Four Stock Indices Reach Records on the Same Day… Small caps, large caps, and tech stocks – Russell 2000, Dow Jones, S&P 500, and Nasdaq – reached new highs on Monday.
What it means – There’s an old investment axiom: “Buy the rumor, sell the news.” Investors have bought up stocks and dumped bonds in anticipation of new programs under a Trump presidency.
I think making wholesale changes will be more difficult, and less rewarding, than many people expect. Tax rates might fall, but deductions will be lost as well. Investors should be cautious as we get closer to the next administration. Chances are many of the “trumped up” policies will lose a bit of luster as they are fleshed out. Keep in mind the country’s aging population isn’t getting any younger.
Existing Home Sales Up 2.0% in October, Up 5.9% Over Last Year… Driven by single-family sales, existing home sales pushed higher over the last two months and prices now sit 6% higher than last year.
What it means – Trump’s policies might shift and change, but there’s no denying that interest rates shot higher over the last two weeks, which makes home buying a bit more difficult. We’ll have to see how the numbers shake out for November and the coming months, but it seems likely that home sales, both existing and new, will take a breather. Again, demographics will remain a headwind.
New Home Sales Drop 1.9% in October, Still 17.8% Higher Than Last Year… September new home sales were revised lower as well, taking the froth out of third-quarter results.
What it means – Housing starts shot up last month, but new home sales fell a bit. More supply, a bit weaker sales, and higher interest rates could lead to falling prices in the months ahead. While this could cause some pain for home sellers next year, home buyers might finally catch a break. Unfortunately, most home buyers are also home sellers, as consumers move from one dwelling to another. Lower prices are great for first-time home buyers, who have been notably absent for years. Boomers were overwhelmingly compelled to buy homes, but their children the Millennials aren’t the least bit interested in being anchored to owning homes.
Durable Goods Orders Up 4.8% in October, Up 2.1% Over Last Year… Excluding aircraft and autos, orders rose 1.0% for the month and increased 0.3% for the year.
What it means – Airplane orders fly all over the place (pun intended). The meat of this report is non-defense spending excluding aircraft, which is a proxy for business spending. This measure perked up a little in October, but is lower compared with last year. The trend remains the same – modest growth in some areas, but nothing that points to an economic breakout.
IRS Files “John Doe” Request to Justice Department Seeking Identities of All Coinbase Users from 2013 through 2015… Coinbase allows users to hold a digital wallet of bitcoin. The IRS wants to investigate Coinbase users for tax evasion.
What it means – And so it begins. I’ve been warning for years that this day would come. The U.S. government, as well as other nations, won’t stand idly by, allowing constituents to move capital freely and evade the taxes due when bitcoin is bought and sold. Doing so would undermine their fiscal and monetary policies. This was not a shot across the bow. It was a boarding party.
If you use bitcoin, expect the government to knock on your door, demanding that you declare all purchases and sales of the digital currency, and then demanding a tax payment on any gains. This won’t end well.
Next Week – Next week brings reports on the S&P CoreLogic Case-Shiller Home Price Index and the Employment Situation report for November. We’ll also get retail sales reports on Black Friday and Cyber Monday.
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