We finally have an large financial firm that agrees with me. Goldman Sachs recently stated that the current stock market rally is fueled by FOMO, and will soon come to an end. They see the S&P 500 falling almost 20% in the next three months. When you consider that stocks have experienced the strongest rally in decades over the same period of time when tens of millions of Americans have lost their jobs, there is little to justify such a strong enthusiasm and appetite for risky assets. With many companies who received PPP funding scheduling massive layoffs when their 8 week commitment to maintain their payroll expires, we know that things will get even worse. Congratulations to Goldman Sachs for being honest, knowing that their statement could hurt their bottom line.
Today is a slow day for scheduled economic reports, so the bond market will trade heavily based on the technical outlook as well as responding to the Federal Reserve’s purchases of mortgage backed securities. So far this morning, bonds are looking vulnerable and I feel we could see a bit of upward pressure on mortgage interests rates as the day goes on. With the US Treasury set to sell a tremendous volume of debt on the open market, if investors don’t respond with a decent appetite, that will press rates higher. Be careful today.
We have been, and will remain in a locking bias.