09 Nov Locking bias
The markets are settling in to the unanticipated reality of a Donald Trump presidency. Stock investors across the board had all but written off Donald’s ability to win the race yesterday morning. However, as the votes started to come in, reality quickly settled in. Many investors became fearful of what this will mean to our markets. As a result, stocks fell sharply in overnight trading. The fear quickly wore off as those with the influence to move the markets showed their belief in the future and began to pour their money back into the stock market. By the time stocks opened, they were higher than they were when markets opened the day prior.
Mortgage bonds, on the other hand, are the ones taking the beating. It’s no secret that Donald believed the artificial inflation in the US stock market because of the Fed printing money and buying bonds is not a long-term strategy. Therefore, the punch bowl will not likely be as plentiful as it has been under a Democratic Presidency. Donald believes more in building an economy through business growth vs. Fed policy and government stimulation. It will take a bit, but we will hopefully be able to see the direction mortgage rates will take in the near term. In the meantime, we will experience significant volatility and change.
With mortgage rates climbing sharply higher, we will maintain our locking bias.