The stock market continues to rally this morning, blasting into unchartered territories once again. This has been a headwind for the bond market, adding upward pressure to mortgage interest rates. Until the stock market finds a new top, it will be difficult for mortgage interest rates to find much improvement. With both stocks and bonds competing for the same investment dollars, as long as the stock market is making spinning off such irrational returns, investors will favor the riskier asset of stocks over the stability of a low rate of return promised by the bond market.
Both the New York and Atlanta Federal Reserve dramatically cut their estimate for 4th quarter GDP. However, this wasn’t enough to slow the pace of the stock market growth. Stock investors are right now highly focused on a partial trade deal with China that is expected to be sign in the weeks to come. In this partial deal, the additional tariffs that are scheduled to hit imports from China into the U.S. on December 15th will no longer happen. However, the tariffs that are already in place are expected to remain in place. The hope is that once a partial deal is signed, it will pave the way for a full trade deal to be negotiated. This is the ultimate hope for the stock market, and what many investors are banking on.
Given the strength of the stock market, we are going to suggest a locking bias.