Market Update: September 10th, 2020 US Economic Reality Check | Mortgage Rundown

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Jason Obradovich, CIO of New American Funding, and Alexis Quinney are back with today's Mortgage Rundown. This week, we talk about what has been going on with the stock market and the health of our economy. Watch the full video to learn more.

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Alexis: Hey, everybody! Welcome back to the Mortgage Rundown. My name is Alexis Quinney, and I'm here with Jason Obradovich, CIO of New American Funding. So, to get started, I wanted to talk today about the stock market. So, Jason, it looks like the stock market is creeping up a bit. So, what can we expect from that? Are there going to be more increases or what's going on there?

Jason: Yes. So, the stock market is kind of an anomaly, right? We're in the middle of this global pandemic and these stock indexes, like the S&P, the Dow are hitting all-time new highs in the middle of a pandemic. And so, it's confusing, right? You're trying to understand what's happening with the economy. But I wouldn't really follow the stock market. The stock market is in the middle of this kind of redistribution. Investors are pulling money from certain stocks and putting it in other stocks. So, the tech sector is just getting a ton of money poured into it. Right? Investors don't want to put money into bonds that earn next to zero percent interest. So, they want to put their money somewhere. And you know what the soup de jour, the thing that's most popular today, is really the tech sector. So, money is just piling in there and just driving those prices, which is pushing the indices up a lot more.

Alexis: OK. It also seems like the stock market continues to reach new highs. So, does this mean that the economy is starting to get back on track? Or what does that really mean?

Jason: You know, it's a little bit of a false positive. You know, I'll try to put up on the screen what's happened with GDP, right? GDP is a function of the amount of product our country produces in any given month, quarter. And most of the indices that we follow really quarterly. So, we won't get third quarter until the end of October. But what you'll see on the screen is just, you know, we kind of hum along at a 2% growth rate. And then second quarter when COVID came and everything just came grinding to a halt. So, we don't really know what the third quarter is going to look like. Yeah, there's a lot of positivity in the stock market. That's great for investors. But what's happening for the people that aren't in stocks or the people who've had small businesses that went under, or people who've lost their jobs or people that are in forbearances. Right? There's so much dislocation going on. So, once we look at the GDP number, which unfortunately like I said is not until the end of October, we'll get a better sense of what economic activity has been like.

The other thing to look at, really, is unemployment. The unemployment rate hit record lows. It sat at record lows for a long period of time and then you had that huge spike. And so, as you can see on your screen, there is a ton of unemployment that's come. And so, what's going to happen? Does it spike up you where the unemployment rate reaches these highs and now we've come way off it? You know, what's that curve going to look like? Things have not returned to normal at all. Can you go to a restaurant and dine indoors? No, you can't. How many people are traveling on an airplane? Not very many. Can you go outside? Yes, you can, but there's a lot of limitations. So, it's not like things are back to normal. So, like I said, the stock market is not the indicator that all is well.

Alexis: OK, that makes sense. So aside from the stock market and maybe aside from unemployment, are there any other pieces of data we can look at to get a better idea of where our economic health is going to go in the future?

Jason: Really, you do want to look at GDP. Unfortunately, it is a lagging index. I know people will look at like inflation.