Home Construction Consolidating Mon, Jan 11, 2021 On a day when major US equity indices were lower across the board, the homebuilder group staged a nice rally. Below we provide a check-up on the group. From the March lows until the October high, the iShares Home Construction ETF (ITB) rallied over 170%, but since that high, the ETF has been in consolidation. As shown below, ITB has been fluctuating around its 50-DMA for the past few months making some higher lows and lower highs in the process. The past few sessions have seen some more moves above and below the 50-day with today's 1.8% gain currently bringing it back above and positive on a year to date basis. Currently, ITB is now 6.23% below its October 15th closing high. As for the individual homebuilder stocks, below we show the constituents of the S&P 1500 Homebuilders index and the story is mostly the same. After surging from the March lows through October, most of these stocks are down double digits from their respective 52-week highs. Similar to the FAANG names that have mostly traded sideways for the past few months, the homebuilders have quietly been experiencing consolidation as well.
Rest of the World Catching Up Tue, Jan 12, 2021 Over the past year, US equities—proxied by the S&P 500 (SPY)—have consistently outperformed global equities more broadly. As shown below, over the past year the S&P 500 (SPY) has risen just over 16%. That compares to 11.26% for the rest of the world as proxied by the Vanguard FTSE All-World ex US ETF (VEU). Breaking that down a bit further by developed and emerging markets, US equities have outpaced both emerging and other developed markets. While emerging markets (SPEM) are right on the heels of the US with just under a 14.78% gain, developed markets (SPDW) have lagged with just a 10.56% gain. So far in 2021, though, the rest of the world has been outperforming the US. Whereas SPY has risen around 1% YTD, VEU is up almost 3 times that. Emerging markets in particular have shown the greatest degree of strength currently having risen 3.87%. Meanwhile, SPDW has gained less (2.7%), though, it is still outperforming the US. In the charts below, we show the ratio of SPY to these other ETFs. A rising line would indicate that the US is outperforming these other measures of global equities while a downward trending line indicates underperformance of SPY. As shown, the longer-term trend has pretty consistently been US outperformance over the past decade but that has faltered at the tail end of 2020 and into 2021. In the case of emerging markets, the line has been on the decline throughout the second half of 2020 as the ratio has hit its lowest level in a year in the past week. The S&P 500's underperformance relative to other developed markets (SPDW) has been more recent as that line peaked in early September but the trend remains the same over the past few months with SPY weaker than global equities more broadly. That is further exemplified by the recent downtrend of SPY versus the All World ex US ETF (VEU).
How Stocks Did Under President Trump Today Joe Biden becomes the 46th President of the United States. We’ve already looked forward at what his presidency, coupled with a blue wave in Congress, could mean for policy in Market Policy Projections for 2021, so today we take a look back at how stocks performed under President Donald Trump. As shown in the LPL Chart of the Day, the Dow Jones Industrial Average (Dow) gained approximately 56% during Trump’s four years in office, which comes out to an annualized return of an impressive 11.8%. “President Trump’s annualized Dow return of 11.8% was the best for any Republican president since President Calvin Coolidge in the Roaring Twenties,” explained LPL Financial Chief Market Strategist Ryan Detrick. “This was still below the annualized returns of Presidents Bill Clinton and Barack Obama.” Over the past four years, the Dow has made 126 new all-time highs, more than the 123 under Obama in eight years (albeit at a drastically lower starting point), and the most since the record 263 under Clinton. It is hard to believe it, but six presidents never saw a new Dow high while in power, with Presidents Jimmy Carter and Gerald Ford being the most recent to checkmark this dubious feat. The records from 2020 don’t end there, as stocks have seen a record surge since the election. In fact, from election day until the inauguration, the S&P 500 Index has been up a record 12.8%.
New Highs for Purchase Applications Wed, Jan 20, 2021 One of the few economic data points released today was weekly mortgage applications from the Mortgage Bankers Association (MBA), and the data was positive. Seasonally adjusted purchases rose 2.7% week over week to the highest level since the last week of November of 2008. That eclipses the previous high of the cycle from late November of last year. On an unadjusted basis, the average level of mortgage purchase applications is off to its strongest start to a year (through the first three weeks) since 2008. As shown in the second chart below, the seasonal bottom for purchase applications typically occurs at end of each year. With that now in the rearview, purchases have been following the seasonal trend higher. This increase typically lasts throughout the rest of winter and peaks in the spring (usually in late April/early May as indicated by the blue dots). So far in 2021, purchase applications are not only following that seasonal pattern but are also running at a stronger pace than other years of the past decade. While purchase applications were stronger, refinance activity took a step back in the most recent week. The Refinance index dropped 4.72% week over week. Although that is lower, outside of last week it is still at some of the highest levels since last March's spike higher. That is also around levels not seen since the spring of 2013. In terms of related stocks' reaction to this data, initially this morning, that stronger reading in mortgage purchases led mortgage REITS as proxied by the iShares Mortgage Real Estate ETF (REM) to nearly break out from the past couple of month's range. but the rally was stopped in its tracks by the release of the weaker than expected homebuilder sentiment reading from the NAHB. Meanwhile, perhaps a bit ironically, the S&P Homebuilders (XHB) have continued to rally, rising 2.37% to a new 52-week high.
