The European Central Bank Provides Hope

The stock market is climbing higher in early morning trading. As we’ve talked about in recent market updates, I see stocks once again challenging new all-time high records in the near term. However, I don’t see the party lasting too long. Since stock investors are celebrating negative news in hopes that it leads to the Federal Reserve to cut interest rates. When you think through the logic, how long will negative economic date be able to add support to the stock market? It’s a backwards philosophy in play right now. Clearly, negative economic data will eventually lead to a drop in the stock market. When that motion comes into play, we can plan on mortgage interest rates benefiting.

Mario Draghi, the President of the European Central Bank, announced today that he is pushing for more Quantitative Easing (QE) to help support a sluggish economy and low levels of inflation. The bond market is celebrating this announcement, as it provides a clear sign that the world’s global growth is slowing. This is a big change from how people felt last year, when there was little concern of a slowdown in the pace of economic growth. The good news is that more and more people are aligning with our predictions. The balls are already in motion. We’ll be seeing the pace of economic softening progressing.

We remain to have short term concerns over rates. However, long term we remain bullish (seeing lower rates).