Low Rates and Hope for a Vaccine

We saw S&P futures shoot up after market close yesterday. This was largely a response to Moderna, a US based biotech company, posted promising results to its initial clinical trials and plans to begin a Phase 3 study of 30,000 people later this month. The company estimated that it has the capacity to deliver 500 million doses per year. Moderna holds 1 of the 23 potential vaccines currently in clinical testing.


With the stock market once again hitting multi-month high levels, odds currently favor a pull back in the near term.  However, if stocks happen to break above the current ceiling, we could see a more dramatic move higher.  Given the current state of the US economy, there is little justification for stocks to remain at current levels.  There is a clear disconnect between the economy and the stock market.  With the Fed supporting the markets, we are in a state of artificial high stock prices, low interest rates and consumer cash flow.  With more Federal stimulus likely on its way, we can expect another cash injection of at least $1 trillion.  This unfathomable amount of money will further cause US debt levels to increase, which will some day lead to a tightening in our economy as taxes will be forced higher to help support the added interest the government will be burdened with.


Mortgage rates continue to fall, and came the closest to all-time lows since 1971 last week. Bonds are down slightly today to the middle of a large trading range. This is a volatile spot with room for gains or losses. We hold a locking bias.

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