Thanksgiving Awaits

Nov 19, 2018
Thankgiving

Thanksgiving Headlines Holiday-Shortened Week

Who are we kidding, after the tumultuous midterm elections and the overseas turmoil in the form of Brexit and Chinese trade wars, this Thanksgiving week comes as a welcome reprieve and everything else will take a back seat. Before the feeding frenzy, however, we do get another look at the state of the housing market with both existing home sales and housing starts for October. The trend in housing this year has been a plateauing of activity as a consequence of both higher rates and prices. Durable goods orders for October will also give us a look at the pace of sales of big ticket items with a decent month expected, ex the volatile transportation segment. Finally, the Leading Index for October will give us a look at economic expectations with a decline versus September forecast.


Treasuries

Treasuries

Short-Term Rates

Short-term Rates

Economic Calendar

Economic Calendar

 


Top Events of the Week Top 5 Events for the Week

NOV 19 - NOV 23,  2018

1. Thanksgiving — Thursday
2. October Existing Home Sales — Wednesday
3. October Housing Starts & Permits — Tuesday
4. October Durable Goods Orders — Wednesday 
5. October Leading Index — Wednesday
 

 

1.  Thanksgiving – Thursday

We think it’s safe to say what the most anticipated event of this week will be.  After the  headline-inducing midterm elections and the ongoing issues with Brexit and overseas growth concerns, everyone will be looking forward to the Thanksgiving holiday (and a long weekend for some). The opportunity to eat, drink and find fellowship with friends and family, and give a little thanks along the way, is easily the big event this week. For those traveling pack plenty of patience along with a heavy dose of good humor, and above all be safe. 

 

2.  October Existing Home Sales —Wednesday

The housing market has had mixed releases this year and the pair of existing sales and housing starts figures will be more data points to assess the health and trend in housing.  Existing home sales account for nearly 90% of the market and gives us the broadest view of market health but with data based on closings it can be a bit dated. October existing home sales are projected to total 5.20 million annualized units which is slightly up from the 5.15 million in September. The average over the past year has been 5.25 million annualized so in keeping with recent housing releases a below-average print with a modest month-over-month increase of 1.0%. 

 

3.  October Housing Starts & Permits —Tuesday

Housing starts for October are expected to increase 1.6% month-over-month with an annualized starts number of 1.225 million versus 1.201 million in September. The average over the past year has been 1.264 million so a below-trend starts number is expected but a slight sequential increase versus September. Permits, which aren’t subject to the vagaries of weather which can impact the starts number, are expected to decrease slightly to 1.260 million annualized versus 1.270 million the prior month. The average over the past year has been 1.319 million, so a below average print is expected with a slight sequential decrease. In summary, the housing numbers are expected to show another month of activity stuck around recent levels with little to indicate activity is about to move higher or lower. 

 

4.  Preliminary October Durable Goods Orders —Wednesday

While the headline durable goods orders number for October is expected to be off versus a strong September ( -2.5% vs. 0.7%), ex the more volatile transportation sector the report should be up slightly versus the prior month (0.4% vs. 0.0%). Shipments of capital goods less air and defense (a measure of business investment) are expected to be up 0.3% versus –0.1% the prior month. If orders less transportation pan-out as expected, it will indicate a rebound from a soft September. 

 

5.  October Leading Index —Wednesday

The Conference Board’s Leading Index is a compilation of readings that tend to lead the economy and the index has a solid track record of predicting recessions. The index always falls well below zero prior to a recession and currently the index is far removed from that level. That’s good news as angst grows around the Fed tightening into a potentially slowing economy such that it tips the economy into recession. That being said, the October number is expected to soften to 0.1 versus 0.5 in September. For the past year the index has averaged 0.6.

 

Leading Index & Recessions Graph

 

 

 

 


Technicals Investment Yield Ranges Over Last Year

 

US Treasuries

FHLB Agency Bullets

Mortgage Backed SecuritiesMunicipals

US Corporate - Financials

US Agency Swap Rates

 Source: Bloomberg

 

 

 


 

Tom Fitzgerald Signature

Thomas R. Fitzgerald

Director, Strategy & Research

Tfitzgerald@centerstatebank.com

 

 

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