Guest Post – Tradition Mortgage’s Weekly Update August 31, 2015

Stock Market Volatility = Rate Volatility

Over the past week, mortgage rates were pushed and pulled by unusually large movements in global stock markets, which overshadowed our positive US economic data. Concerns about slowing global economic growth, particularly in China, caused the U.S. stock market to decline sharply early in the week. However, with stocks at much lower prices, buyers stepped in later in the week, erasing the week’s earlier losses. While the magnitude of the moves were relatively smaller, a similar pattern was seen in mortgage rates. Rates dropped early in the week and then gave back their improvement later in the week. This relationship between stocks and mortgage rates is common, as investors shift assets between stocks and bonds.

The recent revisions to U.S. Gross Domestic Product, the broadest measure of economic activity, revealed an increase in growth during the second quarter to 3.7% from an original estimate of 2.3%. The positive GDP news was somewhat countered by the fact rising inventories accounted for the majority of the increase, which raises doubts about future growth without more sales demand. Investors will be watching closely the upcoming Payroll report due out this Friday, as continued strong numbers will improve the odds of a Fed rate hike of .25% in September. Expect more volatility in both the stock and bond markets in the days ahead!

Jim Krantz
Vice President
NMLS # 761955
Direct 952.252.4488 / Cell 612.716.9999 / Fax 952.252.4489

Tradition Mortgage LLC
NMLS # 286998
4350 Baker Rd Suite 190 / Minnetonka, MN 55343 /