The one day panic appears to have
abated today; the stock market opening strong and US interest rates back to
the close last Friday. The Russian/Ukraine situation has cooled about as
quickly as it started on Saturday. Putin now saying Russia has no interest in
continued military aggression. We noted yesterday that eventually financial
markets would push the political issue behind it, we didn't believe it would be
this soon. It isn't over, and it won't be over for a long time but unless there
is fear of military activities there is little reason for US interest rates to
be driven by safety fears. Putin has a history of aggressive acts as he never
did believe in the dissolution of the Soviet Union and every now and then he
reminds the world of that.
So far today the markets are
mirror image of yesterday. The stock market
higher and interest rate higher; the panic over the weekend is over for the
moment and not likely to return now through the rest of the week. Now it is
back to the basics, economic data and forecasts. Regardless of what the
“specialists” are saying, or the politicians are thinking, all of the players
in this regional power play are not really interested in pushing things too
far---and that includes Russia.
There are no economic releases
scheduled today. Tomorrow starts the monthly employment guesses with ADP
reporting its private jobs report for Feb. The rest of this week markets will
focus primarily on the US economy while still monitoring the events unfolding
in the Ukraine.
Bond and mortgage markets remain technically
bullish but unlikely to rally as long as no country fires weapons.
Fundamentally the outlook still is for higher interest rates driven by
improving economic outlooks and the Fed on course to continue tapering when the
FOMC meets in two weeks. I am still recommending to lock your interest rate.
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