Is A Housing Boom On The Way?

Yesterday, we got the session I was expecting. Last Friday, investors were on the fence about being ‘long,’ but they could have bailed out and enjoyed the weekend without having to check on the latest news on the coronavirus, or whenever the next dark cloud moved over the horizon. As it turned out, Apple (APPL) confirmed what was obvious when management offered a wide revenue range for the current quarter.

The warning was inevitable, only the timing was up in the air.  Apple still doesn’t have a handle on how deeply the virus will impact business. However, conventional wisdom is that this is a temporary situation. Because of the massive lockdown numbers, it should improve, and businesses can truly get back online. Of course, there is no reason to get ahead of the actual all-clear, which is still several weeks away. Therefore, assuming the worst hasn’t been the proper reaction.

Communication Services and Utilities were odd bedfellows, as they were the only two advancing sectors. Conversely, no sector was off more than 1%, although Energy and Financials continue their long decline.

The Flattening Yield Curve

Here we go again. The curve between the 2-year and 10-year Treasury yield is beginning to flatten. Once again, I think it’s more about the implosion of global economies from Japan to Germany than a sign of impending doom for the U.S. economy.

I’m not particularly worried, but it could become fodder for the economy, the stock market, and even political conversations.

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Portfolio Approach

We issued alerts to take profits on two positions in the model portfolio a little sooner than we anticipated; the gains were solid in a short period of time.  We also added two new positions between yesterday and today.

Today’s Session

Housing Boom!

The Housing data in this morning blew away Wall Street consensus and adds fuel to my theory 2020 will see a housing boom. 

Starts

Housing starts pulled back from a sizzling December (revised higher to 1.631 million from initial read 1.608 million) coming in at 1.567 million annual rate, while the street was looking for 1.420 million.

Permits

The big takeaway came in permits, which rocketed to their highest level since March 2007.  The 1.551 million annualize rate was paced by a 6.4% rise in single family and +15.2% increase in multifamily units.