The Week Ahead: Is the Market Too Confident‪?‬ Advisorpedia's The Week Ahead Podcast, Powered by Tematica Research

Join Tematica Research's Chief Macro Strategist, Lenore Hawkins, and Chief Investment Officer, Chris Versace, as they discuss and debate what's driving the market and the economy this week.

Markets last week

So much for the inflation story - after 2 days to digest the Fed’s latest decision, if the concern is the Fed raising rates, high growth should have been hit and value preferred. The opposite happened. Thursday the tech heavy Nasdaq Composite & Nasdaq 100 closed in the green while the rest of the major indices closed in negative territory again. To really emphasize the lack of inflation fears, the 10-year Treasury yield dropped 6 basis points Thursday  to 1.509%. Long bond is now down 38 bp from recent peak on March 18 and back to the same level it was in February 2020 when Fed Funds rate was 1.6% and unemployment was 3.5%.

Big news was Fed 

Median dot plot fo 2023 move to 0.6% from basically 0 with 13 or 18 members seeing at least one hike by the end of 2023. This was 7 in March. 11 see at least 2 hikes by end of 2023.

The market really wants some sort of Oracle to tell them what's coming, but those dot plots, they aren’t it.


Go back to when these “dots”were first introduced by Ben Bernanke in January 2012 when the funds rate was also near-zero. For 2014, the “dots”called for two hikes to 0.75%. The Fed was all bulled up on growth  back then,too.  Where  did  we  finish  off  2014?  Try  the  zero-bound on the funds rate.
How about Powell and crew in September  2018? The dots said 3.375% for 2020. Where did we close the year? Try near-zero. Even at the peak, the funds rate never broke above 2.5%


Housing Boom? 


What about the recent notable downward drift in pending home sales?    
Homebuying plans from the University of Michigan Survey of Consumers are down to a 39-year low? 
S&P500 homebuilder index is in full-blown corrective mode? 
National Association of Homebuilder’s (NAHB) Market Index came in weaker than expected last week to the lowest read in ten months, driven by rising cost pressures and the low availability of lumber and other building materials. 
And now we have House Starts below consensus. Both Housing Starts and Building Permits for May came in weaker than expected for the second consecutive month. Starts haven’t fallen far from their March peak, but Building Permits are down more than 10% from their January peak and saw declines in every region of the country.
Building permits fell 3.0% to a 7-month low of 1.681 million units v consensus estimate of 1.730 m  - a  2.8% miss
Rental boom perhaps - Single-family rents rose 5.3% YoY in April, the largest 1-year gain in nearly 15 years.


May Retail Sales came in below expectations by a meaningful margin, dropping -1.3% MoM versus expectations for a decline of -0.8%. Ex-autos, the miss was by more than a full percentage point. One positive note is that April’s originally reported numbers were revised upwards, so the net is pretty much a wash.

Philly Fed last week followed the NY Empire with signs of the manufacturing sector peaking out. Survey came in at 30.7% in June, below 31% e from 31.5% in May and well below April’s 50.2%. Orders softened to 6 month low & backlogs down to 3-month low. Even delivery time index fell from 41.5% to 29.3% AND workweek subindex dropped to a 6-month low.

Economic Data to Watch THIS WEEK

Tuesday, June 22


May Existing Home Sales - (Last REPORT) Existing home sales in the US unexpectedly sank 2.7% to 5.858 million in April of 2021, compared to forecasts of a 2% rise. That’s 3 consecutive months of declines as housing supply continues to fall short of demand.


Wednesday, June 23: 


Weekly MBA Mortgage Applications Index -Last report mortgage applications in the US increased 4.2% in the week ending June 11th, the first rise in 4 weeks, data from the Mortgage Bankers Association showed. We’ll be watching because the average rate on