Are Stocks Ready for a Pull-Back?

Mortgage bonds are holding their position this morning. Something to remember is that bond investors have a much stronger gauge of the strength of the US economy than stock investors do.  With the bond market being a much more accurate reflection of what is to come,  todays strong bond market strengthens my view that the US stock market is overvalued and ready for a pull back.  History shows that once a peak in the stock market is achieved, it is followed by a sharp fall.  That is what I anticipate happening in the near term.

Markets are awaiting the release of the Fed Meeting Minutes today. Since Fed Chairman Powell has already provided a clear picture of the mindset of the Fed and its members, I don’t anticipate this to be a market moving report.  The Fed is clear that rates are now on hold and the market should not anticipate additional rate cuts or hikes unless the economic conditions change drastically to warrant such a move.

The bond market is on the brink of a breakout.  At this point, it is looking as if the breakout will be favorable to mortgage interest rates.  However, until that move has been confirmed, there is great risk in floating.