Good Tuesday AM,
Bonds doing well today for the second day in a row. Stocks, which faded a bit yesterday, are back up again today. There are some interesting and scary things happening in the stock market. Mainly, the VIX, which is the markets fear indicator, continues to rise alongside of the overall stock market. The VIX is designed to go up when the markets go down and the opposite is happening. This suggests to me that some very big money is beginning to hedge their portfolios. The VIX is one hedge and bonds are the other, so bonds may benefit from this uncharacteristic market behavior.
The WSJ shared the above graph and this commentary: All three major U.S. stock indexes have climbed for five months after a brutal February and March that ended the longest bull market on record. The benchmark S&P 500 has surged 35% over that period, its largest five-month percentage gain since 1938. The index advanced 7% for the month—its best August since 1986—Some investors are bracing for a potential reversal in the markets in September. U.S. lawmakers are scheduled to return to work following an August recess, and a failure by Congress to deliver additional relief measures for American consumers and businesses could weigh on market sentiment.
Last, I hear concern regularly of what may come to pass in 2021 with foreclosures. I have been doing a little research in my spare time and came across some insight from Bloomberg which I tend to agree with. “The federal government’s slow reaction to the Great Recession exacerbated that crisis. Unemployment benefits provided only subsistence levels of income, and the HARP and HAMP foreclosure programs weren’t fully up and running until two years after the recession began. This recession will be “night-and-day different,” the federal government reacted quickly and aggressively to the COVID recession. Jobless workers received $600 a week on top of their state unemployment benefits. And the terms of the federal forbearance program were generous — borrowers can stop making mortgage payments for up to a year with no penalties. Many private lenders followed suit. Indeed, lenders seem to have no stomach for a repeat of the foreclosure crisis of the Great Recession. Default filings clogged court systems, and the clumsy response led Washington to impose strict regulations on mortgage lending. During the aftermath of the pandemic, lenders are positioning for a more-cooperative, less-punitive approach, “The industry is going to do a better job of keeping people in homes. This time around, it feels like the mortgage finance industry is part of the solution, and not part of the problem, like it was in 2008.”
Please remain safe and healthy and make today great.
