We all know what the term whiplash means when someone gets into a
car accident. When we hear the term, we envision a painful neck injury and
maybe a neck brace. This term is also often used with the term
"whipsaw" when observing the markets. A whipsaw occurs when the
market moves erratically in several directions. And if you follow that market,
you can get economic whiplash. Now the stock market has not been that erratic
as it has steadily moved upward this year with a few days of retrenchment here
and there. However, the bond market has been a bit more schizophrenic in its
personality this year. For the past few years, the bond market has been a safe
haven from volatile markets. The Federal Reserve Board pushed rates down and
the struggling economy kept them down.
Anyone
who purchased or refinanced a home or bought a car has seen the benefit of low
rates in the past few years. And those who put their money into bonds have seen
a good steady return for the most part. At the beginning of this year, it
appeared that the economy was going to start to roll. Rates then made their
first move upward in the past several months. Then came some headlines in
Cyprus, the Boston bombing and some weaker economic reports. Rates edged back
down to near historic levels. The stronger-than-expected employment report
caused rates to move up in short order. That is a lot of movement for a market
which still features historically near record lows. On the other hand, it is a
lesson to be learned. When rates decide to move upward, there is nothing the
Fed can do about it. And we will get no warning
Mike Ervin
Senior Mortgage Banker
NMLS # 282715
Office: 650-735-5261
Cell: 650-766-8500
mike@mikeervin.com
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