Good Friday AM,

January is already in the books. 2021 has started off quickly for sure. Volatility continues with the Dow down 600 points as I type (Nasdaq off more than 300). The retail investors are trying to keep the equity markets moving up but they can be unsophisticated and I sense this will end badly for many retail investors.

The data out today was mostly stronger than anticipated. We saw a spike in PCE prices, Personal index, and the Employment Cost Income. Consumer spending was weak BUT it beat expectations. Bonds are giving back some of this week’s gains but I suspect this is more of a technical move since we had touched the top of the trading channel and are now moving the other way. At 1.07, we are close to the middle of the range. Mortgage bonds started off in the hole but have since moved up to unchanged. The one thing to keep in mind is that while Treasury yields have risen in January, mortgage rates have not. It’s odd and counterintuitive. The reasoning is that lender margins were very wide in 2020 and have been shrinking as Treasury yields have moved up in January. Margins now are more normal so if Treasury yields were to move up, I suspect mortgage rates will follow suit. I am not calling for rates to move up, just offering a little cautionary note.

Please remain safe and healthy, enjoy the weekend and first, make today great!