2019 was an incredible year for stocks, which finished the final trading week of the year at all-time highs. Generally speaking, when stocks go higher, so do rates. And that was the case this past week as home loan rates ticked up to the highest levels in months.
So, what was the reason for higher stocks and higher rates?
Global financial improvement! 2019 was a “tug of war” year between central banks around the globe cutting rates and adding monetary stimulus, and economies attempting to avoid recession.
We are finishing the year with economies winning and showing improved growth and confidence heading into 2020.
What does this mean for rates in the near-term? If countries around the globe continue to improve, their rates will continue to creep higher. If rates around the globe creep higher, so will ours.
The good news is that because inflation remains extremely low, we should not expect home loan rates to move too high anytime soon.
Bottom line: the U.S. has been and continues to be the global economic leader and moves into 2020 with a Goldilocks backdrop which includes a strong labor market, rising wages, low inflation, and low rates.
Forecast for the Week
The upcoming week will be holiday-shortened with little economic data hitting the wires.
The bond markets will close early at 2:00 p.m. ET on Tuesday, December 24 for Christmas Eve, and stocks will close at 1:00 p.m. ET. All markets are closed on Wednesday, December 25 for Christmas Day. Normal hours will be seen for all markets on December 23, 26 and 27.
The only economic data point of value next week will be New Home Sales.
The week is typically one of the slowest trading volume weeks of the year with many investors and traders on vacation for the holidays. The markets will keep an eye on any headlines from the U.S./China trade front, but given it’s Christmas week, there shouldn’t be any glaring headlines.
Reports to watch:
- New Home Sales will be released on Monday, Durable Orders on Tuesday, with Weekly Initial Jobless Claims on Thursday.