Economy
Fresh data from the National Association of Realtors showed signs of weakness for the housing market. It was the worst April since 2009 for sales of existing homes which may not come as a surprise to those of you following this industry. We haven't seen prices come down for single family homes in a meaningful way, and with the 30-year mortgage rate back up to 7% this week, the affordability picture isn't getting any better. The Wall Street Journal reported last week that demand from first time homebuyers is at an all-time low. The national homebuilders that are large enough to self-finance deals are able to offer new mortgage rates lower than the typical loan, but that's not been enough to get people off the sidelines.
For as bleak as the housing market looks right now, the labor market is still resilient. We saw no uptick in initial claims for unemployment insurance last week compared to the week prior. There's some important inflation data on deck coming next Friday which has the potential to move the market's expectations on the Fed's policy moves later this summer.
Source: WSJ
Markets
Things got off to a rocky start earlier this week as the market reacted to the recent credit quality downgrade on the US by the rating agency Moody's. The downgrade can't be pinpointed to one factor, but the passing of the "big beautiful" bill in the House over the weekend may have been a contributing factor as estimates are for a $3 trillion expansion in the deficit over the next decade. It's too early to tell what, if any, measures will make it into the new law, but the bond market definitely had some opinions. Rates on treasuries shot higher this week, possibly signaling investor concern about the trajectory of our country's fiscal policy. Currently about $1 in every $7 the US spends is on interest payments on debt, and rates moving higher has the potential to make our interest expense an even greater piece of the pie.
Then Friday, apparently frustrated with the pace of negotiations with the EU, President Trump threatened 50% tariffs on EU goods. He also had Apple in his crosshairs and threatened 25% tariffs on iPhones unless they were manufactured in the US. For the week, the S&P 500 fell 2.61%, putting us back in negative territory for the year and about 5% off the all-time high.
What We're Reading
- Trump's Tariffs: Where Things Stand - WSJ
- The Hardest Day to Invest is Always Today - Ted Seides
Have a great weekend.
Dogwood Wealth Management