december 2018 Archives - Insignia Mortgage

After a gloomy start to the week, U.S. equities rallied significantly to the delight of traders and investors. While the equity markets are poised to close lower for the year, a strong rally on the day after Christmas stock rally and a follow up positive close took some risk off the table with respect to if “Mr. Market knew something the rest of us didn’t”. Part of the recent volatility can be attributed to year-end tax selling, but the violent moves appear to be the result computer-driven algorithmic trading. Volatility is usually a benefit to bonds, and given the strong economic data and low unemployment rates throughout the year, we are glad to report the 10-year Treasury is well under 2.82%. Around the developed world, interest rates remain accommodative as both China’s and Europe’s economy show signs of slowing. Whether or not a recession is on the horizon is debatable, but low rates appear to be needed to keep the global economy moving forward.

With inflation in check, a volatile stock market, the threat of ongoing trade tensions with China, as well as a partial government shutdown, we see interest rates remaining low for the first few months of the year. This reprieve in interest rates should be a boon for home buyers who were worried about rising interest rates and a slowing housing market. Banks are fighting hard for home loans and we look forward to helping our borrowers and referral partners in the coming year find the best loan they can.

As the end of the year quickly approaches, market volatility has spiked and fear over a slowing economy, global trade tensions, and a government shutdown have taken most major global stock indexes into bear market territory. Long-dated bonds have traded (as expected) higher as the flight to quality has pushed 10-year Treasury yield to under 2.80%. Parsing out the negative news stories that continue to be the focus of concern lately, it is important to remember that our economy remains strong, employment remains at historical lows, and inflation is contained. However, for the moment, the markets are focused on negative headlines, and stocks are getting beaten down.

In economic news this week, the most anticipated Fed meeting in years ended as we predicted. The Fed raised overnight lending rates by .25%, and while the Fed comments were dovish with respect to anticipated future Fed hikes, the market wanted more. The lack of the so-called “Powell putt” to soothe the markets increased selling throughout the week. However, if the Fed focuses on the data, we don’t foresee 3 or 4 rate hikes next year.

The Fed’s favorite gauge of inflation, the Personal Consumption Expenditure (PCE), came in as expected on Friday, yet another reason to support not raising rates any time soon.

In housing, buyers and sellers are working well together to make a deal and lenders remain committed to closing loans, a major source of revenue for most non-money center banks.

Tag: december 2018

Market Commentary 12/28/18

Market Commentary 12/21/18

(1) Disclosures

(2) Disclosures