Did China Just Save The Day?

On the Trey Ware Show this morning, Karl discussed how a good China Manufacturing report over the weekend may give the bulls more fire power and lift the major averages to new highs soon.

Trey Ware:          Our friend Karl Eggers from Eggerscapital.com is joining me right now. US mortgage rates posted their biggest weekly drop in more than a decade amid concerns about a slowing economy. The average 30 year fixed rate mortgage dropped by 22 basis points down to 406 with an average half point from 428. The average 15 year now is 3.57 down from 3.71 so that’s an interesting little take on that isn’t it Karl?

Karl Eggerss:       Yeah, the slowing economy fears which are not just in the United States but around the world are causing interest rates to fall which is a good thing and a bad thing right. We want the economy to keep growing but we want interest rates to be at a reasonable level. When they fall too much of course then the stock market falls because people believe that the economy is going to go into recession. So it’s this Goldilocks right now where I think the federal reserve is done raising rates, interest rates have come back down. You’re going to see another run in housing and a whole another cycle in housing I think. And-

Trey Ware:          When you say a run in housing are you talking about more people buying houses? Is that what you’re saying or what?

Karl Eggerss:       Yeah, just overall activity. We started to see everybody that had refinanced had done that. Everybody that wanted to move, had done that, and this cycle is over.

Trey Ware:          They are just so expensive in San Antonio though because of the inventory here, home prices are so high.

Karl Eggerss:       No they are and look we can’t have our cake and eat it too all the time. I mean if prices were falling, we would worry about the 2008 fear-

Trey Ware:          That’s right.

Karl Eggerss:       You’re right. It is difficult. Now what we need, if housing prices are going to rise, we need wages to keep up with them and you’re starting to see wages accelerate a little bit but still they’re not where a lot of people need them to be. So there’s still this disconnect between housing prices and can people afford it or not. So I think that is something that we need to continue to watch but we did get some really good news overnight from China that’s been a big concern as we need a trade deal with China but also China’s economy kept slowing and slowing and slowing. They got a really good manufacturing number last night. So you’re going to see the market up again today and I wouldn’t be surprised if we see the market maybe even as early as this week but maybe next week push to new highs and break the old highs that we saw last year and that would be a good thing and again it’s just balance. Fed off the table, economy slowing but not slowing so much that we go into recession.

Trey Ware:          So maybe we break 27 this week?

Karl Eggerss:       What’s that?

Trey Ware:          Maybe we break 27 this week?

Karl Eggerss:       I think there’s a very good chance we could break 27 this week.

Trey Ware:          Wow. Alright Karl Eggerss, Eggerscapital.com check him out and thank you very much Karl. He joins us every Monday at this time.

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