Mortgage Rates Flat

Mortgage Rates were ready for a change, or at least a number of us were doing such with all the data that came out this morning, but all in all it was so much of a mix bag that it all but confirmed that the Fed will not move next week and that the economy is definitely slowing down.

Stocks rallied today on the decline in retail sales. The bond market did not find any bounce. Investors liked the weak sales because it is believed the Fed will stay away from increasing rates while the long end of the curve has finally come to an end worrying or believing whatever the Fed and other key global central banks think or do. It is not the first time, or likely the last time, investors and big money like weak data - just enough to believe the Fed will stay put. The PPI today also supports the idea that the Fed will not move. That should have been a given before today’s data but apparently not. Since the great recession in 2008 central banks have been the equity markets’ best friends. Forcing rates down and removing any alternative but stocks. Fixed income people and retired folks be damned, it is the top 10% that have enjoyed the slow recovery - the slowest recovery on record from a recession. OK, my rant - in the real world we have to take what it is for as long as it lasts regardless of personal thoughts - going against the grain is a loser in the moment.

Tomorrow the August CPI and the U. of Michigan consumer sentiment index comes out.  Despite today's relative calm, the potential for volatility remains elevated.  This will continue to be the case at least through next week's Fed meeting on Wednesday. 

In summary, the recent pop higher on interest rates has left a lot of us wondering what's next.  From a technical stance, we are poised to move even higher.  From a fundamental perspective, we are probably right in the sweet spot.  From a risk perspective, we are shadowed by a looming rate hike, and foreign & domestic economic data that we cannot foresee.  If you missed the boat last week to lock, and have 45-60 days to test the markets' acceptance of higher rates, I recommend floating.  Inside of this timetable, it is way too risky to make the call.  Interest rates always move up quickly, and unpredictably in many cases.  A move down would require some fresh new data or event of a negative economic picture.  The question is, are you willing to see your rate move higher???  At this point defense wins games.