Locking bias

The US stock market is once again setting new all-time highs this morning, as they seem to be ignoring the reality of a Federal Reserve interest rate hike that will be announced on Wednesday.  It seems that all sectors, from consumers to business owners to investors, all continue to cheer the election of Donald Trump to the White House.  You know when Kanye West shows up to meet with his “Friend”, who happens to be a Republican presidential nominee, something is in play J.  In all seriousness, the overexuberance seems to be reaching a point of tipping the scales too far for the stock market.  Although there is great resilience in stocks, at some point this increase must come to an end.  It has been too sharp in a limited amount of time, which is often the set up for a reversal.

We continue to see strong news coming from the business sectors as well as housing.  Today’s release of the November FNIB Small Business Optimism Report, which measures optimism amongst small business owners within the US, rose 3.5 points to 98.4.  This was the strongest reading since May 2015 and the largest single monthly gain since April 2009.  The main reason for the jump was once again sited to be the election of Donald Trump.  Many business owners now expect better business conditions going forward, primarily bases around lower taxes, fewer regulations and changes to the costly Obamacare program that has increased the employer’s costs to insure their employees. 

We anticipate an increased level of volatility ahead of Wednesday’s Federal Reserve interest rate and policy decision.  While in a downward channel, volatility is not generally a friend to mortgage interest rates.  Therefore, we will maintain our locking bias.