Locking Bias

The S&P 500 is again at all-time highs, as investors continue to believe in the long term sustainability of a bull market that is now approaching 2,000 days long.  There are only three other times in history when this has happened, and no others that were created through artificial inflation of the markets by the Federal Reserve at the level we have seen the past 5+ years.  Since there is no precedence to use to predict how markets will fare following the end of a multi-trillion dollar Fed stimulus investment, the way markets react will be closely studied as we see QE3 come to an end in October.

Core Logic reported that home prices increased 1.2% from June to July, and 7.4% year over year.  These are decent numbers, and shows reasonable, sustainable growth at least in the short term.  Core Logic also forecasts a .06% increase in home prices in the next month, with a 5.7% increase from July 2014 to July 2015, which is also in line with healthy, sustainable appreciation.  The President and CEO of Core Logic said, “Most states are reaching price levels not seen since the boom year of 2006.  Our data indicates that this trend will continue, with more states hitting new all-time peaks this year and into 2015 as the recovery continues.”

This week will be action packet, ending with Friday’s Bureau of Labor Statistics’ Jobs Report.  They are projecting 225,000 new jobs created in the month of August.  If the reality is in line with this projection, bond markets will breathe a sigh of relief.  However, should they be stronger than anticipated, it could put upward pressure on mortgage rates.  We anticipate bonds to move towards the bottom of their trading channel, which is a healthy move even while in an upward trend.  However, we see little chance of noticeable gains in the near-term.  Therefore, we will maintain our locking bias.