Market Commentary 7/30/21

Rates Lower On Covid Delta Fears

It was a big week for the markets. Big tech reported mixed results. While the earnings were strong overall, Facebook and Amazon warned of slowing growth. Bonds fell on Friday due to fears of economic slowdowns that may result from the rapidly spreading Delta variant. Also helping push yields lower was a better than expected inflation reading on the Fed’s favorite inflation gauge, the PCE (personal consumption expenditures). GDP grew at a strong clip, but below expectations. The combination of a lower than expected inflation reading and a slowing economy will provide some cover for the Fed to keep rates lower for longer although Fed officials are slowly warming up the markets for an eventual reduction in the ultra-accommodative monetary policies.   

A bipartisan infrastructure plan will help spur more growth in the U.S. economy. It is a welcome upgrade to our infrastructure and will provide high-paying jobs throughout the country while not raising taxes. 

Should the Delta variant prove to be a temporary setback, bond yields should drift higher over the coming months and therefore it remains prudent for clients to look to lock-in mortgage rates now versus waiting for lower rates in the future. The UK data is encouraging as new Covid infections are falling sooner than expected. While the virus remains an enigma, similar vaccination rates suggest that the course of the virus may follow the UK path. We sure hope so.