Monday Market Forecast - November 10-14, 2014
The elections are over, finally. Sanity has finally been restored to Washington DC. Just kidding. But the financial markets may actually be more free from political influence in the coming weeks so that's a good thing. Last week we saw a pretty boring week in the bond markets, with the exception of Friday, when the market moved in a favorable direction and brought rates down just a bit.
Then today rolled around and took out most of Friday's gains. The market had a pretty tough day, mostly as a reaction to Friday's rally. The DOW pushed up slightly and is currently sitting at insanely high levels, which traditionally isn't good for bonds and mortgage rates, but the recent rally hasn't hurt us too bad.
Tomorrow is Veterans Day, and that likely also played a role into the bond selling today. Stock markets are opened tomorrow & bond markets are closed, so investors may have been either freeing up capital or hedging risk in the event that the DOW rally continues tomorrow.
The rest of the week is fairly light on economic news, although toward the end of the week we'll see the monthly JOLTS report on Thursday followed by the retail sales report on Friday, which should be the big market mover this week. Chances are much of the week will be a tug-of-war between stocks and bonds as investors look for the right place to park funds.
My personal opinion is that the stock market is a bit overbought, especially coming off of a recent decline of nearly 1000 points. The recent rally was fast and large, which presents the opportunity for a continued steady climb, or a reversal, which I think is more likely considering the all-time high levels of the DOW we're seeing. 17,000 was a tough ceiling to crack and I don't think the current stay above that mark will be a long one, at least not at current levels. If I'm right, this should be good news for bonds & mortgage interest rates.
My advice to clients is still to lock in, but not out of fear for higher rates, but simply because loan turn times are so fast right now that I don't think there's enough time in the loan process to see rates drop very much. Rates rise faster than they fall, so a rate increase is more likely than a drop in a span of just a couple weeks. Either way, I see rates remaining in a tight window that's had them within .25 of 4% for a 30 year fixed over the past several weeks.
If you have any questions about rates, mortgage programs, or the direction of the market, ask an expert! Or you can call me at 484.680.4852.