11 Feb Chairman Powell to Testify
Stocks entered uncharted all time high levels in early morning trading. So far, mortgage interest rates have not been effected. I believe rates are at great risk as the pressure continues to temp bond holders into selling bonds in favor of quick and higher returns offered in the stock market. If this plays out, we will see upward pressure added to mortgage interest rates. From what I can tell, the stock market run will continue with my estimate of an S&P target in the 3450 range. With economic forces and the labor market strong, this appears entirely possible.
This morning, Fed Chairman Jerome Powell will provide his semi-annual testimony before Congress. I anticipate his tone will solidify the Fed’s belief of continued strength in the economy and upward pressure on consumer inflation in the medium term. I also expect Powell to mention concerns of the longer term impact the Coronavirus may have on the global economy, with China being the primary focus of concern. We wil have to be on guard for any surprises in his testimony that could cause an adverse reaction in the mortgage bond market. However, since he has remained consistent in his recent speeches, hopefully there isn’t anything that causes concern.
We will maintain a locking bias.