The Profit Margin: November 20, 2023
Statistic of the Week
Baby boomers are dominating the housing market. The boomers have about $18 trillion of value in their homes. (Millennials have about $5 trillion). 51% of those over 50 are planning on downsizing – a trend that would eventually bring 30 million homes on the market. But… the median age for a repeat buyer (someone who has purchased a home before) is now 58 years old. In 1981, that figure stood at 36.
Global Perspective
The Bank of Japan, the central bank for the nation, is slowly unwinding an immense monetary stimulus program. This is being challenged by weak household and business spending, as the Japanese economy shrank at a rate of 2.1% in the third quarter. Economists believe that an inflation rate of 3% is pressuring Japanese economic activity and could ultimately cut into domestic demand.
Market Moving Events
Monday: Leading Economic Indicators
Tuesday: Existing Home Sales, FOMC Meeting Minutes
Wednesday: Jobless Claims, Durable Goods Orders, Consumer Sentiment
Thursday: US Markets Closed
Friday: US Markets Close at 1PM EST
Commentary
Multiple positive inflation data points (chart right) helped push equity prices higher and bond yields lower last week. All three major domestic averages logged positive weekly performance. The Nasdaq was the week’s leader, up 2.37%.1 The S&P 500 rallied 2.24%.2 And the DJIA moved 1.34% higher.3 The Nasdaq has completed its best three-week stretch since April 2020, while the S&P 500 has not seen such a strong three-week period since May-June 2020.4 The yield on the 10-year Treasury fell 0.20% on the week to finish Friday with a yield of 4.44%.5
With continued disinflation (a slowing of the inflation rate, not deflation), investors will continue to monitor for hints of change to Federal Reserve policy. At this point, the markets are pricing in no more rate hikes. The next move that the futures markets are predicting is a rate cut in May.6 While several Federal Reserve officials are scheduled to speak this week, and we expect them to continue their “talk tough” on inflation, it is likely their focus is shifting to the employment situation. The labor market is still strong; however, there has been some softening around the edges. Initial jobless claims hit a 3-month high.7 By itself, this is nothing to worry about. But continuing claims (those remaining on unemployment benefits), are hovering around a 2-year high.8 The labor market was too tight for too long. And, we do want to see some gradual easing. We do not want an overcorrection.
The week ahead is shortened because of Thanksgiving. There are several key earnings reports. Light volumes could increase volatility.
Sources
Market Moving Events:
MarketWatch.com
Chart of the Week:
Clearnomics,
Bureau of Labor Statistics
Statistic of the Week:
Fortune Magazine, The Washington Post
Global Perspective: The Economist
Commentary:
1.Bloomberg
2.Bloomberg
3.Bloomberg
4. Investor’s Business Daily
5.MarketWatch.com
6. Barron’s
7. Investor’s Business Daily
8. Investor’s Business Daily