Good Tuesday AM,

I hope you had a terrific Labor Day weekend. The weather has just been kooky. Between the cold snap, ridiculously high winds, and the horrible fire in CA that was set off by some pyrotechnics during a baby gender reveal (that’s no joke) causing poor air quality, we are battling the elements today.  The ten-year had a rough go on Friday. The better than expected jobs report caused some hurt, but that was a knee jerk reaction. There are too many weak data points as well which, along with the Fed buying when they need to buy, will keep rates low. The 10-yr was mid .70’s Friday, today back down to .67. Mortgage bonds are up a solid 10-20bps and I like this direction. I am sure that stocks getting a little beat up is also helping bonds. The Dow is down 400 and you get the feeling that the buy signals are starting to fade. Trump announced he wants to break economic ties with China. If this actually happens, it will upset the balance in most markets and may cause disruption in the supply chain. Bonds like uncertainty and tend to rally, while stocks go the other way. From Dan Rawitch, “I am watching the 3370 level on the S&P 500 (where we currently are). If we can close above that number today, we may see a bounce back in the equity markets (bad for bonds and rates), if we close below that level, we could see a much bigger stock market sell off (good for bonds and rates). Today, the Small Business Optimism index was released, and shockingly, it beat expectations.”

Please remain safe and healthy, make today great!