Q2 GDP numbers were released last week showing a massive 32.9% decrease from Q1. The majority of the report was dismal excluding residential housing showing a 16.2% increase. In regards to COVIDs impact on hosing, the National Home Builders Association’s chief economist Robert Dietz predicts, “Housing gains will continue as the consequences of the virus crisis are likely to lead to a reversal for declining tends in home size and a greater need for additional home office space”. This prediction is logical, however, rental forbearances will not be shown until next quarters report. We have reported on the number of vulnerable people once rental forgiveness stops. Now many activist groups are pushing for continued forgiveness which will have a cascading effect to the GDP and general market.
One of the big fears of the COVID relief stimulus is the large inflationary potential pumping so much cash into the market has. This morning, the Personal Consumption Expenditures (PCE) was released showing .9% inflation from last years core rate. This is a huge relief for the Fed who has an annual target of 2%, giving them more confidence in additional rounds of stimulus.
Mortgage bonds are flat this morning sitting that the very top of their trading channel. With so much room to fall in the channel, we hold a locking bias.