Last Week in Review: Stocks and Bonds are Getting Along, for Now
This past week, Freddie Mac reported the average 30-year mortgage is at an all-time low of 3.01%
At the same time, the NASDAQ and Stocks overall are hovering right near all-time highs. Typically, when Stocks move higher, so do rates. Not this time around. So, what’s happening?
Bond prices are moving higher and rates lower in response to fear and uncertainty surrounding COVID-19, along with the reality that inflation will remain low and unemployment will remain elevated for the foreseeable future. Also, helping Bonds and rates is the daily buying of Treasuries and mortgage-backed securities from the Federal Reserve.
Stocks are hovering near all-time highs due to state and economy re-openings, positive economic data, along with an overwhelming monetary response from the Federal Reserve and Treasury.
It’s very likely that both Stocks and Bonds will continue to remain elevated in price, with rates remaining low, as we work through COVID-19 while monetary response remains in place.
Once we move past COVID-19 — and we will — the monetary response will ratchet down significantly and the next directional move in Stocks, Bonds, and rates will be determined by the health of the economy, inflation, corporate earnings, and the relative performance of the U.S. versus the globe.
Bottom line: Home loan rates will likely remain historically low for quite some time as it will take a while to fully repair the economic damage caused by COVID-19.