Good Morning on this Fantastic Tuesday,

Stocks are up… third day in four. I can’t help but see this as an opportunity to sell, not buy. If you don’t know who’s the one in the room being fooled, it’s probably you. GDP expected to be -30 for Q2, economic activity has dropped 29% nationally, and this is only week 4 of the US shutdown. Bonds are losing steam as stocks gain. I suspect this will be short lived. It would be fantastic news to know that we have/are cresting in both new cases and deaths (although the latter will lag) and that we will see some thawing of this freeze we are in, but I don’t think it is possible to just restart the economic engine and regain the same momentum. Consumer behavior for the short term has changed. We will dine out less, shop less, buy less, etc. I don’t know what are the correct multiples since there are no earnings or even revenue to base it on. OK, I’ll move on. Mortgage bonds are down today pushing rates higher as equities advance. That said, the Fed is buying whatever is needed to stabilize the market, so not much chance of things getting much worse. The 10-yr yield has risen to .78% today. I’m a bit surprised by it and we will see where that goes in the next few days. There is a lot of room in this trading channel.

On the economic data side, which has almost no bearing at this point, the JOLTs job opening number and small business optimism were released and they are both bond friendly, which is no surprise. As always, when you see a rate that will work for your customers, lock it. They can start saving money now and you can get paid. Seems a win-win.

Last, it’s clearly forbearance season. The graph below shows how quickly homeowners have chosen this option (which, in itself that this is month 1, is interesting). I don’t know that most understand that the forbearance is not a deferment and that the repayment terms are likely onerous and may not be able to be met. This could become problematic in early 2021. I can’t stress enough that while forbearances are a great tool when needed, they are not something to use lightly.

Stay healthy and make today great!