As promised, it’s always good to step back occasionally and make darn sure we are not all being Lemurs (most known for following each other without thought) and gathering together, just before we go over the cliff….
Ok, so you are about to receive a blast of charts… we will code this post Forecast so we can go back and look at the “Forecasts” later….
Is the Market (S&P 500) Expensive?
This is the trailing PE (Price Earnings Ratio) the most macro valuation measure used from our Friends at Factset !
Green dotted line represents, 5 year average, and the dark dotted line represents the 10 year average….
Answer – Not cheap, but MAYBE not as frothy as it may feel at times (present party included) – certainly have been MUCH more expensive in the past…
Remember, tariff progress may release some pent up/held on the sidelines demand!
What Areas are PROJECTED to Grow in 2020
This is what analysts are PROJECTING/Forecasting (hence our coding for future review) for the year 2020!
Recent Losers are expected to be next years winners- i.e. Energy and Materials….
What happens if Tariff Agreements are not reached? Not being negative here but we must consider this could be better or worse!
Earnings Versus Market Price Movement
You hear us say all the time, Earnings are the ultimate driver of prices… and they are….
No one says this is easy…. Earnings have been flat, but markets up….
Theoretically this should not happen … UNLESS market participants expect future earnings growth as markets are forward looking.
How about the Consumer?
Recall the consumer drives over two thirds of the economy through spending in our consumer consumption economy….
A Happy Consumer = Spending Consumer
One of the many Consumer Sentiment Indicators… University of Michigan…
Steady as she goes!
Ok … you get the point, not too bad!
We could find something really hot and really cold, but these are the biggies from a high level!
Of course we did not forget the inverted yield curve and it’s recession predictiveness … we spoke about it here, here, here and here…. more to come…
Have a Great “Lemur Checkup” Day!
John A. Kvale CFA, CFP
Good News On Housing, Mortgage Rates, And A Happy Consumer … Early Observations
Last week we had two good personal data points concerning housing which set us in motion for additional research.
With residences being one of the larger assets for many, a downturn in prices i.e. 07-09 … caused pause for much of the consumer due to a drop in asset value, creating a negative feed back loop, thereby lowering confidence and spending.
Things may look different this time.
Initial Data Points On Housing/Residence
The jury is still out on all of this, and we would think commercial i.e. Office Properties, raw land, and other similar assets may see negative pressure initially coming from our current situation and the easy pivot to Virtual ….
However a silent winner, or at least a stabilization of value may be residential. It makes sense as there are usually winners and losers when change occurs.
With two noted sales last week, we set out for more information on what may be occurring.
The MBA Purchase index, (includes all purchase mortgage applications) has bounced back strongly and is back to about 90% of the original tracking high, set just a few months ago. Hat Tip RB, for bringing this to our attention, we were very surprised!
Here is a good chart, which is copyright protected, as such, not included in this post.
Mortgage Rates Lower – Included in the nice bounce back of the Purchasing Index above, are the following updated lower Mortgage rates … a second positive to go with the consumer and residence real estate.
While this lowered mortgage rates took time to develop (blip in chart), due to a dash for cash and a wave of refinance, along with underwriters concerns of consumer credit health, due to heightened unemployment, it does appear lower rates may be adding wind to the sails of residential market.
Consumer Confidence – One of the most widely followed confidence indexes, the University of Michigan Sentiment index last week released their latest results, and found surprisingly the index jumped higher than expected, mostly based on current situations, likely associated with the light at the end of the tunnel of openings.
Here is a chart from last month, again copyright restricts last weeks results, but this index bounced back to almost 74 last week…again surprisingly.
Certainly headed in the correct direction.
So a hot New Homes Mortgage Purchasing Index, along with lower Mortgage rates and a happier than expected consumer may lead to additional good news for the economy, spending, asset prices, and an eventual return to a more normal!
It’s early, and things could change quickly, but the initial bread crumbs look VERY positive!
Have a Great “Positive Consumer” Day!
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
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Posted in Forecast, Interest Rates, Investing/Financial Planning, Market Comments
Tagged Consumer Confidence, MGA Purchase Index, Mortgage Rates, U of M, University of Michigan