The new year appeared to be rolling in with lots of possible momentum for stocks and lots of peril for bonds. But January ended up flipping the S&P index on its head late in the month and bonds got turned upside down somewhat quickly as well.

But there are bright spots which we will discuss in the newsletter.

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     January was flat overall for the S&P 500 index! But when you look at the details of it, it was anything but flat. Looking at the start of January and then jumping to the end of January, it basically didn't move. Markets really can drive you crazy, but if you have a process it really does make sense of it all and keeps the insanity at bay.

     In November we saw the S&P index shoot higher (along with other stock indices) making November the best performing month in over 30 years.

     Then hopes ran high for a repeat of that strong performance in December. But December really didn't come through for those who build their portfolios on hope since In reality, hope it's not an investment process. Yet, then as January started, hopes were renewed for many and as you can see in the graph below, markets shot higher for most of January. Then as fate would have it, in the final few days of the month of January, all the gains in January, greater than 4% at one point, went away and the month ended with the S&P index up only about .25%. 


January 2021 for the S&P 500 index. A great month was just not to be for this index.

     So if the S&P index is not shooting higher as the media talking heads announce that it is, what is going on with the market and where is there real growth? As we look at the first graph below we can clearly see that though the S&P index rose over the last 90 days, it has begun to flatten out some in December as did so as well in January.

This shows the S&P 500 index for Nov - Jan. It started with a bang and has slowly lost steam as this 90-day cycle has moved along.

     In this second graph, we see other broad Market indexes here in the U.S. have risen also, and typically much more so than the S&P index itself has. These indexes, the Russell 2000 and the NASDAQ have so far not shown their willingness to flatten out very much and lose their momentum.

This shows the S&P 500 index, the NASDAQ, and the Russell 2000 for November - January.



     At CRA we just love to talk about bonds! taxable government bonds, tax-free government/municipal bonds, taxable municipal bonds, corporate bonds, high-yield corporate bonds. Whatever flavor bonds come in, we love to stay in conversation about them and at different points, each of them has great potential to reward investors. Bond is just another word for a loan and bonds really do make the world go round. If you have a mortgage on your house, you helped the bond market. So most Americans really help the bond market but they may unknowingly also depend on the bond market just for daily life. If you borrow money to buy a car, even at a 0% interest rate as a lot of cars all right now, you helped the bond market! And obviously, when you buy a house, you really help the bond market. So while most of us think the bond market is kind of boring, It is anything but boring and truly bonds do make the world go round. 


     As we pointed out in multiple newsletters from last year, for the entire year, every single month during the year the performance of bonds versus stocks from the beginning of the year, bonds always had greater performance and they also did not suffer the 34% drop which stocks had indicated by the S&P index last year.


      We did discuss in our newsletter last month that long term Government Bond rates have started to rise. That rise continued into the month of January which gave an opposing position to bonds a great move higher. 


     So let's talk about the way bonds benefit investors. The first thing is bonds have a dividend that they payout to the owner of the bond. So if you own a bond you get paid money as the owner of that bond either monthly or quarterly or maybe annually.  If you own a bond and the dividend rate on new bonds of the same type are lower than the bond you own, your bond will also go up in price.  So that's the second way you can benefit by being the owner of a bond.


     We also have to look at the other side of that same equation. If new bonds coming out have a higher dividend rate than the bond you own, while you still get paid the dividend on the bond you own the value, or price of the bond you own, goes down. So if new bonds have a higher dividend rate than the one you have and for whatever reason, you need to sell your bond, you will get less money than you paid for it.


     So, if you had strong reason to believe that interest rates were going to be going up, meaning new bonds would have a higher dividend rate than old ones, there are certain types of Investments that will allow you to make the value of what you own go up at the same time interest rates are going up even though people who own bonds have the price of their bonds going down.


     This is exactly what has been happening for about the last 2 months, long term government bond yields have been going up and the prices of those bonds have been going down. Just the exact opposite of what we saw a full year ago.  Certain investors who hold investments designed to increase in price as interest rates increase as well have had a greater return in 2021 by owning those types of Investments than they would have made so far in 2021 in the S&P 500 index. This too reflects the opposite of what happened in early 2020.



We remain watchful. 



Ken Graves, Chief Investment Officer

Capital Research Advisors, LLC 

Capital Research Advisors, LLC, 
4185 B Silver Peak Parkway, 
Suwanee, GA 30024 
800 -767- 5364 
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Mortgages (click here)  


Mortgage rates have been flattening out a bit right now. Is the bottom in or is this simply a pause before rates will go lower?  We do indeed see long-term Government Bond rates rising but this can happen and rates on mortgages could still go lower. 
Refinance and maybe make some easy money every month for the next 30 years.

Mortage Trouble Ahead?


Overall mortgage delinquency numbers are improving, but the delinquency rate for homeowners who are seriously behind in their payments is soaring, another indication of a bifurcated housing market.

The number of borrowers delinquent on their mortgages fell by 340,000 in July, a 9 percent drop from June, according to data released Friday by Black Knight, a mortgage data and technology company. (Black Knight counts all homeowners who are delinquent, regardless of whether they are in a forbearance plan.)

But the number of homeowners who were at least 90 days behind on their payments grew by 376,000 last month, a 20 percent increase from June. Serious delinquencies are now 1.8 million higher than pre-pandemic levels and are at their highest level since early 2010.

“The good news is that overall delinquencies are trending downward and, in fact, the number of newly delinquent homeowners has fallen far below pre-pandemic levels,” Andy Walden, Black Knight economist and director of market research, wrote in an email. “However, while this indicates that the inflow of new covid-19-related delinquencies has subsided, the number of homeowners who have missed three or more payments is now at a 10-year high.


More than 85 percent of these borrowers were in forbearance as of the end of July, making clear that “economic distress from the pandemic continues to impact their ability to make mortgage payments,” he said. “It remains to be seen how those loans will perform as we move on into the fall.”

Foreclosures also ticked up, despite moratoriums still in place.


Mortgage delinquencies track closely with unemployment. States that have been hard hit with job losses, particularly in the leisure and hospitality industry, are the ones facing the highest numbers of borrowers behind on their payments. The top five states with borrowers who are not current on their mortgages are Mississippi, Louisiana, New York, Hawaii and New Jersey. The top five states with borrowers who have serious delinquencies are Mississippi, Louisiana, Nevada, New Jersey and Alaska.


A survey of Mortgage Bankers Association members also found that delinquencies spiked in the second quarter. The MBA releases its data on a quarterly basis, while Black Knight issues its data monthly.

The delinquency rate for loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 8.22 percent of all loans at the end of the second quarter, according to the MBA’s national delinquency survey. Like Black Knight, the MBA includes loans in forbearance.

“The COVID-19 pandemic’s effects on some homeowners’ ability to make their mortgage payments could not be more apparent,” Marina Walsh, the MBA’s vice president for industry analysis, said in a statement. “The nearly 4 percentage point jump in the delinquency rate was the biggest quarterly rise in the history of MBA’s survey. The second-quarter results also mark the highest overall delinquency rate in nine years and a survey-high delinquency rate for FHA loans.”

“There was also a movement of loans to later stages of delinquency, with the 60-day delinquency rate reaching a new survey-high, and the 90-plus-day delinquency rate climbing to its highest level since the third quarter of 2010,” Walsh said. “On a more positive note, 30-day delinquencies dropped in the second quarter, which is an indication that the flood of new delinquencies may be dissipating.”

Although the data rouses fears of what befell the housing market in 2008, Walsh tamped down those concerns.

“Fortunately, there are several mitigating factors that make this current spike in mortgage delinquencies different from the Great Recession,” Walsh said. “These factors include home-price gains, several years of home equity accumulation, and the loan deferral and modification options that present alternatives to foreclosure for distressed homeowners.”




By Kathy Orton
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This report/summary is to be considered general in nature, reflects our opinions and is based on our best judgment at the time of writing. All information is deemed to be from reliable sources but we cannot guarantee its accuracy. No warranties are given or implied as to their promise of occurrence in the future or their accuracy. It is the readers’ responsibility to decide if any of our opinions are suitable for their own individual situation, and in what manner to use the information. No specific decisions should be made based on this report. These opinions should not be construed as a solicitation for any service. Past performance does not guarantee future results. The opinions expressed in this piece are those of the author and do not necessarily reflect the opinions of Ceros Financial Services, Inc.

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All the information in our newsletter is believed to be reliable and much of it is based on the proprietary research of Capital Research Advisors, LLC itself. However, because of the volume of information we review and the frequency with which it changes the information can only be provided as is on a best efforts basis. The information is not intended to be actionable investment research and therefore should not be used as such. Sources for this information include, but are not limited to, CBS MarketWatch, Big Charts, Bloomberg, Streetscape, Money/CNN, Futuresource, Stock Chart, Yahoo Finance, AmiBroker and

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Suwanee, GA 30024
800 -767- 5364
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