Market Snapshot November 29, 2018
Good Thursday A.M.,
There is some data out today (below), which was mixed. Unemployment up but so was income and spending. Pending home sales tanked. Inflation is currently nonexistent. I don’t want to say it’s irrelevant today, but the data has much less impact than the reverberations from Mr. Powell’s speech yesterday. During his speech he shared that the Fed rate was “just below” normal. Markets took that as a sign they would only see one more rate hike (which is both unlikely and has already been priced in) and started to run. Dow ended up 600+, bonds pushed through resistance and most everyone went home smiling. Today stocks are giving back about 20% of those gains. Bonds still have the wind at their back with the 10-yr at 3.02% and mortgage bonds +15bps. The 10-yr id trade below 3% briefly overnight, but other than it being a talking point, we can’t rely on that as an indicator. The only other data point today will be the release of the minutes from the last fed meeting. I suspect there will be a marked change in posture in those notes from Mr. Powell’s speech. We will see. If we can close below 3% on the 10-yr, I think I would float.
- Unemployment Jobless Claims: Actual 234K, Consensus 220K, Last 224K.
- Personal Income for Oct: Actual 0.5%, Consensus 0.4%, Last 0.2%.
- Core PCE for Oct: Actual 0.1%, Consensus 0.2%, Last 0.2%.
- Pending Home Sales Index for Oct: Actual -2.5, Consensus 0.5%, Last 0.5%.
Looking for a reason to buy now? I don’t agree with the forecast, however Zillow is predicting the 30-year fixed mortgage will be at 5.8 percent by the end of next year, the highest level since the Great Recession. This will spur many potential homebuyers to reconsider renting, which will fuel a new increase in rent appreciation as demand for this housing sector grows. On the bright side, next year will also see home prices growing by 3.79 percent in 2019, according to a Zillow survey of more than 100 housing experts and economists. And more residential properties will be destroyed as the frequency and magnitude of natural disasters intensifies over time.
Make today great!