“Failure is an option here. If things are not failing, you are not innovating enough.” — Frank Bunker Gilbreth, Sr.
Chart of the Day
Good morning!
There are concepts of a plan on how to fix inflation, manufacturing and even low water pressure. Whether they’re working or not is still too early to tell. However, not nearly as much has been planned for what seems like an inevitable housing market chaos somewhere on the horizon.
One broker’s quote from last week’s Beige Book stood out to me: “It seems like there is no longer a first-time homebuyer market while million-dollar homes continue to sell.”
A recent report from Zillow backs that up. Half of all states in the U.S. have at least one city where a starter home costs over $1 million. And that’s not just in (in)famously expensive states like California or New York, but also places like Texas and Wyoming. For context, the real median household income was $80,610 in 2023, Census data show, which would pose significant hurdles to buying a million dollar home for very obvious reasons.
Pending home sales Wednesday will provide insight into how many homes might be being sold as this metric typically leads existing-home sales by a month or two. Recent readings haven’t been all that good. In March, existing-home sales noted the biggest monthly drop since November 2022, surprising since we are in what is supposed to be the more busy spring season.
Higher interest rates are mostly to blame. Those who locked in homes at ultralow rates during the pandemic are reluctant to give up their treasured finds, contributing to lower inventory for prospective homeowners. And it also doesn’t help that if they try to go for a newly built home, the average 30-year mortgage rate still stands at 6.81%, more than double what it was five years ago.
Of course, we all know that Trump is a big proponent of the Federal Reserve bringing interest rates down. But his open dislike for Fed Chair Jerome Powell and fickle trade policy are making it hard for the central bank to consider rate cuts and hurting the housing market even more.
Even though the bond market chaos has subsided some, it can’t be ignored. The yield curve has steepened massively. Yields on short-term Treasurys have fallen as they bake in recessionary worries, but the longer-term yields have jumped because of potential inflationary pressures from tariffs leading investors to bet that the Fed will need to keep rates higher for longer. The term premium—the additional yield investors demand to hold a long-dated bond rather than a short-dated one—has climbed to the highest in over a decade, according to Pictet Asset Management.
In addition to high grocery and energy prices, it can also be argued that Trump won re-election because of the housing slump. The American dream is so inherently tied with the idea of a home with white picket fence, but in recent years, it seems to have become reserved for only the affluent.
That could haunt the president if not tackled.
Share your thoughts
Other than impacting interest rates, what are some other ways the president can revive the housing market? Click here to send us your response.
📧✍️Here’s what a reader commented📧✍️
Question: What are some other things that America needs to tackle before growing as a manufacturing powerhouse?
Answer: I’m a 40-year veteran of the apparel industry now a financial advisor. All of my friends still in the business are literally being wiped out and can’t afford to stay in business because they can’t go 90-180 days without cash flow from operations. Introducing tariffs on goods ordered 90 days ago that have been paid for and retailers have contracts on has killed companies not just hurt but killed. If Trump doesn’t fix this by Memorial Day, 1000’s of small businesses are going bankrupt and they don’t have billions of cash piles like the public companies do. It’s a lot worse than being reported.
How to fix? Don’t break contracts. Want to place a tariff on imports? Fine, do it at the origin of the order, idiots! You can have the customs people verify the order origination date.
I love Trump but hate this for all of the 1000’s of small businesses that are now about to die.
Catch up with FS Insight
Equities continue to drift higher, more evidence that many stocks got “washed out.” and as long as macro developments remain supportive, we see upside.
Technical
Both Treasuries and equities look to be getting back in sync, as the gains in Treasuries over the last few days should constitute the start of a large pullback in yields, which might last until August.
Crypto
We discuss a groundbreaking SBR bill, bullish shifts in the options market, and why suppressed implied volatility could signal another sharp move, this time to the upside.
News We’re Following
Breaking News
- U.S. economy shrunk 0.3% in the first quarter as Trump policy uncertainty weighed on businesses CNBC
- US and Ukraine expected to sign minerals deal FT
Markets and economy
- Here’s What Is Driving the Rapid Reversal of the Historic Market Selloff WSJ
- Sell in May? Don’t get taken in by seasonal trading patterns CNBC
- Chinese investors pile into gold funds at record pace FT
Business
- Why New Wegovy Deals Won’t Restore Novo Nordisk’s Obesity Lead WSJ
- Wall Street is anxious to hear Apple CEO Tim Cook’s first public comments on tariffs CNBC
- Super Micro shares dive after server maker issues weak preliminary financials CNBC
Politics
- Revisiting Springfield, Ohio, Where Trump’s Claims About Migrants Eating Pets Are Still Felt WSJ
- Eight Charts That Sum Up Trump’s First 100 Days NYT
Overseas
- ‘Goldman of the Tropics’ wants to help Brazil feed the world FT
- Vietnam Used to Be a Safe Haven for Trade. Now It Might Not Be. NYT
- India poised to take military action against Pakistan SEM
Of Interest
- Starbucks customers are giving the company over $200 million of free money MW
| Overnight |
| S&P Futures -4
point(s) (-0.1%
) Overnight range: -35 to -1 point(s) |
| APAC |
| Nikkei +0.57%
Topix +0.63% China SHCOMP -0.23% Hang Seng +0.51% Korea -0.34% Singapore +0.72% Australia +0.69% India +0.16% Taiwan +0.01% |
| Europe |
| Stoxx 50 +0.15%
Stoxx 600 +0.26% FTSE 100 +0.06% DAX +0.52% CAC 40 +0.49% Italy -0.43% IBEX -1.63% |
| FX |
| Dollar Index (DXY) +0.14%
to 99.37 EUR/USD -0.18% to 1.1367 GBP/USD -0.33% to 1.3365 USD/JPY +0.52% to 143.07 USD/CNY -0.11% to 7.2636 USD/CNH -0.05% to 7.2644 USD/CHF +0.21% to 0.8256 USD/CAD -0.01% to 1.3831 AUD/USD +0.17% to 0.6395 |
| Crypto |
| BTC +0.09%
to 94954.73 ETH -0.21% to 1805.54 XRP -1.96% to 2.2347 Cardano -1.01% to 0.6978 Solana -0.97% to 147.18 Avalanche -0.71% to 21.65 Dogecoin -1.07% to 0.1754 Chainlink -1.37% to 14.57 |
| Commodities and Others |
| VIX +1.03%
to 24.42 WTI Crude -0.99% to 59.82 Brent Crude -1.09% to 63.55 Nat Gas -0.12% to 3.38 RBOB Gas -0.84% to 2.054 Heating Oil -1.98% to 2.079 Gold -1.12% to 3280.11 Silver -2.04% to 32.26 Copper -4.32% to 4.614 |
| US Treasuries |
| 1M -2.1bps
to 4.2738% 3M -0.3bps to 4.2781% 6M -2.7bps to 4.1445% 12M -0.8bps to 3.8853% 2Y +1.2bps to 3.662% 5Y +0.5bps to 3.7712% 7Y -0.5bps to 3.9587% 10Y -1.2bps to 4.16% 20Y -2.5bps to 4.6449% 30Y -2.4bps to 4.6246% |
| UST Term Structure |
| 2Y-3
M Spread narrowed 1.0bps to -65.2
bps 10Y-2 Y Spread narrowed 2.4bps to 49.4 bps 30Y-10 Y Spread narrowed 1.1bps to 46.3 bps |
| Yesterday's Recap |
| SPX +0.58%
SPX Eq Wt +0.58% NASDAQ 100 +0.61% NASDAQ Comp +0.55% Russell Midcap +0.57% R2k +0.56% R1k Value +0.55% R1k Growth +0.63% R2k Value +0.39% R2k Growth +0.72% FANG+ +0.54% Semis -0.17% Software +1.29% Biotech +0.63% Regional Banks +0.9% SPX GICS1 Sorted: Fin +0.97% Materials +0.93% Cons Staples +0.77% REITs +0.74% Utes +0.71% Indu +0.64% Cons Disc +0.59% SPX +0.58% Comm Srvcs +0.5% Healthcare +0.49% Tech +0.46% Energy -0.37% |
| USD HY OaS |
| All Sectors +0.6bp
to 421bp All Sectors ex-Energy -0.7bp to 379bp Cons Disc -0.2bp to 417bp Indu -0.8bp to 318bp Tech -11.7bp to 396bp Comm Srvcs +4.6bp to 607bp Materials +0.9bp to 401bp Energy +12.6bp to 466bp Fin Snr -1.5bp to 348bp Fin Sub +1.8bp to 291bp Cons Staples -1.2bp to 292bp Healthcare +0.2bp to 426bp Utes +1.1bp to 290bp * |
| Date | Time | Description | Estimate | Last |
|---|---|---|---|---|
| 4/30 | 8:30AM | 1Q ECI QoQ | 0.9 | 0.9 |
| 4/30 | 8:30AM | 1Q A GDP QoQ | -0.2 | 2.4 |
| 4/30 | 10AM | Mar PCE m/m | 0.0 | 0.3 |
| 4/30 | 10AM | Mar Core PCE m/m | 0.1 | 0.37 |
| 4/30 | 10AM | Mar PCE y/y | 2.2 | 2.5 |
| 4/30 | 10AM | Mar Core PCE y/y | 2.6 | 2.78871 |
| 5/1 | 9:45AM | Apr F S&P Manu PMI | 50.5 | 50.7 |
| 5/1 | 10AM | Apr ISM Manu PMI | 48.0 | 49.0 |
| 5/2 | 8:30AM | Apr AHE m/m | 0.3 | 0.3 |
| 5/2 | 8:30AM | Apr Unemployment Rate | 4.2 | 4.2 |
| 5/2 | 8:30AM | Apr Non-farm Payrolls | 135.0 | 228.0 |
| 5/2 | 10AM | Mar F Durable Gds Orders | 9.2 | 9.2 |
| 5/5 | 9:45AM | Apr F S&P Srvcs PMI | n/a | 51.4 |
| 5/5 | 10AM | Apr ISM Srvcs PMI | 50.4 | 50.8 |
| 5/6 | 8:30AM | Mar Trade Balance | -119.5 | -122.662 |
