We all know people who have been looking for a house over the last few months. This search story is similar across the country.
Lack of Supply + High Demand = Inflated Prices
Pre-2020, a common refrain was that millennials are just not buying houses.
Equities advanced last week over the shortened holiday week. The S&P 500 was up 2.7%, led by a rebound in the Technology sector. The NASDAQ was up 3.4% and took its cue from a decline in Treasury yields.
There was a significant drop in personal income in February; it decreased by 7.1% over the month. This is after January saw an increase of 10.1%. The main contributing factor to the decrease was that there were no stimulus checks sent out in February.
Equities came under pressure this week as the anticipated stimulus pop failed to materialize. The S&P 500 was down 2.1% on the week, but there was significant dispersion with many popular stocks down much more.
A big economic number this week was the Retail Sales report for February. The decline of 3% comes after a strong January number of 7.6%. The decline, which was larger than expected, could be a function of more moderate sales after January’s bump from the second round of stimulus checks.
Equities bounced back this week with the S&P 500 advancing 2.1%. Focus continues to be on the outperformance of stocks with lower valuations. The NASDAQ continues to underperform amid big swings in intra-day volatility.
Inflation has become the central topic in financial markets given its linkages to both bond and equity prices. It is also one of the most controversial and difficult-to-understand concepts. The Federal Reserve’s own model has been inaccurate for decades and they are now acknowledging this as they change their working assumptions.
Orders for durable goods in January, a leading economic indicator, were up by 3.4%. This is the ninth month in a row the index is up. The increase was led by transportation orders, up eight of the last nine months.
Equities bounced back mid-week amid sector divergences. The S&P 500 was down 0.1%, balanced by declines in high growth stocks and gains in so-called value stocks. Rising interest rates put pressure on growth stocks nearly every day, although some days witnessed mid-day buying to limit the damage.
Equities inched up on the week, setting new highs in the process. The S&P 500 advanced 0.6%, but there was notable rotation under the surface. The energy sector jumped 4.0% as freezing temperatures across the country forced oil shut-ins and boosted demand for natural gas and other related commodities.