February 25, 2020
This week we ponder an interesting question. At the beginning of last year, rates were headed higher and we were not supposed to see low rates again for quite some time. Of course, the market analysts were wrong, and rates fell as 2019 progressed. We kept hearing of the threat of recession while trade wars were being fought. It made sense that rates would go down if the economy was slowing.
Yes, the economy did slowdown in the second half of 2019. However, we came no-where near a recession and the threat of trade wars started waning. Sure, there were plenty of headlines to worry about, including the impeachment trial. But looking at the numbers, the end result of this trial was never in doubt. We had a good strong first jobs report of the year. So why have rates not moved higher?
Some will blame the coronavirus. Yes, the stock market fell back as rates moved even lower as news of the virus spread. Yes, news spreads faster than a virus. But as the initial shock settled down, the stock market recovered and rates still have not risen much. Now, we know the threat of the virus is not over. Perhaps this will bring the slowdown the markets were anticipating. Or perhaps we will have moderate growth with historically low rates. We would call that the best of both worlds. Our advice? Enjoy the ride while you can and let’s not try to explain what is happening. Sometimes the markets just have a mind of their own.
Source: Origination Pro
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