24 Apr Stocks Take Another Beating
Mortgage bond prices continue to drive lower, pushing mortgage interest rates to more than four year highs. This is happening at a time when the U.S. stock market is also falling, which isn’t in line with general financial market trends. Further, yields on the 10 Year Treasury Note have hit 3%, which is a symbolic move for the bond market. The next ceiling will be 3.04%, which bonds should hit in the near term. We feel this level will initially stop the rise in interest rates. However, it’s only a matter of time until this ceiling is broken to the upside and yields exceed that critical level. That will push interest rates higher than they have been in many years, which will also signal a trend reversal of 30 years of yields being in an extended downward trading channel. Wow! That will be an entirely new world that very few real estate professionals have experienced.
The Dow Jones is down significantly today, marking the longest losing streak since March of 2017. Higher interest rates could cause stocks to stabilize and come down from currently inflated values. With P/E ratios still historically high, stocks will become more susceptible to investors leaving the risky asset of stocks for the stability of a fixed return. Especially with many believing that the stock market is on the verge of being a bubble that is preparing to pop. Eventually, that will help interest rates improve.
As expected, we remain in a locking bias.