Thoughts to Ponder . . .
- Don’t worry about what to wear today, your smile goes with any clothes.
- All you have to know about celery is that it’s made up of 95% water, and it’s 100% not pizza.
- Today I laughed until my abs started hurting, so I can skip the gym.
- Isn’t it funny that the number 2 pencil is the most popular?
- I walk around like everything is fine, but deep down inside my shoe, my sock is sliding off.
And Now on to The Market Update . . .
As of late, the stock market has been trading within a fairly-narrow range.
- At this point investors have accepted the reality that the Fed will likely raise rates at the December policy meeting.
- Bond yields and mortgage rates have been rising at a record pace since Donald Trump won the election.
- His anticipated stimulus plan and various financial regulation rollbacks are expected to create inflation, which works against fixed income investments like bonds.
- Investors have been taking money out of the bond market and putting into stocks, which tend to do well when inflation occurs.
Nowhere more than applications for mortgage refinancing has the impact of mortgage rates rising been seen.
- Since the election, applications for refinances have been plummeting and last week was no exception.
- The Mortgage Bankers Association of America reported that applications for refi’s declined 16.0 percent for the week ending November 25th.
- Some of the decline can be attributed to the Thanksgiving holiday however, rates are the main factor driving the slowdown.
Purchase applications have remained relatively stable, as the rise in rates has not deterred buyers.
- In fact, it is likely that fence-sitting buyers are jumping into the market to purchase before rates rise to the point that they may impact their ability to afford to purchase a home, or even qualify for financing.
Home-prices appear to be stable in that prices in the 20 major cities measured by Case-Shiller remained virtually flat.
- In smaller cities outside the main 20, prices have increased by 0.4 percent for September.
- Home prices are 5.1 percent higher than the same time last year, which essentially leaves the year-on-year differential, unchanged.
Further indication of a flat real estate market is the pending home sales index.
- The latest report for October showed the volume of sales up only 0.1 percent.
- With this index remaining flat, it basically indicates that final sales will likely remain little changed through the end of the year.
- The resale market for homes has been soft compared to the market for new homes, which to date has been having a good year.
The labor market continues to show signs of strength with the latest employment report released by ADP.
- On Wednesday, ADP announced that their private payroll forecast shows an increase of 216,000.
- This is far higher than analyst’s consensus of 160,000.
- Unlike prior years where ADP has not been able to come close to the labor department figures for employment, for the most part, this year ADP has been spot on with their forecasts.
- This latest report further bolsters the sentiment that the Fed will raise interest rates at the December meeting.
This week’s potential market moving reports are:
- Monday December 5th – ISM Non-Mfg Index
- Tuesday December 6th – Factory Orders
- Wednesday December 7th – MBA Applications, JOLTS
- Thursday December 8th – First Time Jobless Claims
- Friday December 9th – Consumer Sentiment