Housing Inflation Seems To Be Cooling Off

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In his podcast addressing the markets today, Louis Navellier offered the following commentary.

Housing Inflation Cooling Off

The National Association of Realtors on Thursday announced that existing home sales declined 5.9% in July to a 4.81 million annual pace. The inventory of unsold homes is currently 1.31 million, which represents a 3.3-month supply at the current annual sales pace. Median home prices have risen 10.8% in the past year to 403,800, but actually declined 2.4% in the past month from June’s $413,800 median home price. So the Fed’s higher interest rate policy is now causing housing inflation to cool off, which is further evidence that the Fed will likely only have one more key interest rate increase.

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Healthy Labor

Finally, the Labor Department reported on Thursday that weekly unemployment claims declined for the first time in the past three weeks. Specifically, weekly unemployment claims declined to 250,000 in the latest week, down from a revised 252,000 in the previous week. Continuing unemployment claims rose to 1.437 million in the latest week, compared to a revised 1.430 million in the previous week and are now at the highest level since last April. Overall, the labor market remains healthy and new job creation should continue.

We are in the “dog days of summer” and the stock market is expected to meander listlessly on light trading volume for the remainder of August. Due to “meme” stocks being touted last week and there being a lot of short covering in low-quality companies, I am expecting that the stock market will begin to consolidate and meander sideways after an incredible run since June 16th.

Dovish Fed?

The latest Federal Open Market Committee (FOMC) minutes that were released on Wednesday did reveal that the Fed acknowledged that “a slower pace of rate hikes at some point” did get Wall Street’s attention and raise speculation of the possibility that the FOMC may only hike key interest rates another 0.75%. In the Fed’s best cover all probabilities language, the FOMC minutes also revealed that “bulk of the tightening had yet to be felt” and added that there is a “risk of tightening more than necessary” to get inflation under control. Finally, the FOMC minutes also said that the Fed may need to keep interest rates at a level that restricts economic growth “for some time.”

If you do not mind me cutting through all the Fed’s double speak, the FOMC is going to raise key interest rates 0.75% on September 21stto get in line with market rates (i.e., Treasury yields). Then the Fed will be neutral and not raise key interest rates at its November FOMC meeting, since it is only 6 days before the mid-term elections. Finally, if the Fed has to fine-tune its interest rate policy up or down, it can do that at its December FOMC meeting when no one is paying attention, since investors will be distracted by the holidays.

What I am expecting with the September 21stFed rate hike is the FOMC Statement will acknowledge that the Fed is now “neutral” and continues to be “data dependent” moving forward, which are dovish comments that Wall Street wants to hear, so I am expecting the stock market to explode to the upside on September 21st.

Coffee Beans

A massive moth spotted on a resident's garage in Washington was identified as the first atlas moth ever documented in the United States. Atlas moths, one of the world's largest species of moths, are native to the tropics. Researchers are now trying to determine if the moth is part of a population in Washington. Source: UPI. See the full story here.