Market Snapshot March 8, 2018

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Good Thursday morning,

 

The markets remain tenuous due to concerns over the Tariff talks. China has formally promised retaliation and this would indeed spark a trade war and the EU has shared the same. Trade wars, like most wars, produce only losers, nobody can win. This will be good for bonds and bad for the economy. It will hurt stocks as well. This morning Jobless claims missed expectations and bonds are edging higher. The 10-yr is at 2.85% and mortgage bonds are +15bps. The 10-yr would need to close below 2.84% to see some semblance of a mini rally. I think that will be tough to get to today as we are waiting on the Trump Tariff plan (to be released this afternoon) and the monthly jobs report (the biggest economic report is out tomorrow a.m.). 200k new jobs expected along with an unemployment rate down to 4.0% and most importantly a wage increase of .2%. It is possible Mr. Trump declares economic war, but I wouldn’t be surprised if he softens the blow saying Tariffs are going into effect but not for everyone (or anyone of consequence).  We will see. Strong recommendation to watch the markets into the closing and consider locking heading into tomorrow’s jobs report.

 

The ECB met today and the subsequent statement from Mr. Draghi shared that the European economy continues to expand and there is an end to their QE program on the horizon. That will likely push the Euro higher and also raise European bond yields. As European bonds and US bonds tend to be interconnected, I would expect a corresponding rise in yields in the US. A rising tide lifts all boats .

 

Here is an interesting stat: The national homeownership rate, as measured by the American Housing Survey, rose from 63.5 percent in 1985, to 65 percent in 1995, and to 68.8 percent in 2005. By 2015, the rate had declined to 62.7 percent, below the 1985 level. With low inventory and higher rates, this number may fall further.

 

All I got, make today great!