Waiting on a “Partial” Trade Deal

Stocks are in rally mode once again this morning, as investors remain hopeful that a partial-deal trade agreement will be announced between the U.S. and China. If a deal is made, it would come just days before a huge tariff is to come into play against goods being imported into the U.S. from China.

The key point to remember here is that President Trump has clearly stated in the past that no partial deal would be negotiated. So, if this does come to fruition, it seems valid to question President Trump’s change of heart. Personally, I believe that Trump knows the damage that the tariffs would create on the already fragile U.S. economy. Therefore, he is doing his best to avoid the tariffs from hitting the market.  Some also speculate that it is also partially due to the intense impeachment pressure the Democrats are putting on their party to push the process. Either way, it seems to weaken the negotiation process if President Trump does in fact soften.

Stocks have now recovered most of the losses they incurred over the past couple of weeks and will again be within striking distance of challenging all-time high levels. This has taken its toll on the bond market, driving mortgage interest rates higher along the way. I suspect things will get worse for interest rates before they get better. If a partial deal is not negotiated, we will likely see mortgage rates quickly improve. However, if the rumors in Washington are true, rates will move higher.

We will maintain our locking bias.