Good Monday AM on this Thanksgiving Holiday week,
I love this time of year (other than the cold weather and the annual crud I catch). Something internally switches over though and I am reminded of people who I have come into contact with and who have had an impact on me. I enjoy the introspection, which I don’t make enough time for during most of the year.
Bonds are flat to slightly better on the morning.
This is a short week and volume is already on the light side. Volume will continue to drop as the week goes on. Holiday weeks can be dicey because many big traders (the guys that run the desks) leave early for the holiday. This leaves their underlings and the retail amateurs at the helm. This impacts the market direction and rarely makes sense. Also, when the volume is low, the market can move bigger, up or down, but not be sustainable either way. So, we get chop and chop grinds up all traders. There is no news until Wednesday, so the charts matter a ton! For this reason you may see some big swings but I would not expect the price to improve much if at all.
In advance of reading the rest, I know it will appear at first negative however, I am hoping you will see it for what it is: more contrarian. While understanding that nothing turns on a dime, I am absolutely bullish on rates and on housing. We must clean up the economy (which is happening rapidly despite what the Fed wants to currently acknowledge). If you’ve seen Shawshank, we end up on the beach. We’re currently in the scene where Andy is, well, a little dirty during his 300 yard crawl (enough said).
Why do I see the Fed pausing and pivoting? Why do I see the economy much slower already? Why do I see us coming out of this in 2023? Three reasons are below.
- Savings are quickly being depleted. All that stimulus money has vanished (like FTX assets)
2. Companies are laying off in large scale. It may not yet be in the employment reports but it soon will be.
3. Americans are trimming their holiday spending plans, anticipating spending less on gifts and charitable donations. Elevated inflation and weak consumer sentiment have made it hard for many households to pay for daily expenses. People plan to buy an average nine gifts this year, down from 16 last year, report Rachel Wolfe and Jon Hilsenrath.
And as a result, the smartest guys on the street are already capitalizing.
Investors are buying up housing industry stocks on the assumption that softer-than-expected consumer price data is a sign that inflation has peaked. Slower inflation could lead the Federal Reserve to ease its pace of interest rate increases, which could put less pressure on mortgage rates and encourage more buyers into the housing market, report Karen Langley and Ben Eisen.
Please remain safe and stay healthy, make today great!