Inflation Tame – Bonds Remain Weak

It’s more of the same today, with stocks again setting new all-time high records in early morning trading.  In fact, the Dow Jones Industrial Average is celebrating another milestone as the Dow rockets to 24,000.  After hitting 23,000 just over a month ago, this new milestone was fueled by a growing economy, record high corporate profits and progress on the Tax Reform bill.  This makes the over-all Trump rally resulting in a spike of nearly 6,000 points since his election last year.  That is over a 30% increase in just over a year.  Considering that the stock market rally began years ago under President Obama, this historic rally has reached an unprecedented rally.

News of the White House replacing Secretary of State Rex Tillerson hit the wires this morning.  This would be another major shakeup to the Trump Administration and would end months of tension between the President and one of his key leaders.  Although this may not have much of an impact on the markets, it again puts into question the overall stability of the White House and its key staff members. 

The Fed’s favorite gauge of inflation, Personal Consumption Expenditures (PCE) was released this morning.  Again, it shows that inflation levels are tame.  Headline PCE showed an increase of just 0.1% for the month, bringing the annualized rate down from 1.7% to 1.6%.  The Core Rate, which strips out food and energy prices, was up 0.2% for the month.  On a year-over-year basis, the rate remained the same at 1.4%.

Mortgage bonds remain under pressure.  With the technical picture looking negative, we will maintain our locking bias.