Fed officials pushed back on the markets’ aggressive rate cut projections.

  • Bostic:

 

Source: Reuters   Read full article

 

  • Goolsbee:

 

Source: @economics   Read full article

 

  • Williams:

 

Source: CNBC   Read full article

Nonetheless, the market is still pricing in some 140 bps of rate cuts next year.

 

 

US Economy

 

  • US manufacturing output climbed last month, spurred by the conclusion of the UAW strike.
  • Excluding vehicle production, US industrial output has been deteriorating over the past two years.
  • The NY Fed’s regional manufacturing index (the first such report of the month) dipped back into contraction territory this month.

 

 

  • Staff reductions accelerated.

 

 

  • At the national level, the US manufacturing PMI from S&P Global surprised to the downside amid soft demand.

 

 

  • However, service firms are reporting growth.

 

 

  • Mortgage rates are down sharply from the peak (2 charts).

 

Source: Mortgage News Daily

 

 

  • The NAHB homebuilder sentiment index showed a modest improvement this month, driven by a pullback in mortgage rates.
  • Asking prices for newly-listed homes are well above last year’s levels.

 

 

  • CoreLogic sees home price appreciation running below 3% next year.
  • Over 41% of household income now goes into mortgage payments for recently purchased homes.

 

 

  • The proportion of mortgage-free homes has been rising.

 

 

  • At the national level, the World Economics SMI index remains in growth mode.

 

 

  • The stock market is pricing in a sharp rebound in US manufacturing activity.

 

 

  • The Cleveland Fed’s median CPI measure remains elevated.

 

 

  • Consumer confidence jumped this month, boosted by the stock market rally and cheaper gasoline.
  • Existing home sales remained soft last month, but firmer mortgage applications point to an uptick.
  • Despite the pushback from Fed officials, the market is pricing in over six 25 bps rate cuts next year.

 

 

Market Data

 

  • Historically, commodity bull markets have occurred alongside weak real S&P 500 returns.

 

 

  • US growth stocks appear stretched versus value stocks, which may point to a decade of weak relative returns.

 

 

  • Office construction starts:

 

 

  • 72% of S&P 500 members have underperformed the index this year.

 

 

  • Finally, here is a look at US stock market cycles over the past 60 years.

 

 

Great Quotes

 

“The most dangerous words in investing is ‘This time it’s different” – Sir John Templeton

 

Picture of the Week

 

Christmas Tree in Castle Square, Old Town, Warsaw Poland

 

 

 

All content is the opinion of Brian Decker