What Corona Virus?

The stock market seems to no longer care about the Coronavirus as it climbs back towards all-time record high levels once again.  The extreme volatility in the stock market is a clear sign of a lack of direction.  Further, it shows the level of greed that drives the market.  When stocks can go from a state of panic to one of manic without any fundamental change or reason, there should be concern.  Stock investors are heavily opportunity based.  So if we see the concern over the impact the Corona virus will have to China’s economy, we will once again see stocks fall.

Mortgage bonds fundamentally shifted this morning, breaking out of a nice upward trading channel that has greatly improved mortgage interest rates over the past few weeks.  This is not a good sign for the near term direction of mortgage interest rates.  However, after such a strong move higher, it is a healthy move for bonds to retrace some of the gains they have made.  That will help strengthen the bond market in the event there are economic reports that come out in favor of strengthening the price of mortgage bonds.

We will maintain a locking bias.