Market Commentary – 5/13/16

The latest reports show very low inflation. The Producer Price Index (PPI) rose just .2% in April over March which was less than the .3% expected. With inflation pressure light, interest rates should remain low in the U.S. in the near term. Abroad, specifically in Asia and Europe, central bank stimulus programs have continued and poor economic reports will also suppress global interest rates. Collectively, all these data points translate into lower interest rates over the long haul, which hurts savers but helps speculators, investors, and stock pickers.

It would seem like a no-brainer to lock in interest rates with the 10-year U.S. Treasury Note trading at ~ 1.730%, but many experts believe U.S. interest rates will decrease even further.  Some economists fear that the U.S. economy is beginning to resemble Japan’s with low growth, low yields, and weak demand. Even with the prospects of potentially lower yields, we continue to be biased toward locking in interest rates at these exceptionally low levels.