Stocks are down a bit and Bonds are higher this morning.  The news of the day was Gross Domestic Product (GDP), which was reported up 2.5%, lower than expectations of 3.1%.  This was a lousy GDP number, and shows the US economy is sluggish.  And that’s with this incredible amount of stimulus and Quantitative Easing (QE). 
Remember, QE, while specifically is the government purchase and reinvestment of Treasury Bonds and Mortgage Backed Securities, has dramatic ripple effects.  Think about this – if you were lucky enough to have accumulated $1M in savings, three years ago you could have invested this money in a “no risk” investment like 3-Yr Treasuries and given yourself a nice $50k per year income.  But today, that same investment would only give you $2k per year in income. 
The government’s QE has made it very difficult for people to receive any sort of meaningful “no risk” income, even if they have accumulated millions of dollars.  This is forcing so many of us to search for alternatives… all with higher risk.  People are flocking to the Stock market, many without experience, because there are few other places to put your money.  It’s no wonder why Stock prices have risen in virtual lockstep with QE (See the chart below).




When the music stops, it’s going to get ugly for Stocks.  And this is why we may be entering a strange news environment regarding employment.  The Fed has made it clear, at least for today, that the trigger for stopping QE is a 6.5% rate of unemployment.  In a normal world, good news for the Job market would be good for Stocks and bad for Bonds.  But in the newly created “world according to Fed”,  the closer the unemployment rate gets to 6.5%, the more concern there is that QE will end.  This leads to a selloff in Stocks, which leads to improving Bond prices.  This makes it more difficult to navigate through some of the upcoming Job reports, including the releases next week. 
And an important takeaway from this is that real estate has been, and will continue to be, a beneficiary of the present environment where there are no longer any “risk free” trades that offer a meaningful return. 
We will continue the same floating stance we have adopted since April 11^th.  This philosophy has helped us to gain almost 100 BP, as well as 15 days of time.  But there may be some overhead resistance from the highs reached on April 5^th, which is a bit higher than present levels.  We will watch this carefully throughout the day