Market Commentary 7/27/18

Bonds breathed a sigh of relief as the highly anticipated first reading of 2nd quarter GDP registered at 4.1%, a strong reading, but in line with expectations. However, the report confirms that the US economy is running on all cylinders and business confidence remains high.

The trend with interest rates has been up the last couple of weeks as trade tensions have decreased for the moment and the US and global central banks are slowly removing accommodation from the bond market in their desire to begin to normalize interest rates. This tightening has resulted in a flattening yield curve which has pushed up short-term interest rates and has made borrowing more expensive for business and consumers.

Housing has been a big beneficiary of low interest rates the last decade and with interest rates moving up a touch, we are starting to see how interest rates can work as a restraint in evaluating the purchase of a home. Although rates are just one factor in buying a home, the rise in interest rates is making it a little tougher on buyers.

Next week will be an active report week with several key economic reports slated to be released. With that in mind, we remain biased toward locking-in interest rates at what is still considered a low rate environment.