Friday Market Update for the Week of September 3rd 2021

Happy Friday, Brian Manning here. I can’t believe it is jobs week already. We’re going to get into that in a moment, but before we talk about what’s going on this week let’s just talk about what happened in the end of last week. So in the last week, we had the wrapping up of a Federal Reserve meeting. At the end of these meetings, Fed president Jerome Powell always does a speech in kind of a press release. His comments were certainly rather dovish, but nothing that led us into really learning about what their plans are at the end of September, as far as their Jackson Hole meeting, because usually the end of September, at the end of this meeting, if they’re going to announce something rather impactful, this is kind of a usual place where they would do it. Our guess is really that the Federal Reserve was waiting to see what’s happening today with employment reports, which we’re going talk about in a minute here.

Monday this week, we’ve got pending home sales. Pending home sales for the month of July were down 1.8%. Not really too bothersome, really for a couple of reasons. One, inventory is still down 12%. Number two, usually in a home buying market or home buying season, spring is usually really the big time for purchases to take place. So you see a lot of activity in the spring because people are trying to make moves, usually before kids are going back to school. Typically July and August calm down a little bit going into summer. So certainly seeing what happened in month of July, it wasn’t really that worse at all. Tuesday this week, we got Case Shiller. So Case Shiller measures home appreciation on national level. So on a month over month basis, homes appreciated at a rate of 2.2%, which is really strong. On a year over year basis, home appreciation was up 18.6%. So certainly just a blockbuster report and just really strong appreciation across the nation.

We also get the FHFA, and their component of appreciation. So the FHFA looks at homes across the United States, only that have a conventional mortgage attached to them. So if its owned free and clear, has a VA, USDA, FHA mortgage, those don’t count. This is only homes across the United States that have conventional mortgages attached to them. And those rose at an annual rate of 18.8% appreciation. So unbelievable. The rental component here, it’s pretty crazy to see as well. So on a month over month basis, rents increased by 2.1%. On a year over year basis, rents increased by 14%. So you’re definitely seeing some heating up there in the rental market.

Wednesday this week, we get ADP. So the first week of every month, we always get employment data. So being in September, we’re getting data for the month of August right now. First Wednesday of every month, we get ADP. ADP reports back on private payrolls. So expectation was that 600,000 jobs would have been created in the month of August, instead of we got 374,000 new jobs added. So that was definitely a miss of a report. And today, the first Friday of every month, we get the BLS report, that’s the Bureau of Labor Statistics. Expectations for the BLS was that 700,000 jobs would have been created for the month of August. Instead, we got 235,000 jobs that were created. So definitely a big miss on the employment report.

Another component that’s looked at is going to be earnings because this is kind of an indicator of maybe inflationary pressures. So weekly earnings were up by 6/10%. Normally, when you have a big miss in an employment report like we did today, the bond markets would go crazy and you’d see mortgage rates really improve but everyone has all eyes on inflation right now. And we see weekly earnings starting to increase at the rate that they are, investors are watching inflation to wait and see what’s going to happen there. But I would say kind of the idea that we all have to look at right now is what is the Federal Reserve going to do because the Federal Reserve, as I said in the beginning of this, has a meeting at the end of September, that’s usually when they really announce impactful news and the Federal Reserve was all eyes on this employment report, if it was a really strong blockbuster report, this would have given the Federal Reserve a really strong reasoning to go into this end of September meeting and really probably announce the tapering of their bond buying program but now that the employment reports, both ADP and the BLS were as weak as they were. It’s really hard to say what the Federal Reserve is going to do. And do they actually have the ammunition that they need now at the end of September to start tapering their bond buying program, I would say probably not. But that’s just my guess, we’re going to have to wait and see what happens. I’m around all weekend. I know it’s a holiday weekend. Saturday, Sunday, Monday – you got any questions? Give me a call. Call me on my cell phone, text me. Happy Labor Day weekend. Have a great day.