The story this week has been stock market records and rising
interest rates. The stock market has
been on a rapid rise hitting new all time highs almost daily. Monday the Federal Reserve officials
suggested that the central bank will continue to support the economy even as it
continues to improve. This simply means
that they plan on keeping interest rates artificially low allowing businesses
and consumers to continue to borrow money at very low interest rates.
Tuesday the market hit another record high during the day as
investors continued to believe that the global economy will continue to improve
because governments around the world are all doing what is necessary to supporteconomic stability and growth.
Wednesday the market closed at yet another new record based
upon the optimistic ADP employment report indicating that the economy added 198,000
jobs. Additionally the prior months report
was revised upward by 23,000 up to 215,000.
Although payrolls did not increase as much as the prior month, the
employment sector continues to show modest improvement.
Finally, on Thursday the market once again topped the
previous close. Manufacturing was up and first time jobless claims were less
than expected. Friday we will here from
the Department of Labor on national unemployment however that report will be
released after the writing of this article.
Mortgage rates have been rising all week long in response to
the strong gains in the markets. The
positive movement in the stock markets and expectations of the continued
economic improvement has investors putting more money into the stock market
while selling off their bond investments.
The selling of bonds and mortgage backed securities drives the yield on
securities higher causing interest rates to rise.
The forecast from Fiserv Case-Shiller predicts that home
prices will increase by an average of 3.3% annually from now through September
2017. This would be a completely
different picture than what we have experienced since 1997 where house prices
rose and fell sharply. Between 1998 and
2006 prices averaged increases of 5% or more per year however once the real
estate bubble burst home prices fell 30.5% from 2006 to September 2012.
Lastly the government spending cuts that went into effect on
March 1st have not seemed to dampen the mood of consumers and
business owners. The public seems to
have gotten used to the craziness coming from the government and since many of
the cuts do not impact the bulk of the population, most people are just going
about their daily business.
JJ Mack
916-517-1800
JJ.Mack@apmortgage.com
www.apmcroseville.com
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