If you like roller coasters, you don’t
need to go to an amusement park. Just watch
the stock market over the last few days and you will get an incredible ride. However,
if you want the full experience, then be an active investor. This way you can get the full jolt of the
markets biggest rises and falls of 2014.
And you get to do this all in the same week.
On Tuesday the market dropped 275
points. Growing fears about the
economies of Europe and China are becoming more widespread. The latest economic data coming from these
two countries has not been strong. As we
know, what happens in other economies can directly impact what occurs in the
U.S.
Wednesday there was jubilation on
Wall Street as investors cheered and celebrated the release of the Fed’s FOMC
minutes. The Fed has continues to
maintain that they will keep interest rates ultralow until the economy shows
significant signs of strength. Given
that economic data in recent months has been anything but strong, that is a
clear indicator that rates will remain low for quite some time. Investors love low rates because it is likely
then that the stock market will continue to rise.
Then came Thursday’s market plunge
of 334 points which virtually wiped away almost all the gains the market has
made this year. The stock market sits at
about ½ percent above where it started January 1st. Thursday’s plunge was driven again by
Europe’s and China’s week economies.
You
may be asking yourself what changed between Tuesday and Thursday? The answer is ridiculously stupid and
simple. On Tuesday a certain word was
NOT used in the news feeds…on Thursday the word was used. The word that can send a market into chaos is
RECESSION. Although neither economy is
in a recession, the mere suggestion that it may happen is enough to freak out investors.
The one thing the stock market
roller coaster has caused is to get investors to jump out of the stock market
and over to the safe haven of the bond world.
Yields on bonds are at the lowest point of 2014 which means that
mortgage rates are dropping. Mortgagerates are now also at their lowest point of 2014. With continued market turbulence it is likely
mortgage rates will decline even further.
This could be a nice boost for the housing market on both purchases and
refinances.
The purchase index according to the
Mortgage Bankers Association is up 2.0 percent.
The refinance index jumped 5.0 percent for the week of October 3rd
which is occurred prior to the significant rate declines from this week. It is highly likely that we will see
significant jumps in both indexes next week given the bond rally that has been
occurring with the stock market craziness.
JJ Mack
916-517-1800 x 300
JJ.Mack@apmortgage.com
www.apmcroseville.com
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