Stocks in rally mode

In response to our government’s last minute agreement to avoid tax hikes, stocks opened the first trading day of 2013 in rally mode.  At least that’s what appears to be the case in the headlines.  The reality seems to be that the deal simply postponed decisions on government spending cuts and the immediate tax hikes that most everyone is subject to.  Nevertheless, the lower payroll tax did expire, so paychecks will be smaller.  The Dow is up 230 points at the moment.  This follows a sub-13,000 opening on Monday.  mortgage bonds moved lower, but continue to be supported by Fed buying.  As a result, interest rates have been pushed slightly higher, but to a lesser degree than expected.  There will be plenty of volatility in the next few months since no real spending or debt-limit issues were agreed upon by Washington.  We will suggest locking on the short term and floating for transactions a month or more out.

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