21 Oct Good time to lock
Extraordinary volatility in the markets continues today, with the stock market spring boarding higher out of the gates this morning above its 200 day moving average. The S&P 500 had its biggest rally of 2014, and is now set to challenge the 25, 50 and 100 day moving averages. The stock market is within a whisker of breaking above the downward channel that has plagued the market for weeks and terrified investors with the fear of a significant correction. However, as we have learned from the market lately, strong up days aren’t necessarily a good sign; it is often an indication of a market correction or a bear market formation. The next couple days will be critical in determining whether this is a short term increase or the return of a run higher in the market.
In spite of the strength in the stock market, damage to the bond market has been minimal. It seems that bond investors aren’t overly convinced that of the stock market’s ability to withhold these still lofty levels after the Fed exits the investment buying spree they have been on for years. Many investment houses continue to sell their bond holdings as a sign of their continued faith in the stock market. These are crazy times in the market, and the volatility is likely going to sustain for a while.
Tomorrow is an important day for both markets, with CPI (Consumer Price Index) being released in the morning. With the recent trend showing a weakening in inflation, there is a good chance the trend is continuing. This is helping to keep the bond market tame at the moment. We see this as a possible opportunity for mortgage rates if the report is below expectations. However, there is risk in floating. Therefore, for those not wanting to take the risk, now is a great time to lock.