The markets are surging to new highs today’s with more positive news of the coronavirus vaccines (The Primary Bull Driver). Today’s U.S. reports revealed a disappointing November consumer confidence drop (Bear Alert), an expected November pull-back for the Richmond Fed index, and remarkably strong September and Q3 gains for the home price indexes. For confidence, we saw a November drop to a 3-month low of 96.1 from 101.4 (was 100.9) led by expectations, alongside small job differential and inflation index gains.
However, for Richmond, a November drop to 15 from an all-time high of 29 was accompanied by an ISM-adjusted decline to a still-solid 55.3 from a 2-year high of 61.0.
The FHFA house price index surged 1.7% in September, leaving the largest monthly gain on record and another all-time high, while the S&P Case Shiller house price index climbed by a solid 1.2% to leave a fresh record high for that index as well.
We’re seeing a modest but thus far manageable pull-back in expectations with the virus resurgence, while the housing market is in the midst of an historic boom.
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* Consumer confidence fell to a 3-month low of 96.1 in November from 101.4 (was 100.9) in October, versus a 6-year low of 85.7 in April and an 18-year high of 137.9 in October of 2018.
* The current conditions index fell to 105.9 from a 7-month high of 106.2 (was 104.6) in October, versus a 7-year low of 68.4 in May.
* The expectations index fell to 89.5 from 98.2 (was 98.4) in October, a 3-month high of 102.9 in September and a 4-year low of 86.6 in August.
* The job strength diffusion index rose to an 8-month high of 7.2 from 7.1 (was 6.6) in October, versus a 6-year low of -15.7 in April, and a 19-year high of 38.3 in August.
* The Conference Board’s 1-year ahead inflation index rose to 5.7% from 5.6% in October, versus a 9-year high of 6.6% in June and a 4.3% cycle-low in February of 2019.
* The Richmond Fed index fell to 15 from an all-time high of 29 in October and a 2-year high of 21 in September, versus a -54 all-time low in April, and a prior all-time low of -44 in February of 2009.
* The Richmond jobs index fell to 15 from a 2-year high of 23 in both September and October, versus a record-high of 26 in August of 2018, an 11-year low of -22 in April, and an all-time low of -35 in February of 2009.
* The Richmond workweek slipped to 9 from a 16-year high of 23 in October that was also seen in February of 2018, versus an 11-year low of -28 in April and an all-time low of -39 in February of 2009.
* The FHFA house price index surged 1.7% to 302.5 in September, while the S&P Case Shiller index surged 1.2%, leaving fresh record highs for both.
The Conference Board’s consumer confidence index fell -5.3 points to a 3-month low of 96.1 in November from 101.4 (was 100.9) in October and 101.3 in September, versus a 6-year low of 85.7 in April, leaving modest November declines for most survey measures. (BEAR Alert – If confidence continues to drop, we could see lower consumer spending which will drop the markets.) We’ve seen small erratic oscillations in most measures since June around levels that are in expansion territory, and well above readings from prior recessions.
The Conference Board’s September 1-year ahead inflation index reading of 5.7% remains historically high despite a fifth consecutive decline, as the public faces high prices for a wide array of necessities subject to supply chain disruptions. This has occurred despite more moderate CPI and PPI gains that reflect “core” price weakness for goods where demand has fallen i.e. luxury goods like clothing, and unobserved prices like owner’s equivalent rent.
For other November surveys, Michigan sentiment fell to 77.0 from a 7-month high of 81.8 in October, versus an 8-year low of 71.8 in April, a 2-year high of 101.0 in February, and a 14-year high of 101.4 in March of 2018. The IBD/TIPP index fell to 50.0 from an 8-month high of 55.2 in August but a lower 45.0 in September, versus a 5-year low of 44.0 in July, a 59.8 cycle-high in February, and a low from the last recession of 37.4 in June and July of 2008.
The Bloomberg Consumer Comfort index rose to 49.8 in the third week of November to leave a 48.4 average thus far in November, versus averages of 47.2 in October, 48.7 in September, and 44.3 in both July and August. The monthly average marked a 6-year low of 35.9 in May and a 66.2 cycle-high last January. The weekly index marked a 6-year low of 34.7 in May and a 20-year high of 67.3 in January.
THE FHFA and S&P Case Shiller Home Price Indexes:
The FHFA house price index surged 1.7% to 302.5 in September, leaving the largest monthly gain on record, and another all-time high on the index. It follows a 1.5% increase to 297. (was 297.7) in August. The index has posted monthly gains since January 2012, with the exception of a small dip in May. Home prices by this measure are up 9.1% y/y versus the 8.% y/y (was 8.0% y/y) growth rate in August.
All nine regions posted gains on the month, paced by the 2.4% climb in the mid-Atlantic area. Home prices are up a record 3.1% in Q3 versus Q2, and are up 7.8% y/y for last quarter, the fastest year-over-year rate of appreciation since 2006
The FHFA attributed the strength to the “historically low interest rate environment, rebounding housing demand, and continued supply constraints.”
The S&P Case Shiller house price index climbed by a surprisingly solid 1.2% to 232.5 in September for the 20-City index (NSA). This is another fresh record high on the index. It follows the 1.2% jump to 229.7 (was 229.4) in August. The monthly index has been on the rise since February.
On a 12-month basis, the index is up 6.6% y/y, the fastest pace since April of 2018, versus 5.3% y/y (was 5.2%) previously. The y/y index has been in positive territory since May 2012.
The September 10-City index increased 1.3% to 245.0 after the 1.2% August gain to 242.0 (was 241.5). The 12-month index was rose to 6.2% y/y versus 4.9% y/y (was 4.7%).
All of the 20-cities surveyed posted y/y gains, led by Phoenix (11.4%) and Seattle (10.1%), with Chicago (4.7%) and San Francisco (4.3%) bringing up the rear.
Advisor Market Report