The impeachment of President Donald Trump is in every headline this week, but you might be surprised to know that it isn’t moving markets. Most investors are banking on the Senate acquitting President Trump and not removing him from office. Because of that, 74% of investors who voted in a survey from the equity strategy team at RBC Capital Markets believe that this impeachment will be neutral for markets.
Many investors believe that this will track with what happened with markets when President Clinton was impeached in 1998. During that process, stocks rallied hard. In 2019, the S&P 500 is up nearly 7% since House Speaker Nancy Pelosi formally announced the impeachment proceedings.
We might sound like we’re just copying and pasting information, but it truly is the trade deal with China that is the main market mover. Now we are also seeing global economies stabilize which again will prove fruitful for the stock market. We are already seeing it in the bond market as investors are starting to move back to equities and away from the “safety” of government-backed notes. As of Friday morning, the benchmark 10-year yield was trading at 1.92%. The yield has risen close to 40 basis points since October. The 30-year yield has also increased significantly, climbing 30 basis points to 2.350%. That’s its highest level since Nov. 13.
Housing in 2020
People have jobs and they’re spending their money. Those are two of the main reasons that Fannie Mae economists have revised up their real GDP growth forecasts for Q4 2019 and full-year 2020. Fannie Mae’s Economic and Strategic Research Group also expects a significant uptick in single-family housing starts and sales in 2020.
The forecast was revised up to 1.8% for Q4 2019 and 2.1% for full-year 2020. Housing will play a significant role in the growth in 2020, according to the ESR, because of a more positive homebuilder sentiment, low interest rates and “waning risks of a significant near-term economic slowdown.”
Again, we may sound like we’re repeating ourselves but the inventory issue won’t be solved because homebuilders believe they’ll have a good 2020. The National Association of Realtors reported this week that the number of homes for sale in November was the lowest on record for the month. There was just a 3.7 month supply at the end of November, a decrease of 5.7% from a year ago. The NAR started tracking this metric in 1999.
The only price range where supply is growing is on the high end, which isn’t in demand. Meanwhile, homes priced between $100,00 and $250,000, which are ideal for first-time homebuyers, are down 7% annually. Because of that scarcity, home prices are starting to shoot back up. The median home price in November was $271,300 which is, again, the highest since the NAR started measuring these statistics in 1999.
The good news is, rates are still staying well below what we saw last year. This week’s Freddie Mac 30-year fixed-rate mortgage average was 3.73%. A year ago at this time the average was above 4.8%. Remember, that average is not necessarily the interest rate you will receive for your mortgage. Your interest rate is based on a lot of factors including credit score, down payment and type of loan.