Market Commentary – 10/24/15

U.S. bonds sold off this week in response to another positive week in the world stock markets. The U.S. stock market experienced an excellent week of trading as global central banks (minus the United States) are all utilizing quantitative easing policy tools in response to their slowing economies and deflationary fears. Both China and Europe are lowering interest rates. China surprised the market Friday morning with an interest rate cut. This has pushed money out of the safe haven status of U.S. bonds into riskier assets such as equities and has increased bond yields.

While a Fed funds increase is off the table for October and maybe for the rest of the year, it will be interesting to see how U.S. bonds trade as other countries pump their economies with new “QE” while the U.S. moves away from these stimulus policies. As written previously, the world economic issues remain highly complex and deciding where rates will trend is a tough call.

However, with U.S. bonds still trading a tad over 2%, we are biased toward locking in interest rates at these levels.