Mortgage rates remain elevated, so it makes sense that refinancing activity is minimal—relevant only for those who qualify. In contrast, a purchase-driven increase in the Mortgage Market Index may signal authentic growth, as long as purchases are not influenced by FOMO (fear of missing out). This purchase-driven activity could reflect improving consumer confidence and resilience in the housing market, but it will be crucial to monitor whether these purchases are supported by sustainable financial conditions.
Last week, I reported challenges in regional manufacturing and a contraction in housing. This week, we seem to be observing the opposite: improved conditions in manufacturing, housing, and consumer activity. High consumer sentiment, as reflected in various metrics, remains strong. While some of this might be tied to the holiday season, the scale of activity—such as rising retail sales and home purchases—seems unseasonably robust.
To gauge market sentiment, I often turn to the VIX, the market’s fear index. The movement of the VIX since Nov. 20th, 2024, has been steadily downward over the last three weeks, which aligns with this broader optimistic consumer narrative. This trend is further confirmed by signals such as narrowing junk bond spreads and shifts in the US02Yr and US10Yr yields.
Similarly, crude oil prices are a key indicator for inflation trends, as they directly affect transportation and production costs. If oil prices are truly dropping, it would make sense for consumers to feel optimistic. Falling crude prices might also align with easing inflation, a narrative supported by other signals such as gold prices and ISM Manufacturing Prices.
This week, I’ve relied heavily on the Economic Calendar from TradingView to track and interpret these trends.
Thank you for your time, and have a great weekend.
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