Tag: market commentary

Jan-18-blog 2019

Market Commentary 1/18/19

Posted on by Damon Germanides

The effects of the partial government shutdown

Interest rates are drifting higher as the damage caused by last month’s brutal volatility washes out and the focus returns back to earnings, the economy, global trade, and inflation.  

We will learn more about earnings in the coming weeks, but it has been a mixed bag so far. With respect to the economy, the U.S. economy remains strong, but across the pond, Europe’s economy appears to be slowing along with China. The global economic slowdown is a big concern and is partly responsible for the drop in interest rates that took hold late last year and continued into 2019. Counteractively, a slowing economy could be good for stocks as it will keep the Fed from raising rates.  

Secondly, the effects of the government shutdown (if it continues), will become a drag on future confidence readings and overall GDP if it’s not resolved soon. However, keep in mind, Wall Street loves political gridlock and the surge in the stock market is evidence of this.

Thirdly, there are rumors that the U.S. and China are working together on a trade deal. Stocks are higher on this news and bonds have sold off a touch as the risk of an all-out trade war subside.

Finally, inflation remains in check even with full employment here in the U.S. This is a big positive for bond yields along with the Fed clearly stating their intention to remain patient.  

With the recent upward trend in stocks, and, the 10-year Treasury Bond trading below 2.80% yield, we remain biased toward locking-in interest rates given recent events.   

Dec-28-blog

Market Commentary 12/28/18

Posted on by Damon Germanides

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.

market commentary blog image 12/21/18

Market Commentary 12/21/18

Posted on by Damon Germanides

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.