Weekly Insights - Oct 23, 2023

Weekly Economic Recap

Consumer Resilient, but Leading Indicators Suggest Imminent Slowdown

Homebuilder confidence fell to the lowest level since January as higher mortgage rates continue to dampen housing demand according to the NAHB Housing Market Index. Expectations for future housing market conditions and historically low buyers' traffic were the main contributors to the drop in sentiment.

Retail sales increased more than expected in September helped by an increase in gas station sales. The control group, which excludes various volatile components, also increased more than expected led by internet sales (due to end of summer discounts) and spending at restaurants.  

Housing starts increased in September despite multi-decade high mortgage rates. Construction of multi-family housing increased at the fastest monthly pace since August 2022.

Building permits, an indicator of future construction, fell less than expected in September. Single family building permits rose while permits for multi-family housing fell.

Initial claims for unemployment fell last week to 198K, which was below the estimate and the lowest level since January. Continuing claims increased and were higher than consensus estimates.

The Leading Indicator Index declined for the 18th consecutive month which marks the longest consecutive decline in the Index since the Great Financial Crisis.

Existing home sales declined in September to the lowest level since 2010. Sales dropped in the west, the south and the Midwest but modestly increased in the northeast.

Weekly Market Recap

Global Equities Fall as Treasuries Climb to Multi-Decade Highs

Equities: The MSCI AC World Index fell for the fourth time in the past five weeks as Treasury yields surged to multi-decade highs. All three major U.S. indices (i.e., S&P 500, Dow Jones Industrial Average and Nasdaq) were lower as investors digested the latest Fed official comments to suggest rate hikes may still be on the table. Growth was under the most pressure as U.S. Treasuries climbed to multi-decade highs. Both developed and emerging markets were also weaker as fighting intensified in the Middle East.

Fixed Income: The Bloomberg Barclays Aggregate Index fell as Treasury yields moved to multi-decade highs. The U.S. 10YR yield flirted with the key 5% level, reaching highs during the week not seen since 2007. Floating rate instruments were the only sector of fixed income higher. The safest areas of fixed income fell the most, including investment grade and municipals.

Commodities/FX: The Bloomberg Commodity Index was marginally higher for the second straight week. Precious metals led gains as investors flocked to these safe-havens amid the Israel-Hamas conflict. Gold prices were higher for the second straight week. Crude oil was also higher for the second consecutive week as global supply concerns linger.