The Housing Boom Continues, Historic Patterns from Equities, and Why ‘Investment-Grade’ Doesn’t Mean What It Used To…

The housing market is still booming and contractors are racing to meet demand, bringing single family housing starts to their highest level since 2007. Manufacturing has softened across the U.S. (despite experiencing a small bump in KC), but the same can’t be said for equities—stocks closed at all-time highs yesterday as anticipation grows for a long-awaited stimulus deal and FDA approval of Moderna’s Covid vaccine. The March market rout and these new record highs aren’t the only reasons it’s been a historic year for equities though. Meanwhile, Bitcoin made headlines again this week, but is it enough to justify bullishness on crypto? And are you keeping an eye on the quality of your investment-grade debt?

1. While U.S. industrial recovery continues, it looks like the trend is moderating, similar to what happened following the Great Recession.

 

2. Another softening of a regional Fed survey as Covid surges…

 

3. The Patrick Mahomes effect?

 

4. Do the markets need to “rest” a bit to keep this rally intact?

 

5. Just how frothy are the markets? Another historical view:

 

6. Another historical metric… and adding Tesla will only make the S&P 500’s P/E go higher…

 

7. Sublime to the ridiculous…FAANG companies have products/services, revenue, earnings, strong market positions, employees, pay taxes, and the ability to increase all of these. Bitcoin has?

 

8. Another tailwind for the U.S. stock markets: foreign purchases set a new record…

 

9. However, U.S. investor cash levels are indicating the dry powder is mostly spent.

 

10. The quality of U.S. inv’t grade debt has deteriorated over the last ten years… leverage of 4x or more is now well over a third of the bonds…

 

11. The Fed (FOMC) reaffirmed their commitment to near zero interest rates through 2023 as well as their QE of $120 billion/month

 

12. Near-zero rates in the U.S. look generous…

 

13. Trade brings influence…

 

14. New daily cases of Covid has reached 250,000 in the U.S., ~600,000/day worldwide…

 

15. Please, help if you can…