We will file this commentary under the subject heading of — you can’t predict the future, especially in a world economy. First we had a solid but unspectacular report of economic growth for the second quarter. Then we had a solid but unspectacular jobs report. In between, the Federal Reserve Board’s Open Market Committee lowered short-term rates for the first time in a decade.
Everything should have been smooth as silk in the markets with an economy that is not too slow and not too strong. Then the trade war with China reared it’s ugly head. We struck first by announcing additional tariffs. Usually things heat up for a bit and calm back down. But China retaliated by not only targeting our goods, but also lowering the value of their currency to make their goods more attractive in the world markets.
By the time the counter-punch was felt, the stock market had it’s worst day in a year. The fear was that the trade war could become a currency war. That could hurt the world economy and anytime there is international unrest, our bonds typically benefit. The result? Even lower interest rates and a greater chance that the Fed will ease up even more. Lower rates could spur even more economic growth if these wars do not spread and consumer confidence does not wane.
Dave Hershman is the top author in the mortgage industry. Dave has published seven books, as well as hundreds of articles and is the founder of the OriginationPro Marketing System and Mortgage School. Want to send this commentary and other news in a personalized format to your sphere database or on social media? Sign up for a free trial at www.OriginationPro.com.