How Economic News Moves Markets

Regarding NOI growth, 12 markets saw NOI rise during the quarter, while 10 markets experienced NOI contraction. Nineteen markets posted quarterly AIMI growth, while six metros contracted during Q3. Among the metros showing the strongest gains are Las Vegas (+7. 1%), Jacksonville (+6. 3%), and Atlanta (+5. 5%).

At the same time, application and acceptance rates for mortgage refinances surged through 2020, with mainly high credit score borrowers taking advantage of lower mortgage rates. The October survey shows credit application and acceptance rates falling sharply since February 2020, with application and acceptance rates for credit card and credit limit increase requests showing the largest drop, followed by auto loans. “The positive momentum that home sellers are seeing will carry on well into the new year, ” National Association of Realtors Chief Economist Lawrence Yun said, citing low mortgage rates and remote-work flexibilities.

Rejection rates among applicants increased by 3. 8 pp, or 27%, during 2020 from 14. 2% in February to 18. 0% in October. The increase was largest for respondents with scores under 680, consistent with a general tightening of lending standards since February.

Amazon has been weighing on the sector lately, underperforming the broader market. AMZN is up 5. 5% since the start of November, when the vaccine-inspired rally moved cash to recovery stocks. Prepayments fell 11% from October’s 16-year high, but with interest rates at record lows and refinance incentive at an all-time high, prepay activity is likely to stay elevated in coming months, Black Knight says.

On a Y/Y basis, AIMI rose 2. 0% as mortgage rates decreased by 44 basis points. Consumption patterns are expected to shift back toward services suppressed by the pandemic in 2H21. Increases in commodity prices in the 2H20 will be pushed downstream for the next six to nine months, leading to higher prices for finished goods. No mention is made of the recently approved COVID-19 or its expected economic impact. As for any sort of outlook, the economy, of course, will depend on the course of the virus. “The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. ” The Federal Open Market Committee keeps the federal funds rate target range at 0%-0. 25%, as widely expected.

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“The balance of risks to our baseline remains on the downside, ” Gruenwald says. “The result of these mandated lockdowns – as well as voluntary restraint by economic actors – has been an abrupt loss of much-needed momentum, ” S&P analyst Paul Gruenwald writes. “The rebound in activity in the third quarter was better than expected as restrictions were eased and mobility and confidence picked up. ”

The rapid pace of recovery from the pandemic-reduced recession has slowed in recent months and spending on services remains low, Fed Chair Jerome Powell says during the traditional post-FOMC decision press conference. The most recent draft proposal includes $600 in direct payments to individuals, $300 per week in extra unemployment insurance payments, ~$17B for airlines and more aid for small businesses. 5-year Treasury-indexed hybrid adjustable rate mortgage averages 2 . 79%, unchanged from a week ago and down from 3. 36% a year ago. “Breakeven inflation expectations have increased recently and we could see this trend continue into next year, ” Wells Fargo Head of Global Fixed Income Strategy Brian Rehling says. “I know what the claims data is doing, it’s moving in the wrong direction, ” Mark Cabana, head of global rates strategy at Global Research at BofA Securities says, but the Fed hasn’t seen enough to move the duration of its bond buying. With a continuing auto demand recovery, 2020 Mainland China is seen delivering 23. 6M units (-5% Y/Y); 2021 China market is seen delivering 24. 9M units (+5. 6% Y/Y). Region-wise, European recovery prospects are mixed, with worrying virus resurgences and ongoing restrictions, varied economic support, the Brexit negotiations and fears for a post-holiday third wave of the virus.

Global new light vehicle sales in 2021 are estimated to be 83. 4M, up 9% from a 2020 projection of 76. 5M amid a recovery in industry demand levels, especially in major markets, IHS Markit says. “Because policy rates will likely remain near zero for a few years, excess cash is not an investor’s friend, and yield will be hard to find, ” they write. The strategists expect sovereign yields to rise and yield curves steepen as global activity and risk sentiment improve along with medical progress. “This could create tactical opportunities in equities sensitive to interest rates. However, we believe the gravity of easy central bank policy will keep rates near secular lows, ” they say.