Good morning on this Terrific Thursday,

Despite some unfriendly news for bonds, they are holding up reasonably well this morning.

GPD was revised upward by a large and unusual amount.

The upward revision was big enough to cause the fourth quarter to be revised. This is not good for the perception of rates. Many think that with such a strong GDP, the Fed will be forced to clamp down further on rates. Oddly, bonds are steady, and stocks are getting creamed. Bond guys are the smartest in the room. Less emotional and more forward-thinking. The equity markets are emotional and often miss the bigger picture. Eventually, the two will agree, but I have usually found bonds to lead the charge. Be careful floating into tomorrow; there is a lot of risk around the PCE numbers.

I’ve shared that the Fed doesn’t really have to pivot for rates to improve, all that must happen is for markets to settle down and trade normally. The typical spread between the 10-yr Treasury and the 30 yr Mortgage rate is 1.75% – 2.00%. With the 10-yr trading at 3.60%, a 30-yr mortgage rate should be at 5.5%. We are a full point above that. The pretty picture below is a great explainer…

Yikes, life expectancy in the U.S. fell again last year to the lowest level since 1996, federal data showed, after Covid-19 and opioid overdoses drove up the number of deaths. Covid-19 was the third-leading cause of death for a second consecutive year in 2021, the Centers for Disease Control and Prevention said Thursday, and a rising number of drug-overdose deaths also dragged down life expectancy.

Overdose deaths have risen fivefold over the past two decades.

The death rate for the U.S. population increased by 5%, cutting life expectancy at birth to 76.4 years in 2021 from 77 years in 2020. Before the pandemic, in 2019, life expectancy at birth in the U.S. was 78.8 years. The decline in 2020 was the largest since World War II. If you have your health, you have everything…

Please remain safe and stay healthy, Happy Holidays and make today great!