Stocks Begin 2018 with a Boom

Mortgage bonds ended 2017 with a mini rally. However, hopes of continued improvements were shot down this morning when stock investors started the new year with a bang.  The rally in bonds could have been portfolio investors needing to make year-end rebalance adjustments to comply with their stated risk-level allocation.  Once the New Year passed, all bets were off as investors looked to over-capitalize on the raging stock market once more.

Today is a quiet day for economic reports. However, the wires heat up as the week progresses.  ADP’s estimate for new job creations for the month of December are due out on Thursday, and the Bureau of Labor Statistics is set to release their numbers on Friday.  Markets are expecting to see around 180,000-190,000 from each.  With December showing a lot of seasonal hires, we can expect many of the new jobs to be below-average wages.  Since many retail jobs pay less than other industries, such jobs have a muted impact on the over-all economy.  Further, employers tend to not lay off employees in the month of December.  Doing so has been associated with cold hearted bosses who don’t care about families.  As a result, the labor force may appear to be stronger than it would accurately reflect.

Given the strength in the stock market, we will suggest a locking bias.