Good Tuesday AM,
Bonds are up from yesterday. The 10-yr at .58 (huge line of resistance) and mortgage bonds +20bps. When price consolidates on lower volume, this can be bullish. Essentially, this allows energy to build and can lead to a breakout. Consumer confidence took a hit, no surprise there, and I believe this will filter down into consumer consumption which directly impacts GDP. Bottomline… the two-day FED meeting starts today with the rate decision and guidance tomorrow at 11 a.m. The Fed knows they must keep rates very low and has stepped up its buying of mortgage bonds (which is why we are seeing a bit of a rally today). The first look at Q2 GDP is Thursday and it is going to be interesting. I still do not think it will be as bad as economists are projecting. I think June was exceptionally strong and I think the numbers will be massaged for the best possible optics as we are less than 100 days from the election. As for locking or floating, I would wait to see how the markets act today, if we tail off into the close, I would likely lock. If we stay strong, I would float.
I am including a few economic graphs courtesy of the WSJ on how Federal Debt impacts GDP. Too much debt becomes a burden and stifles growth but enough debt is needed to drive growth. Threading the needle is insanely difficult. The Fed deserves our thanks.
Will the economic growth stall after the US debt-to-GDP ratio exceeds 100% as it did in Italy and Japan?
Each country’s fiscal stimulus and the GDP contraction in the first half of 2020.
And.. if you’re planning to travel outside of the US, here’s a handy dandy map of how other countries are handling their borders.
Global travel restrictions:
Please remain safe and stay healthy, make today great!