China News… Again….

Both the stock and bond markets have fluctuated wildly so far this morning, as investors emotionally react to rumors surrounding the trade war with China.  Early this morning, Bloomberg reported that the US is weighing an interim trade deal with China.  The stock market jumped higher on the news, getting within reach of achieving all-time high record levels.  However, shortly after this report from Bloomberg was released, a senior White House official said the White House is “absolutely not” considering making a deal.  As a result, the stock market lost steam.  I’m still baffled by investors who are so quick to react to the trade war news.  Time and time again it has proven to be inaccurate hyperbole that may just be a part of the negotiation process.  In the end, some win and others lose as a result.

Consumer inflation numbers came in hotter than expected, with the Core Consumer Price Index (CPI) numbers showing a month over month increase of 0.3%.  This will place the year over year growth rate at 2.4%, which is well above the Fed’s target rate of 2%.  This creates an interesting problem for the Fed.  Although I continue to believe that the Fed will cut the Fed Funds Rate by ¼% when the announcement is made next Tuesday, I think that Fed President Powell will have a more bullish tone to his speech.  This can be either good or bad for mortgage interest rates.  In general, it would be bad.  However, if it scares stock investors, we could see money flow out of the stock market and into the bond market.  Either way, things aren’t looking good for mortgage interest rates in the near term.

We will maintain a locking bias.