Good Thursday AM,
A good amount of data out today. CPI was largely at expectations. The core was at 1.6% and the Annual was at 1.2%. Unemployment claims were the bigger miss. Expected at 725k, new claims jumped to 853k. This is going the wrong way folks. We need more employment not more unemployment claims. Stocks have not yet rolled over so, with that bonds are not improving. Treasuries and Mortgage bonds are both flat. It is still too early to tell what equities will do today and it almost feels like the quiet before a storm. However, all this talk of stimulus is keeping air in the bubble. Speaking of which, the House has voted to fund the government for another week to give time for the powers-that-be to continue to “negotiate” (aka argue) about the Covid relief deal (aforementioned stimulus).The bill to fund the government for another week will now go to the Senate for them to approve and kick the can down the road (it’s expected to go through just fine). In the meantime, the same sticking points apply – McConnell wants protections for businesses against Covid related lawsuits along with a side helping of “no soup for you” to local and state governments who are going to need some big time bailout money after locking down and killing their economies. Pelosi wants to bail out the local and state governments and doesn’t want to agree to the business protections. The one thing that does seem to be consistent is that there are two different plans floating around… the $908 billion bipartisan plan and the $916 billion plan that Mnuchin brought to the table this week. Markets seem to have already priced in about a trillion dollars in a stimulus… and when a deal does get announced it shouldn’t shake up rates too much (but could be a blip in pricing for a day or two). In the unlikely event that the deal falls apart and doesn’t get into the spending bill this month, we would likely see bonds improve, but shouldn’t count on that happening.
Why is homeownership so important? Well, CoreLogic reporting on 3rd Q Equity Report, an overview of equity distribution across all US single-family residential properties with a mortgage. The number of mortgages in negative equity fell by 18.3% year over year in Q3 2020. The average equity gain of $17,000 per homeowner in Q3 2020 was the highest in over six years.
On to the vaccine and who is lining up to take it: two of the first people to receive the vaccine in the U.K. had allergic reactions to the injection, prompting a warning for those with a history of significant allergic reactions. Supposedly, most people are unlikely to have such reactions, but the shots might come with temporary side effects such as fever and muscle pain. Be careful…
As we get deeper into the month, trading will thin and become more volatile. I see the risks for worse pricing outweighing the benefit of waiting. Better off locking any December closings.
Please remain safe and healthy, make today great!
