Bulls Bounce as S&P Stumbles

Sep 7, 2023

Although the S&P 500 has dropped in the past week, sentiment has surged with the latest survey from the American Association of Individual Investors (AAII) showing 42.2% of respondents reporting as bullish.  That is up 9.1 percentage points from the previous week. While not large enough to earn any long standing superlatives, it marks the largest one week jump in bullish sentiment since July 20th when it increased 10.4 percentage points and indicates a significant increase in bullish sentiment.

Bearish sentiment in turn was lower at 29.6%. However, the weekly decline was much smaller at only 4.9 percentage points.  Although the jump in bullish sentiment did not borrow heavily from bears, the 4.9 percentage point drop was the largest one week decline since early June.

Additionally, the drop in bearish sentiment was enough to lift the bull-bear spread back into positive territory.  That follows two straight weeks of negative readings.  While not as elevated as the late spring and early summer, at these levels, the bull-bear spread is indicating more bullish sentiment than has been observed for much of the past year and a half.

Using the latest AAII data in combination with the findings from the sentiment surveys from Investors Intelligence and the NAAIM Exposure Index, our weekly sentiment composite indicates that investors hold slightly more optimism than has been the historical norm as the index is slightly positive.  That compares to negative readings the prior two weeks and extremely bullish readings as recently as the second half of July.

In last night’s Closer, we included a look at this composite with the addition of another sentiment indicator: the TD Ameritrade Investor Movement Index.

Housing Prices Back on the Rise

Sep 7, 2023

In last night’s Closer, we discussed a couple of recent releases of alternative housing data sets including the latest delinquency data from Black Knight and housing inventory numbers from Realtor.com. Zeroing on the latter, Realtor.com’s August inventory data showed only 585K active listings nationally after seasonal adjustment. Inventories have been drawn upon for seven months in a row, resulting in the lowest level since June 2022.  On the bright side, August did also see a seasonally unusual uptick in new listings, but that only puts a small dent in what are historically low inventories.

Using state level data aggregated by region, the multi-month drawdown in inventories has been observed throughout the country. The South has tended to have the highest quantity of homes on the market while the opposite applies to the Northeast. In fact, whereas other regions have generally seen inventories rise off of their lowest levels reached in late 2021, the Northeast is only slightly above its series low.

Similar to aggregate inventory levels, median days on market are well off their record lows early last year but have begun to roll over. Currently, median days on market is at 53 days, which is well below the pre-pandemic range.

Given the continued low supply, prices have swung higher with median prices at the highest level since last July both in terms of total price and price per square foot.  Rising at a high single digit month over month annualized pace, August also saw the most rapid appreciation since June of last year.

Breaking down home prices by geography, the West has the highest median home price in the country, but those prices have been relatively stagnant since early 2022.  The Northeast, on the other hand, has consistently had the second highest prices in the country and prices have been steadily rising. In fact, prior to seasonal adjustment, prices in the Northeast have risen 11% YoY compared to the next highest of 8.8% YoY in the Midwest and low single digit growth in the South and West.  For more in-depth coverage of housing and the economy, make sure to subscribe to our Closer feed.

Claims Notch New Lows

Sep 7, 2023

The latest update of jobless claims was broadly positive with both initial and continuing claims moving lower by more than expected. Although initial claims were revised up by 1K to 229K last week, this week’s reading  fell down to 216K. That means claims have broken down out of the past several months range, notching the lowest levels since the end of January.

Before seasonal adjustment, claims are even more impressively low at 190K. That marks the third week in a row below 200K, however, that is still above the comparable readings for the same weeks of the year in 2018, 2019, and 2022. Additionally, as we show in the second chart below, the current week of the year has historically been the one to see claims put in their annual low meaning from a seasonal perspective, claims will face headwinds from here on out.

Switching over to seasonally adjusted continuing claims, like initial claims the latest reading is back down to the low end of the recent range. Claims have been fluctuating around 1.7 million over the past couple of months, but at 1.679 million this week, continuing claims are tied with the week of July 15th for the lowest reading since January 21st.