Re-Open without Consumers?

Stocks are moving higher once again today, as investors look forward to businesses sending their employees back to work as early as Friday in many states.  As far as the economy is concerned, opening businesses can’t happen soon enough.  However, the concern is whether or not consumers will follow.  According to the CBS News poll, 71% said that they would not go in to a bar or restaurant, 85% would not go on a plane, and 87% would not attend a large event.  Based on this, it seems clear that the recovery period from the Covid-19 shut down will be lengthy.  A V-shaped recovery that many are hoping for does not seem likely.


This is a big week for scheduled economic reports, highlighted by the Federal Reserve’s announcement on interest rates and Fed policy on Wednesday.  It is clear that the Fed will keep rates at or near 0% for an extended period of time.  The key items to note will be the Fed’s purchases of corporate and junk bonds, as well as the continuance of mortgage backed securities and 10-Year Treasury Notes.  The Fed’s decision to purchase corporate and junk bonds is clearly an effort to help keep large corporations from laying off employees.  This highly debated issue will be certain to spark both praise and criticism, regardless of the direction the Fed takes.


With the Fed in control of the mortgage bond market, there has been little incentive to float.  We will maintain a locking bias.

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