Trade deal stalemate, positive housing data
The United States and China seem to have reached another stalemate in trade deal negotiations. There is optimism that a deal will get done but probably won't happen until 2020. President Trump said this morning on national television, however, that the trade deal is "very close."
If no deal is reached, another set of previously-delayed tariffs on $156 million worth of Chinese goods are set to be enacted Dec. 15. It is still likely that those tariffs will be delayed again.
That constant back and forth has left the stock market in flux. All three major indices were down on Thursday with Amazon sliding by 0.6%. That was the third straight day of declines for stocks. The 10-year Treasury note yield dropped back slightly, trading at 1.75% Friday morning.
The minutes released from October's Federal Open Market Committee meeting show that members are not planning any more rate cuts for quite some time "as long as incoming information about the economy did not result in a material reassessment of the economic outlook."
Government shutdown avoided
The U.S. government avoided a shutdown with a short-term funding plan that runs through Dec. 20. That bill includes a 3.1% wage increase for military members. It's important to note that, generally, government shutdowns do not have a stark effect on markets. Studies from LPL Financial spanning the last 18 shutdowns show the media change in the S&P 500 was 0.0% over the course of a shutdown. However, studies have shown that budget debates do have significant impact on stock performance.
Solid housing data for October
October was a busy time for the housing industry as permits for new construction jumped by 5%, a post-recession high. Year-over-year, building permits are up 14%. The report from the Commerce Department also shows that housing starts increased by 3.8%.
This week, the Freddie Mac 30-year fixed-rate mortgage average was at 3.66%. One year ago, the average was 4.81%. As a reminder, that rate is just an average. Mortgage rates depend on your credit score, type of loan and down payment among other factors.
Existing home sales rose by 1.9% in the month of October with single-family units leading the way, according to the National Association of Realtors. Year-over-year, existing home sales are up 4.6% reflecting the positive sentiment with lower interest rates.
However, inventory continues to be a headwind for home sales and part of the problem is people, quite simply, aren't moving. The latest migration data from the Census Bureau shows that a paltry 9.8% of the U.S. population moved from March of 2018 to 2019. That's the lowest percentage of migration going back to 1947 in Census records.
As of October, inventory of existing homes for sale fell to 3.9. Typically, a 6-month supply of homes for sale is considered to be a balanced market. Part of the issue is the Baby Boomer generation making the decision to age in place and not downsize.
*Due to the Thanksgiving holiday, there will not be a Market Update on Nov. 29.
