Wednesday, June 1st, turned out to be one of the most volatile days in the market thus far this year.  Soft employment projections and light manufacturing numbers created whispers of a double dip recession (which appear to be premature give one week’s worth of data).  Nonetheless, the cumulative data releases “tanked” the equities sector and rallied Fixed Income to its highest point of the year.

On the data, Federal Reserve officials were in no hurry to respond to indications that US economic growth had hit another soft patch, despite rumors in the financial markets that the Fed might start a new program of US Treasury bond purchases to boost growth.  The central bank has already purchased more than $2 trillion of Mortgage and Treasury bonds.  The purchases were meant to hold interest rates down by reducing the supply of securities in private hands and to drive investors into areas such as stocks to encourage businesses and consumers.  Fed Chairman Ben Bernanke signaled in April that the hurdles to more "quantitative easing," as it is known, is very high and Fed officials have done nothing to indicate that Mr. Bernanke's guidance has changed as economic data has worsened as of late.

Additionally, in an April news conference, Mr. Bernanke said the tradeoffs that would come with additional purchases were becoming unappealing.  "It's not clear we can get substantial improvements in [employment] without some additional inflation risk," he said.

Fed officials have largely held to that line as well.  In comments last week, St. Louis Fed President James Bullard said the Fed was entering a period in which Fed policy will be on pause, meaning it won't be trying to push interest rates either higher or lower.  Chicago Fed President Charles Evans, a strong advocate of past programs, said earlier last month that what the Fed had done already was "sufficient."  And in comments Wednesday, Cleveland Fed President Sandra Pianalto said the Fed's current stance was appropriate and added the recovery was likely to continue, even though growth "may be frustratingly slow at times."

Mr. Bernanke has argued that past bond purchases have worked, but it has have taken a political toll on the Fed. Critics in Congress and overseas say the Fed is fueling inflation globally.  It is clear that the Fed does not want to evoke “QE3” unless they absolutely have to.

Summary: Markets are fickle and reactionary, and the negative economic data as of late has very quickly shifted the markets short term thought process.  While the string of news may or may not be a pre-cursor towards the future, we have benefited with the lowest interest rate cycle of the year in the short term.  For those buyers in the thick of the spring market, or the existing borrower who missed the first few refinance waves, now is the best interest rate climate of the year to capitalize.

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