Mortgage demand is collapsing:
US mortgage applications for single-family homes fell 3.7% last week, marking their 4th consecutive weekly decline. As a result, the mortgage demand index has fallen to the lowest since February 2024 and its 3rd lowest level in nearly 30 years. The index has now fallen a whopping -63% over the last 4 years. This comes as home financing costs have rapidly surged while prices remain at all-time highs. Since mid-September, 30-year fixed mortgage rates have risen ~110 basis points and are back above 7%. Mortgage demand is at 1990s levels. Source: The Kobeissi Letter, MBA Purchase index
Government spending is now half of the economy in most of the developed world....
Source: The Long View @HayekAndKeynes
Good news are coming... while US Q4 earnings season is off to a strong start thanks to banks beating estimates, US inflation numbers came in somewhat cooler than expected:
Core CPI slows to 3.2% in December from 3.3% in November. Analysts had expected the rate to remain unchanged at 3.3%. Overall CPI is unchanged at 2.9% as forecasted. Headline CPI inflation is up for 3 straight months, but core inflation is falling again. It seems enough to please investors: S&P 500 futures are surging over +85 points - the equivalent of a $750B market cap gain - as 10y US bond yields are tumbling by 10 basis points. The dollar is easing, gold is shining and cryptos is surging with bitcoin back to $99K. Alles gut... Source: Bloomberg
The first quarter of FY 2025 produced a deficit of $710.9 Billion.
That’s $200B more than the first quarter of fiscal 2024, or a 39% increase YoY. The US is now running a ~$3 TRILLION annual deficit...
Inflation expectations have almost perfectly bottomed exactly when the Fed started to cut rates.
10-year breakeven rates are now at its highest level since October 2023. As highlighted by Tavi Costa, this is a reminder that when debt limits a monetary authorities actions, inflation becomes the path of least resistance. Source: Tavi Costa, Bloomberg
🚨US PPI DATA SHOULD PLEASE POWELL! December US PPI annual inflation rises 3.3%, below expectations for 3.5%.
vCore PPI inflation increased 3.5% Y/Y, compared to forecasts for a gain of 3.8%. BULLISH🚀 YoY Growth: 🇺🇸 PPI (Dec), 3.3% Vs. 3.5% Est. (prev. 3.0%) 🇺🇸 Core PPI, 3.5% Vs. 3.8% Est. (prev. 3.4%) MoM Growth: 🇺🇸 PPI (Dec), 0.2% Vs. 0.4% Est. (prev. 0.4%) 🇺🇸 Core PPI, 0.0% Vs. 0.3% Est. (prev. 0.2%)
A stunning chart by Goldman: the outperformance of US productivity growth is remarkable, particularly in the COVID/post-COVID era.
Source: GS, Tony Pasquariello, Giovanni Pierdomenico
Markets do not like interest rate uncertainty: Stocks and long-term bonds have declined for 5-straight weeks, the longest streak in at least 13 months.
During this period, the S&P 500 ETF, $SPY, has fallen 4.2% to the lowest since November 6th, a day after the Presidential election. At the same time, the popular bond tracking ETF, $TLT, has dropped 9.1% to the lowest since May 2024. Source: The Kobeissi Letter, Bloomberg
