The drop in the stock market was short lived, with stock prices rallying significantly higher since yesterday’s update when we suggested the losses would be minimal. As with most of both the good days and bad days in the stock market, today’s improvements are brought to you by China which recently stated it would not immediately respond to President Trump’s recent tariff announcement. It’s amazing to me that investors continue to react so dramatically to news on the trade war. History shows that it’s just a matter of days before we get more bad news regarding the matter. However, stock investors are looking for any opportunity to make a short-term profit.
The Pending Home Sales report for the month of July showed a reduction of 2.5%, which is a much steeper drop than the market anticipated. This report measures signed contracts on existing homes and is a good indicator of the strength of the overall housing market. Since this does not include new construction, it doesn’t represent all the market’s segments. Regardless, given the lower mortgage interest rates we have seen, most expected to see this number much stronger. As we work through the tail end of the prime purchase market, hopefully we will see home sales move higher. If not, we can expect to see prices continue to weaken.
Bonds remain in the same trading channel. There remains little benefit to floating on loans that need to close in the near term.