- Millennials, or those born from 1981-1996, are now the largest adult generation. In the first eight months of this year millennials accounted for 67% of first-time home-purchase mortgage applications and 37% of repeat purchase applications. Given that the largest cohort of this generation turned 30 this year the demand for homes is unlikely to decrease soon, indicating that there is support for the current real estate valuations.
- The Fed's plan to raise interest rates three times in 2022 may be derailed by recent developments and planned pull backs. These include 1. the US is now seeing a surge of more than 120,000 covid cases a day. 2.The child-tax credit payments ended last week 3. the student loan forbearance program will end at the end of January. The last two points will force 25 billion dollars out of the economy each month. Bear in mind these events will be occurring as high inflation is disproportionately reducing the real income of low and middle-income Americans.
- Investors have added more money into investment grade corporate bond funds in 43 of the 50 weeks this year. This demand comes as investors look to buy the bonds of large companies with strong balance sheets in an environment where attractive yields are hard to find. The issue is that top-rated corporations are expected to issue 5%-10% less bonds this year. This reduction in new supply combined with continued strong demand is expected to keep bond valuations high.
- Felipe Schwartzman, a senior economist at the Federal Reserve Bank of Richmond, recently cited research that indicates that when the government provided around $2 trillion in pandemic aid, which was equivalent to roughly $16K per household, it disincentivized people to return to work. This could have accounted for a 0.6% decline in the share of the working age population. However, with the personal savings rate returning to pre-pandemic levels people may start looking for jobs with more immediacy.
WSJ - Millennials Are Supercharging the Housing Market
Barrons - The Fed Could Be Shifting Gears at Just the Wrong Time
Bloomberg - Falling Corporate Bond Sales Are one of the Debt's Few Positives
WSJ - Vast Household Wealth Could Be a Factor Behind US Labor Shortage
Economic Calendar
Monday: Leading economic indicators(Nov)
Tuesday: Current account deficit (Q3)
Wednesday: Gross domestic product (Q3), Gross domestic income (Q3), Consumer confidence index (Dec), Existing home sales (Dec)
Thursday:Nominal personal income (Nov), Nominal consumer spending (Nov), Core inflation - mo (Nov), Core inflation - yr/yr (Nov), Real disposable income (Nov), Real consumer spending (Nov), Durable goods orders (Nov), Core capital goods orders (Nov), New home sales - SAAR (Nov), UMich consumer sentiment index (Dec), Five-year inflation expectations (Dec)
Friday: None Scheduled
