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Unlocking the Housing Market - Everybody Wants Some

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SubscribeTHIS IS NOT INVESTMENT ADVICE. Please speak with a registered investment advisor or other qualified financial professional before making any investment decisions.We are approaching the heart of earnings season. As of this writing, a little over one-quarter of S&P500 companies have reported their Q3 results. Results are off to a remarkably good start. According to Factset, "The percentage of S&P 500 companies beating EPS estimates for the third quarter and the magnitude of the earnings beats are at or near record levels." 84% of companies have beat EPS estimates and 81% of companies have beat revenue estimates. In aggregate, earnings and revenues have come in 17% and 3% ahead of expectations, respectively. However, the most important news of the week for us was from the housing market. New home sales, existing home sales, building trends, and inventory levels all demonstrate a market and dynamic that shows no end in sight. We’ve stated that housing is arguably the most important data point to watch in order to measure COVID’s impact on the economy as well as prospects for a recovery. Had housing not bounced back as strong as it has, it would have represented a big, red, warning signal for us about the prospects for the US economy and potential for a quick recovery. The reason being that there is a significant secular demographic tailwind driving the housing data. Coming out of the global financial crisis, household formations in the US were below historical averages for many years. It is only recently that the data has approached the historical average levels but the magnitude of the shortfall from 2008 - 2016 left an extraordinary amount of pent-up demand that still exists. Home building stocks have responded, the iShares US Home Construction ETF (Ticker: ITB) is up 28% this year versus 9% for the S&P500. Despite the significant performance this year, a basket of home building stocks that we follow have a current P/E ratio of 11 versus the S&P500’s forward P/E ratio of approximately 21. Household formations, and the resulting need for housing, may mean that the trend still has many years to run. We wonder, given the valuations, if the underlying stocks may have many years to run as well.Source: CitigroupIf you would like to receive the Weekly Macro Summary directly to your mailbox every Sunday, please subscribe. It’s free.Atlanta Fed GDPNow is currently tracking at 35.3% for Q3, up slightly from 35.2% last week.New York Fed GDP Nowcast stands at 13.75% for Q3, down slightly from 13.79% last week.NAHB/Wells Fargo Housing Market Index reaches all time high of 85.Source: Wells FargoChina Q3 GDP up 4.9%y/y which is lower than 5.5% consensus expectation. While the GDP data was disappointing, some other measures of data released point to a more positive outlook for Q4.Container shipping rates from China to the US’s west coast are up over 60% versus last year.Initial US Jobless Claims 787k this past week versus 875k expected.Source: Macquarie BankSeptember’s Conference Board Leading Economic Index rose 0.7% in September, following increases of 1.4% and 2% in August and July, respectivelyUS September Existing Home Sales +9.4%m/m to 6.54mln, the highest level since May 2006.Source: Macquarie BankUS single-family homebuilding confirms the strength in home sales. Single-family housing starts +8.5%m/m to 1.08mln units in September, the highest since June 2007.US Markit Manufacturing PMI (October Flash) 53.3, in line with expectations. Source: JP MorganData from JPMorgan Chase reveals an interesting spending pattern difference among employed vs. unemployed households receiving unemployment benefits. Source: JP MorganGoldman Sachs Consumer Spending TrackerSource: Goldman SachsSource: JP MorganCentral banks at a panel discussion hosted by the International Monetary Fund on evaluated the merits of central bank digital currencies (CBDC) this past week. ECB President Christine Lagarde discussed on Monday at an interview the high likelihood of lost momentum in the euro area recovery due to the recent rise in COVID-19 infections. The recent economic weakness and language from the ECB has led market participants to expect more action from the central bank to support the region in the coming weeksTurkey’s Central Bank left its benchmark interest rate unchanged at 10.25% this week.Global equity markets are seeing a flood of electric-vehicle companies being listed that have no current revenue.Source: University of Florida, Jay Ritter and SPAC Research Commercial loans outstanding have dropped significantly, a sign of strength for big corporationsThe Federal Energy Regulatory Commission (FERC) proposed a plan to introduce a US carbon tax in a landmark step towards reducing greenhouse gas emissions.As discussed on the , Water futures are set to debut on the CME. We are following up with some finer details.Source: FTQ3 earnings are off to a good start. As of this writing, a little over a quarter of S&P500 components have reported Q3 results thus far.Texas Instruments, (NASDAQ: TXN) revenue of $3.8bln ahead of consensus estimate of $3.44bln.Tesla, (NASDAQ: TSLA) Reported a rise in sales and profit for the 3Q20. Intel Corp., (NASDAQ: INTC), Fell 12% after third quarter results that were inline with expectations.American Airlines Group Inc., (NASDAQ: AAL) Revenue of $3.2bln vs $2.85bln estimated, an 11% surprise. Revenue is down 73% y/y.Southwest Airlines, (NYSE: LUV) reported 3Q20 results this week. Netflix, Inc., (NASDAQ: NFLX) Reported its 3Q20 earnings after the bell on Tuesday. Shares fell 6%. Source: EntertainmentStrategyGuy, NielsonThis past week saw a few acquisitions in the shale energy sector Smaller investors are finally turning optimistic on US stocks. More individual investors are bullish than bearish on US stocks for the first time since FebruarySource: AAII, BloombergGEOPOLITICSThe United States Justice Department filed an anti-trust lawsuit against Google for anti-competitive business practices.The US will remove Sudan from a list of nations sponsoring terrorism for the first time since the early 1990sPeru’s Congress is set to vote on October 31st to start impeachment proceedings against President Martin Vizcarra, the second attempt in five weeks. President Vizcarra is accused of bribery and repeatedly lying to the country as congress seeks to oust him on ground of “permanent moral incapacity.”PUNDITRYBlackrock – Restructuring Opportunities in CreditPIMCO - Secular OutlookThe World’s COVID recovery viewed with High Frequency Data, via Macquarie BankThank you for subscribing to the Primary Dealer Review. If you have any questions or comments, please email me directly at  and I will get back to you.Do you know someone who would like to receive this publication? Please feel free to share the Weekly Macro Summary with them.This weekly summary expresses the views of the author as of the date indicated and such views are subject to change without notice. The author has no duty or obligation to update the information contained herein. Further, the author makes no representation, and it should not be assumed that past investment performance is an indication of future results.Moreover, wherever there is the potential for profit there is also the possibility of loss.This weekly summary is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as an offering of advisory services or an offer to sell or solicitation to buy any securities or related financial instruments in any jurisdiction. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources.The author believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.This weekly summary, including the information contained herein, may not be copied, reproduced, republished, or posted in whole or in part, in any form without the prior written consent of the author.© 2020 Primary Dealer. See , andThis site requires JavaScript to run correctly. Please or unblock scripts

SubscribeTHIS IS NOT INVESTMENT ADVICE. Please speak with a registered investment advisor or other qualified financial professional before making any investment decisions.We are approaching the heart of earnings season. As of this writing, a little over one-quarter of S&P500 companies have reported their Q3 results. Results are off to a remarkably good start. According to Factset, "The percentage of S&P 500 companies beating EPS estimates for the third quarter and the magnitude of the earnings beats are at or near record levels." 84% of companies have beat EPS estimates and 81% of companies...

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