Volatility in the markets continues to dominate investors’ mindsets. The stock market seems to have downturns followed by a significant upswing. Not only does this provide an opportunity for long term stock market investors to make money, it has created an environment where short term investors have been able to profit on the swings. The bond market has held up well through the increased volatility and continues to maintain its position in a wide trading range. We still expect bonds to test the bottom of the range in the near term. However, with each passing day the bottom of the range moves higher so the loss when that happens will not be as exaggerated.
Today is again a quiet news day. The big news of the day came from the National Federation of Independent Business (NFIB) showing that optimism among small business owners is now at its highest level since October of 2006. While the market was anticipating a reading of 98.1, the actual reading came in at 100.4. This number represents an improvement of 2.3 and shows that business owners continue to feel more confident about their futures. When small business owners have more faith in their futures it gives them more power in the present to make hiring and expansion decisions. This will help support continued strength in the economy in the near future.
As mentioned above, we see a likelihood of a pullback towards the bottom of the current trading channel. This will add upward pressure on interest rates in the short term. Therefore, we will maintain our locking bias. Watch the markets closely at 11:00 a.m. MST. We will receive the results of a 10 Year Treasury Note auction. If investors’ appetite for the 10 YTN is weaker than expected, this will help pressure bond prices lower.