Perspectives Blog

What’s behind the weakness in U.S. housing?

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | March 24, 2014

Existing U.S. home sales have been weak across all regions and this weakness pre-dates this year’s tough winter. Skyrocketing home prices, the surge in interest rates, and meager income growth have hit affordability and dented demand. Housing is no longer the accelerator for economic growth that it was earlier in the cycle. While the jury is out on just how much cold weather has impacted economic activity in recent months, we should keep in mi…

How much and how fast?

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | August 29, 2013

The recent rise in long-term interest rates could negatively impact the housing market, which has been a driver of economic recovery. The effect of higher interest rates will typically show up first in the data for new home sales data, which have dropped sharply. The combination of skyrocketing rates and more expensive and rising prices has likely impacted the marginal buyer’s affordability for a new home. One of the most worrisome aspects of…

Hanging in

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | September 20, 2013

Recent retail sales data are well below expectations and probably an indication that consumers have become more cautious about spending. Financial conditions matter greatly, and the recent tightening is likely having some impact on housing activity and consumer attitudes. Spending follows wages and it will be difficult for retail spending to gain much traction with the tie to shallow compensation trends. The best one can say about consumer spe…

The U.S. economy — a gain in GDP?

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | May 2, 2013

…the spreading global slowdown. Fixed investment increased 4%, as residential investment (housing) grew 12% in Q1. This has been rising between 10% and 15% seasonally adjusted annualized rate (saar) for the last few quarters. Housing remains the good news in this report. Non-residential fixed investment grew only 2% on a soft 3% gain in business equipment & software (capital expenditures) and an outright decline in investment on plants/struct…

Gimme credit

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | August 22, 2013

…t 0.2% in July, as auto sales weakened in the month. The proxy for Personal Consumption Expenditures (in GDP) rose 0.5%—decent, but revisions to prior months were downward. A bit more worrisome were the very weak results from housing-related spending (furniture, building materials, appliances), likely related to the softer housing activity seen recently and probably in response to the spike in interest rates seen in the second quarter. Some discr…

Q2 fixed income outlook – Hitting for the cycle

Gene Tannuzzo, CFA, Senior Portfolio Manager | March 31, 2014

…t this stage, but much less advanced than the credit cycle. While moderate growth continues, the economy has yet to recover all of the jobs lost during the recession, and unemployment is still above the Fed’s target. The U.S. housing market is improving on the back of reduced supply, labor market improvements and overall confidence. We believe this creates opportunities for bond investors in the non-agency mortgage market, as well as in certain c…

Retail sector outlook – It’s a share game

Mari Shor, Senior Equity Analyst | March 17, 2014

…he holiday season provides a useful prism through which to examine consumer behavior into 2014. On the positive side, comparisons ease as we cycle the payroll tax increase in 2013, and the “wealth effect” (net equity gains in housing and stocks) should drive sustained strength in consumer confidence. Unfortunately, the negatives seem to outweigh the positives with 1) lower levels of growth in disposable income forcing allocations across spending…