07 Nov Locking bias
The stock market is climbing higher so far this morning on news that Hillary Clinton was cleared of any potential criminal charges from the FBI due to the infamous e-mail investigation. Per most of the economic opinion leaders that I follow, which cross both party lines, there seems to be an overwhelming belief that Hillary will be the next President of the United States. Thus, investors are cheering the news and feeling comfortable taking a deeper step into the US stock market. This is supporting the belief that of the two potential winners, stock investors seem to feel more comfortable with Hillary. This outcome would likely hurt the bond market and cause mortgage bonds to break back beneath their 200-day moving average, which isn’t good news for mortgage interest rates.
Economic news of the week will be overshadowed by tomorrow’s election. Per RealClear Politics, Hillary is projected to win the delegate votes by a count of 297 to 241. The one key wild card seems to be Florida, which has 29 delegate votes up for grabs. It has been a close battle in the Sunshine State, with current projections pointing in Hillary’s direction. If this state happens to switch and vote Trump, we could wake up on Wednesday morning to a Trump presidency. Either way, we can expect an elevated level of volatility for the week.
Given the strength building within the US stock market, bonds are under significant downward pressure. Therefore, we will maintain our locking bias.