Market Commentary 3/1/19

The U.S. economy grew at the best clip in almost a decade even in the face of a slowing global economy, China-US trade tensions, and political uncertainty in Europe.  The strong job market and tax reform helped spur consumer spending and on-going positive business investment. Fourth quarter GDP closed the year out at 2.6%. With the White House gunning for 3% economic growth and the Fed pausing on interest rate hikes, the good times look likely to roll on at least for a while.

Further supporting keeping interest rates on hold was the Fed’s favorite measure of inflation, Personal Consumption Expenditure (PCE), which came in at 1.9%, as expected. Low inflation readings cap bond yields and force investors to invest in riskier but higher-yielding assets classes.

Stocks continue to climb the wall of worry and are re-approaching all-time highs. Market risk-taking is back in vogue even in the face of a decline in earnings.  A return to low rates has triggered increases in mortgage refinances and have certainly helped on-the-fence home buyers jump into the housing market.

With Europe and China slowing, and the Fed being very careful about its next move, we can see interest rates remaining low for the next several months.  With the 10-year Treasury yield under 2.67%, we advise locking rates except for those borrowers willing to play the market in search of a marginally better deal.