Daily Sector Snapshot — 6/26/24
New Highs for Home Prices in 13 of 20 Cities
The latest monthly data on home prices from S&P CoreLogic’s Case Shiller indices was released yesterday. These indices track home prices in 20 major cities/regions around the US.
At the national level, home prices hit another all-time high in April (the data is released on a two-month lag). Month-over-month, the National index rose 1.2%, and it’s up 6.3% year-over-year.
Below is a look at the Case Shiller National home price index since 1990 compared to inflation as measured by CPI. As shown, home prices are up more than 300% over this time frame, which is good enough for just over double the rate of inflation.
Below is a table showing the change in home prices over various points in time for the Case Shiller indices. Boston and San Francisco were up the most month-over-month with 2% gains. The only cities that weren’t up at least 1% month-over-month were DC, Miami, Tampa, and Phoenix, but even these cities all gained at least 0.5%. On a year-over-year basis, all twenty cities are up at least 1.5%, while the composite indices are up 6-8%.
In late 2022/early 2023, we saw a pullback in home prices following an initial post-COVID surge in 2020 and 2021. At this point, though, 13 of 20 cities are back to new highs after prices have gone back up 10%+ for most cities since their 2023 lows. San Francisco, Seattle, Phoenix, Portland, Dallas, Las Vegas, and Denver are the seven cities that aren’t back to new highs yet. As you probably noticed, most of these are cities on the west coast where inventories are a lot higher than they are in areas like the northeast.
Since just before COVID hit in February 2020, home prices are currently up about 50% nationally. Miami and Tampa are up the most since COVID with gains of 70%+, while San Francisco, Minneapolis, Portland, and DC are up the least.
Below are Case Shiller home price charts for the twenty cities and three composite indices. Cities highlighted in green are trading at all-time highs.
Chart of the Day – July Seasonality
Fixed Income Weekly — 6/26/24
Searching for ways to better understand the fixed income space or looking for actionable ideas in this asset class? Bespoke’s Fixed Income Weekly provides an update on rates and credit each week. We start off with a fresh piece of analysis driven by what’s in the headlines or driving the market in a given week. We then provide charts of how US Treasury futures and rates are trading, before moving on to a summary of recent fixed-income ETF performance, short-term interest rates including money market funds, and a trade idea. We summarize changes and recent developments for a variety of yield curves (UST, bund, Eurodollar, US breakeven inflation, and Bespoke’s Global Yield Curve) before finishing with a review of recent UST yield curve changes, spread changes for major credit products and international bonds, and 1-year return profiles for a cross-section of the fixed income world.
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China Struggles
Nowadays, it doesn’t surprise anyone to see Chinese stocks underperforming as the country’s stock market has been mired in a long and steady downtrend for several years. Back in February, there was a brief respite from the selling as the Shanghai Composite bounced just over 20% through May. While Chinese stocks met the technical threshold for a bull market based on an intraday basis (based on closing prices, the Shanghai Composite was up just 17.4%), the rally was capped at the knees with a 7.6% decline over the next five weeks.
While a decline of less than 8% over five weeks isn’t necessarily an extreme move, how Chinese stocks have pulled back stands out. When looking at price charts, trends of lower highs suggest a heavy tape, and by this logic, Chinese stocks have never been heavier. While it’s hard to see in the chart above, over the last 20 trading days, the Shanghai Composite’s intraday high has been lower than the prior session’s intraday high 18 times! China joined the World Trade Organization in December 2001. During that time, there has never been another 20-day period before now where there were as few days where the Shanghai Composite had just two or fewer days that an intraday high was higher than the previous session!
Bespoke’s Morning Lineup – 6/26/24 – The Germans are Coming!
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“I’m afraid what will happen to Europe if it does fail.” – General Lucius D. Clay
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
In the corporate world, you often see scenarios where a company that has done well will use its inflated stock currency to buy beaten-down assets on the cheap. Based on this logic, you would expect US companies, which have steadily outperformed their European peers for years, to be on the prowl in Europe for some cheap bargains. Over less than 24 hours, though, we have seen two major headlines showing the opposite trend. Last night after the close, VW and Rivian announced a deal where the German carmaker will invest up to $5 billion in Rivian. Now, this morning German manufacturing firm Bosch is considering a bid for US appliance maker Whirlpool (WHR)!
The seesaw action in the markets of late is showing up again this morning, and this time, it’s technology, and specifically Nvidia (NVDA) rallying while most of the the rest of the market languishes. One exception in the old economy is FedEx (FDX). Shares are up over 15% this morning following its better-than-expected earnings report after yesterday’s close. On the revenue side, results ended a streak of eight straight weaker-than-expected reports, and it was the first time in seven quarters that sales grew on a y/y basis.
Overnight, equities in Asia were mostly higher even as reports surfaced that the BoJ will consider rate hikes at all of its upcoming meetings and is also expected to announce a reduction in its monthly asset purchases. The yen also fell to its lowest level since Christmas 1986! In Europe, the tone is weaker as the STOXX 600 is down fractionally following weaker-than-expected sentiment reports in Germany and France.
Divergences haven’t just been confined to the stock market lately. In the energy sector, we’ve also seen oil and natural gas follow different patterns. Starting with crude oil, while prices have rallied off the lows from June, the commodity’s price chart has carved out an iron cross formation where the downward sloping 50-DMA crosses down through the 200-DMA which is also sloping downward. Technical analysts view these patterns as a negative technical pattern.
Natural gas, on the other hand, is on the verge of a golden cross, which occurs when the 50-DMA crosses up through the 200-DMA as both are rising, and technical analysts view these patterns as bullish.
To continue reading the rest of today’s morning note, where we show how both crude oil and natural gas performed following iron crosses in crude and golden crosses in natural gas. You’ll also find much more analysis of global equities and economic readings released this morning, so read today’s full Morning Lineup with a two-week Bespoke Premium trial.
The Closer – Cruises, Credit Cards, Consumer Confidence – 6/25/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin with a look at the earnings of Carnival Cruises (CCL) followed by a rundown of consumer confidence (pages 1 and 2). Next, we review credit card delinquencies data (page 3) and the technical setups of metals and agricultural commodities (page 4). We close out with a recap of today’s 2-year note auction (page 5).
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