
Growth and inflation are the 2 items that will trigger stocks and rates either up or down. In terms of growth the trade war between China and the US is weighing on our economy as well as globally and so just be prepared to the swings with one day stocks rallying because of a potential trade agreement (I think in the past year we’ve encountered this 10-20 times!!) and of course just the opposite when talks go the other way.
North Korea?? Yeah right………if ANYONE thinks they will EVER agree to disarm all their nuclear weapons, stop testing and stop amassing more weapons then you’re sadly mistaken. They may agree to stop any new testing but this is because they already have done that and even if they did agree they would circumvent any agreement.
Same with China and the so called “trade agreement” as they basically agreed to buying more of our products but that is weak since it didn’t even address the more important issues of intellectual property and the mere fact that they have broken previous agreements and there is really no consequences if broken..
To summarize, expect rates to remain on a rollercoaster ride on a daily basis but in the short term I would not expect to see any big increases.
Lender Partner
Mitch Lichterman – Loan Originator-TargetRate.com
Phone:310-478-4999
NMLS#:274609
DRE#:01952045
Email: mitch@targetrate.com
