You are currently viewing Market Snapshot 6.20.23- Not Much News

Market Snapshot 6.20.23- Not Much News

Good Tuesday AM and I hope you enjoyed the Juneteenth holiday,

Not much news coming this week. More Fedspeak than anything.

Some articles out on how Mortgage bonds are attractive, which is giving bonds a little lift while equities suffer. I think the note from below is on point.

The calendar doesn’t have a lot this week although housing data yesterday and this morning much better than forecasted. The week headlined with Jerome Powell at Congress with several other Fed officials also speaking. Last week the Fed paused its increases; debates continue whether the Fed is finished or just taking a breath. Data will tell although we expect the Fed is finished. Can’t tell it by the way the equity markets are rallying; economic outlooks don’t look that shiny, rates are beginning to pressure consumers’ credit cards, the cost of basic staples increasing, the service sector that had been holding firm is beginning to show weakness, manufacturing weak, M2 money supply is flat, China’s economy rapidly slowing. The stock market is being stretched and we expect the indexes are headed for a decline, the higher they go, the bigger the declines. If equities do roll over and the economic outlook changes in the minds of investors and traders, the Fed will end its increases.

And a few other interesting market tidbits.

While 51% of earners in the nation make $75,000 or less, only 23% of available home listings are affordable for these households, according to a report published by the National Association of Realtors and The situation is even worse in cities like San Jose, Calif., and New York where only 5% and 13% of respective available listings are affordable for these families.

Good news for Bonds (and may be why we are seeing a little lift today).

The U.S. mortgage securities market is enormous at $8 trillion, but it gets little attention from investors. That’s a mistake because yields on mortgage securities, now in the 4.5%-to-5.5% range, are unusually appealing relative to U.S. Treasuries, and carry little or no credit risk. “Mortgage securities are not only cheap on an absolute basis, but also cheap on a relative basis,” says Dan Hyman, a portfolio manager of the Pimco Mortgage Opportunities and Bond fund (ticker: PMZIX). Hyman notes that corporate bonds—the main alternative to mortgage securities—trade near their historic averages relative to Treasuries. There are other high-profile fans of the mortgage sector, including “bond king” Jeffrey Gundlach, the founder and CEO of DoubleLine Capital, and Dawn Fitzpatrick, chief investment officer at Soros Fund Management.

And be careful where you invest.

Investors are paying less for bonds linked to New York subways and buses. Downtown-focused real-estate investment trusts trade at less than half their prepandemic levels. Bondholders are demanding extra interest to hold office-building debt. Downtowns have been a mother lode for American cities over the years, providing billions of dollars in tax revenue along with their distinctive skylines. In turn, investors who bet on downtown office towers, or on the trains and buses delivering workers to them, could generally trust they held a winning hand. Now, with white-collar workers spending more time in their home offices, a phenomenon that shows few signs of ending, investments linked to downtowns are trading at falling prices in volatile markets.

Please remain safe and stay healthy, make today great!