A Strong Market Recovery Seems Inevitable

The US stock market continues to climb higher in premarket trading, as a V shaped recovery for stocks seems imminent.  In the midst of a pandemic, GDP down and unemployment way up, there is a clear disconnect between the stock market and high level of suffering among America’s struggling businesses and large number of unemployed workers.  Market investors have driven stocks to a three month high, as hopes for an economic recovery continue to fuel optimism as states begin to once again show economic life.  However, the reality remains that it will take a long time to dig ourselves out of the deep economic hole that has been dug.  Even getting back to “normal” leaves many people and businesses deeply in pandemic-related debt that will stiffen future growth.

Even though the US stock market has been on a strong path of recovery, mortgage bond prices have held their ground.  Generally, we would see bond prices fall as stocks advance.  However, this is not a normal market.  This is a market fueled by billions of dollars being pumped into the system each and every day to help assist the stock market to climb while maintaining consistency in bond prices.  It seems the Fed is committed to ensuring rates hold steady through this recovery period, essentially eliminating the volatile times the bond market generally goes through.  We expect to see rates hold low for at least 12 months, which will help consumers as many restructure their finances to match today’s opportunities.

There remains a slow upward pressure on mortgage interest rates.  Given the Fed’s commitment, we don’t anticipate much to lose or much to gain.  We will maintain a locking bias.