Thank President Trump

Thanks to a Tweet by President Trump, mortgage bonds received a nice boost this morning.  In Trump’s statement, he threatened that he would raise the tariff on $200 billion of Chinese goods from 10% up to 25%.  It is now rumored that China is considering skipping trade talks and is also preparing more retaliatory economic penalties to the U.S. as a result.  The details of what happened are unclear at this time, but it does seem clear that there is a serious breakdown in the negotiations between the two economic powerhouses.  Given that much of the rise this year in the U.S stock market was a result of assumptions made that the trade war will be soon coming to an end, this could have a more serious impact on the U.S. stock market over the coming months.  For now, the impact isn’t too severe.  However, any drop in the stock market will generally help improve mortgage interest rates.

Following Friday’s Bureau of Labor Statistics (BLS) Jobs Report release, media outlets are raving at the strength of the U.S. economy.  As I discussed in Friday’s market update, the reason for the cheers aren’t quite as strong as they appear to be at first look.  A deeper look shows reasons for concern that are not publicly being addressed.  Although it’s hard to argue the strength of the current labor market, there are plenty of reasons to argue why the factors that make up the numbers could be facing headwinds within the next year.  If you are basing life decisions upon the current environment continuing, just remember that we are at the tail end of an economic expansion cycle and that the next healthy move is for a slowdown.  Markets will always cycle, and there is no reason to think that this will be the exception.

Although there is no need to immediately rush to lock, I feel that now is a great time.  After floating, we are going to switch back to a locking bias.