Mortgage bonds are climbing higher in early morning trading, with prices still stuck within the same trading range that have held mortgage interest rates in a stable range. Stocks, on the other hand, are once again showing tremendous volatility after China announced their plan to add additional tariffs to US exports that enter China. Clearly, the US and China are nowhere near reaching a deal. In fact, China stated that the “US side will feel the pain.” This move gets us one step closer to a trade war, one which would almost certainly push us into a recession.
With the S&P 500 now down 35 points on the day, stocks are once again experiencing a drop of at least 1% on the day. I believe that the volatility is a precursor to a bear market. A lot of the big money managers are liquidating stock holdings in anticipation of a more dramatic drop coming. This is a time to be cautious. Despite the strength in the labor market and consumer spending, I continue to believe a recession is imminent.
With bond prices moving higher, there is no rush to lock. However, there is also little likely benefit to float. If you choose to float, do so carefully.