One of the key concerns in the bond market this morning is that mortgage bond prices are now beneath their 25, 50 and 100 day moving averages and have a long distance to fall before hitting support of the 200 day moving average. After breaking through major moving averages, we generally will see a significant downward movement in price. This is what we are seeing in early morning trading, which is adding upward pressure to mortgage interest rates. Until bond prices find stability, we can expect to see mortgage interest rates continue to climb.
Merrill Lynch came out with predictions for 2020, showing an estimates 3300 for the December 2020 S&P 500 target. This would be an approximate 7% for the year which is a sharp decline from what we have been experiencing. Further, the GDP estimates for 2020 are set at 1.7%, which is far lower than the Trump campaign would like to see happen in an election year. The prior election Trump Campaign promoted target GDP growth of 4%, which did not happen. It will be interesting to see how mortgage rates respond to the lower GDP projections. Generally, this would help soften rates. However, that is not happening yet.
We will maintain a locking bias.