weekly market update

Entering Monday, the S&P 500 had traded within a very tight range and had gone six weeks without a 1% up or down weekly move, the longest sideways stretch since 2019.  However, optimism around debt ceiling talks and hopes of a pause in future interest rate hikes from the Fed allowed the S&P 500 to breakout to new highs for the year and up over 1% on the week.  Debt ceiling headlines dominated most of the week’s market action, but Fed Chair Jerome Powell did make an appearance on Friday and reassured investors that another rate hike in June was unlikely.  Jobless claims, which last week broke out to their highest levels since October 2021, reversed course and fell 22,000 from the week prior.  Massachusetts again skewed the national figure by contributing over 60% of the decline (~14,000) as the state works to combat a recent surge in fraudulent claims.  Unfortunately, debt ceiling talks stalled on Friday and the S&P 500 was unable to close above 4,200, which is potentially notable as it proved to be a level stocks were unable to break through in February.  Next Friday’s personal consumption expenditures (PCE) report will be interesting as it is the Fed’s preferred inflation gauge, but ultimately, we expect debt ceiling headlines to continue to dominate market sentiment.

HOUSE RICH

Despite the average 30-year mortgage rate being well over 6% and sales of existing homes in April falling over 23% from a year prior, the housing market has proven to be surprisingly resilient and recent data from ATTOM might provide potential insights into why.  The share of US households that are equity-rich or own more than half of the equity in their homes, is over 47% and near historic highs.  Higher levels of equity help to protect the economy from more severe housing downturn scenarios like we saw during the financial crisis and foreclosures have remained relatively low, less than 0.5% of outstanding mortgages.  Since the pandemic, states in the south have seen notable rises in equity-rich homes (see chart below) and sticking with the recent theme of highlighting odd Massachusetts economic factoids, the top zip code was Edgartown, MA (Martha’s Vineyard), where 86.9% of mortgaged properties were equity-rich.

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder

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