Good Tuesday AM,
Last night Perter Navarro, the US Trade Delegate, stepped on his tongue giving some thought that the US -China trade deal was over. That sent stocks down overnight until he and everyone in the White House (including the President) walked those comments back. Markets saw that as an opportunity to celebrate (yes, celebrate that the deal that was in place is, well, in place). With that, Bonds are under pressure this morning and The DOW is up 200+. Mortgage bonds are trying to break out of this current channel but keep getting denied. Kind of like trying to get into that club when you were 16 and underage and the bouncer laughed at you… maybe that’s an overshare. Anyway, equities continue to defy rational investment methodology. If all of your eggs are in the basket that the government will continue to issue money to provide liquidity at the expense of jobs, corporate profits, and GDP, that party ends where, after you spent all of your money on a limo, tuxedo and flowers, your date goes home with someone else and you’re broke. OK maybe another overshare, but the point is the most likely outcome is this ends badly for most retail/Robinhood investors. My thoughts are that institutional investors are starting to load up on short positions. As soon as there is a crack in the markets, those shorts will drive prices down. The toppling point is roughly 3% before computerized trading takes over and the real selling starts. It’s not a positive sign for the market when smart guys are short. Another comment on the market, well more of a did you know: the S&P, which is a broad base of equities and is a more reliable indicator of the markets heath, historically trades at 17x current earnings. If we used that same metric (tried and true for decades), the S&P would currently be below 2200 instead of where it is today, at 3149.
So with that, here are two sets of infographics. One on the markets and one on real estate.
Who owns US equities (this is not updated with the last 60 days, but does share that household percentage continues to increase since 2016)?
The down and dirty on home sales during Covid is that the average time houses are in the market is consistent with previous years, and homes have been selling quicker on average.
Please remain safe and stay healthy. Make today great!