The most recent draft proposal includes $600 in direct payments to individuals, $300 per week in extra unemployment insurance payments, ~$17B for airlines and more aid for small businesses. Advance seasonally adjusted insured unemployment rate was 3. 8%, a 0. 1 percentage point decrease from the previous week’s unrevised rate. 5-year Treasury-indexed hybrid adjustable rate mortgage averages 2. 79%, unchanged from a week ago and down from 3. 36% a year ago. Mansion Global estimates home prices to rise 5% in 2021 driven by robust activity in the U. S. housing market. But the type of inflation being priced in is healthy from the Fed’s point of view, such as the economy growing as vaccines are administered, Cabana notes. Bond yields are edging up today, indicating the market’s comfort with the employment data.
The integration of technology with the financial sector will continue as a key theme in 2021. More fintech firms will come to market through IPOs, insurance companies and banks will purchase fintech, consumers will continue the shift to virtual financial service delivery, they said. They see continued low rates with no rate hikes through at least 2022 and bond yields staying below 1. 5%. However, if fiscal stimulus doesn’t develop or is too modest, a recession could occur in H1, limiting momentum for an H2 recovery. “If that occurs, financial stocks would be at risk for higher credit costs, limited capital return, and even lower bond yields, ” they wrote.
AMZN is up 5. 5% since the start of November, when the vaccine-inspired rally moved cash to recovery stocks. Prepayments fell 11% from October’s 16-year high, but with interest rates at record lows and refinance incentive at an all-time high, prepay activity is likely to stay elevated in coming months, Black Knight says.
With the real 10-year yield at -1. 03%, the 10-year breakeven of 1. 96 is at levels not seen since May 2019. China remains a leading market for electrification with its dual-credit policy; current IHS Markit forecasts predict BEV share of ~14. 6%, representing nearly 3. 2M passenger vehicles in China by 2025. With an ongoing auto demand recovery, 2020 Mainland China is seen delivering 23. 6M units (-5% Y/Y); 2021 China market is seen delivering 24. 9M units (+5. 6% Y/Y). Region-wise, European recovery prospects are mixed, with worrying virus resurgences and ongoing restrictions, varied economic support, the Brexit negotiations and fears for a post-holiday third wave of the virus. Global new light vehicle sales in 2021 are estimated to be 83. 4M, up 9% from a 2020 projection of 76. 5M amid a recovery in industry demand levels, especially in major markets, IHS Markit says. Amazon has been weighing on the sector lately, underperforming the broader market.
The Federal Open Market Committee keeps the federal funds rate target range at 0%-0. 25%, as widely expected. “Housing prices aren’t a financial stability concern at the moment, ” he added when asked about the strength of housing prices. Inflation remains below the Fed’s 2% target; the pandemic has left a “significant imprint” on inflation, Powell said. The rapid pace of recovery from the pandemic-reduced recession has slowed in recent months and spending on services remains low, Fed Chair Jerome Powell says during the traditional post-FOMC decision press conference.
“The United States government is aware of these reports and we are taking all necessary steps to identify and remedy any possible issues related to this situation, ” said National Security Council spokesman John Ullyot. Median expected household income growth was unchanged at 2. 1% in November, below its 2019 average of 2. 8%. That contrasts with the October survey that expected spending to slow along with income growth. In addition, financial markets aren’t showing distress signals and “are very well accommodated by the Fed. ” Roberto Perli, a former Fed staff member and currently head of global policy research at Cornerstone Macro, sees six reasons why the FOMC would extend Treasury maturity extension at this week’s meeting, though he’s not saying they will.
Of expectations for the next 12 months, a full 89% expect stronger economic growth in 2021. Wells Fargo said in October defaults had already peaked, but are reassessing that given increasing infection rates and a delay in stimulus funds.
Regarding NOI growth, 12 markets saw NOI rise during the quarter, while 10 markets experienced NOI contraction. Nineteen markets posted quarterly AIMI growth, while six metros contracted during Q3. Among the metros showing the strongest gains are Las Vegas (+7. 1%), Jacksonville (+6. 3%), and Atlanta (+5. 5%). On a Y/Y basis, AIMI rose 2. 0% as mortgage rates decreased by 44 basis points. No mention is made of the recently approved COVID-19 or its expected economic impact.