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Registered Investment Adviser Caleb Lawrence 

Yesterday’s buy the dip bounce saw the major averages avoid severe technical failure with the largest one-day gains since August of 2015. This mornings unsteady open and loss of early gains as the major averages enter the final hour with modest losses speaks to the technical damage done of late.

There is little economic data today. The Richmond Fed regional index fell 13 points in March to 15 on large declines in new orders and employment. Price data remained high.

Geo-political instability, a looming trade war and higher interest rates are all taking their toll on the markets as they of course react faster than the economy as a whole. That said higher interest rates are starting to bite real estate sales and construction activity, as evidenced by recent data for both series. Additionally, higher interest rates are also putting a noticeable crimp in mortgage lending as refi activity has also struggled since the notable spike in interest rates seen since late 2016. Black Knight recently noted in its Mortgage Monitor report that higher interest rates has pushed the pool of potential refinance candidates to the lowest level seen since December of 2008 in the depths of the previous crisis. While this doesn’t really come as a shock given the decade low period of interest rates proceeding it. Refi’s still make up 37% of the mortgage market, based on last year’s data so the hit to mortgage related revenue won’t be trivial and in fact is already showing up in the data with respect to both origination volume and of course the profits that go along with it.

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