In this week’s Steady Investor, we explore current market news that we believe investors should keep on their radar, such as:
• Mixed signals in the U.S. housing market
• The current status of the U.S. and Europe’s economic activity
• Strong U.S. retail sales
Mixed Signals in the U.S. Housing Market – In early April, we wrote that a housing rebound could be underway in the U.S. For the first time in over two years, home sales increased month-over-month for two consecutive months (January and February), with sales of existing homes jumping 9.5% in February to a seasonally adjusted annual rate of 4.38 million. Economists had expected a 1.3% decline. Things were looking up. But then March happened. Mortgage rates started to creep higher in February as the Federal Reserve dialed back expectations for rate cuts, and by last week had crossed back over 7% – its highest level since late 2023. Existing and prospective homebuyers also appear to be confused by rules that determine how agents get paid, which underwent a historic shakeup earlier this year following a lawsuit filed against the National Association of Realtors. This confluence of forces, combined of course with near-record home prices, caused existing home sales to decline 4.3% month-over-month in March, the largest percentage drop since November 2022.1
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Existing Home Sales Declined Sharply in March
The outlook from here is a bit cloudy. Investors and homeowners alike now expect fewer rate cuts in 2024—if any rate cuts come at all—which could filter through to higher-for-longer mortgage rates and delay both buying and selling decisions.
The U.S. and Europe’s Economic Engines Move in Opposite Directions – When dividing economic activity into services vs. manufacturing, the services component contributes far more to total output. That is true here in the U.S. and across much of Europe, save for Germany which has an export-heavy manufacturing economy. In March, the U.S. and Europe moved in opposite directions, with U.S. services activity decelerating while Europe’s picked up. S&P Global’s U.S. Composite Purchasing Managers’ index dropped from 52.1 in March to 50.9 in April (preliminary reading), which still signals expansion but marks a slowdown from Q1 activity. Of note were falling new orders, which can factor as a leading indicator and should be watched going forward. Meanwhile, in Europe, the HCOB’s composite eurozone PMI rose to 51.4 from March’s 50.3, signaling healthier overall activity and notably an acceleration in the services component. The overarching takeaway, in our view, is a positive one: for the time being, both the U.S. and Europe are in growth mode.4
U.S. Retail Sales Stronger than Expected, Again – Despite inflation pressures and many fears from pundits about the U.S. consumer losing steam, Americans keep spending. In March, retail sales rose by 0.7%, more than double economists’ expectations and largely in line with February’s spending data. These data are not adjusted for inflation, which according to the CPI measure rose by 0.4% in March. The takeaway here is that consumer spending outpaced inflation for the month, which is a good overall sign that economic growth continues apace so far in 2024.5
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You’ll get answers to important financial questions like:
• How do I correctly calculate my net worth?
• How does my net worth compare to other households?
• What strategies can help me grow my net worth over time?
• What are the risks and factors that can help me grow my net worth?
If you have $500,000 or more to invest, simply click on the link below to get your copy today!
Disclosure
2 ZIM may amend or rescind the “Measuring Your Net Worth” guide for any reason and at ZIM’s discretion.
3 Fred Economic Data. April 18, 2024. https://fred.stlouisfed.org/series/EXHOSLUSM495S#
4 Financial Advisor. 2024. https://www.fa-mag.com/news/u-s--business-activity-expands-at-slowest-pace-in-four-months-77821.html
5 CNBC. April 15, 2024. https://www.cnbc.com/2024/04/15/retail-sales-jumped-0point7percent-in-march-much-higher-than-expected.html
6 ZIM may amend or rescind the “Measuring Your Net Worth” guide for any reason and at ZIM’s discretion.
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