Tax Plan Nears a Vote

Stocks are skyrocketing into unchartered territory once again as the tax reform bill appears to be in its final negotiating stages. According to President Trump, the Senate could be voting within a week or two.  According to the GOP count, there can only be two opposing Republican votes.  With several senators still on the fence, negotiations are in full swing.  I can only assume that concessions are being made to secure some who may otherwise vote against the bill.  As unfair as this seems, this is the political world in which we live and has become a part of the process.  It’s strange that people will vote for something they don’t feel is right for the masses of countermeasures are made to give their constituents a reason to agree.

The 100 Day Moving Average has not been an easy battle for mortgage bonds. Although there has been temporary success; at this point the battle isn’t going well.  With the tax plan on the heels of passing, the stock market could be in for a continued rally higher.  As that happens, bonds will likely be facing a headwind.  If bonds remain above their 200 Day Moving Average, we won’t see mortgage rate pricing deteriorate.  However, the exuberance over paying lower taxes could create a rally in the stock market that would be too great for bond prices to hold up against.  We will have to wait and see.

With bonds still fighting this battle, we will maintain our locking bias.