STUART-WEST, PALM CITY, FLORIDA
$410,000 Santa Monica DriveOVERVIEW ~ August 2 through August 6 ~ On the surface, it seemed almost a quiet week in the investment markets. Beneath the surface, however, American investors were uncertain of how to respond to various economic indicators but global investors were still attracted to the safe haven of Treasury securities. In foreign exchange markets, contrary to the usual pattern, global investors elevated the euro’s value against the dollar. The Dow Jones Industrial Average (DJIA) managed a 1.79% gain on the week, a remarkable show of resilience in the face of an unfavorable employment report on Friday.
FOCUS ~ The July Employment Report raised a great many questions without offering answers. Why, for example, did the DJIA, after immediately reacting to the poor employment numbers with a 1% decline, regain all but 21.42 points at the end of the day? Why, on the other hand, did the 10-year Treasury security, which started the day at 2.916%, fall all day without respite, ending Friday at 2.826%? Different elements of the market were acting in diverse ways, telling us little except that investors are extremely undecided about where stocks and bonds and other investments will go in the future.
Possibly more obvious has been the significance of the euro’s movement against the dollar. The dollar began Monday at $1.3033 to the euro, and ended the week at $1.3293, suggesting that even though the DJIA may still be resilient, investors over the world are slightly wary of the American economy at this point. Major investment houses, had already begun signaling a lack of confidence in America’s economic growth late the prior week, reversing recent policy and moving funds into Treasury securities, apparently expecting interest rates to fall even further.
The one point that the week’s action in the markets makes clear is that, at this moment, intense uncertainty among investors has led to very low rates, a good deal lower than many analysts had predicted.
Mortgage rates, as a result of the uncertainty, are remarkably attractive, with the Freddie Mac average 30-year rate falling to 4.49%, its lowest level ever. Hopefully, there will be more definitive answers to the questions raised by the current market very soon.