Commodities and Foreign Currency-
Last week was pretty abnormal with the bond and stock market moving in the same direction. Normally bonds and stocks move inversely because when people are excited investors move into stocks and sell off their bonds and when investors get scared they sell their stocks and get into bonds. Oil and gold did better last week and its strength may explain where the smart money is flowing to. To bolster this commodity story, China is expected to start its fiscal stimulus spending in March and this should add fuel to the rally.
Conversely, a cloud still hangs over this bull commodity argument because the dollar is strengthening. A stronger dollar normally mutes the ascent of commodity prices. The dollar should show strength as long as the European countries continue to struggle economically. England had to bail out one of its largest banks last week and Moody's downgraded the debt of Spain and Greece.
Mortgage Rates-
Mortgage rates rose last week due in part to the rise in the 10 year treasury. I still believe mortgage rate interest rates haven't seen their bottom. The Fed will do whatever it takes to keep these markets liquid even if it has to buy 10 year treasuries.
2 comments:
I think that the bond and stock market are moving in the same direction because there isn't a clear consensus about bonds and stocks. I think investors are split because there are a lot of confusing information affecting the market.
This is strange because they typically move in opposite directions due to the fact that they are fighting for the same money from investors.
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