For the week of november 11, 2019

Optimism is the one quality more associated with success and happiness than any other--Brian Tracy, motivational speaker and author

TransUnion projects a flood of 8.3 million first-time homebuyers will hit the market in the next three years, more than in any three-year period in the last decade. And if economic growth beats expectations, make that 9.2 million.

CoreLogic's chief economist reports, "In addition to lower interest rates, personal income grew faster than home prices during the past year," helping to boost the homeownership rate to its highest level in more than five years. 

Those low mortgage rates continue to fuel homebuyer demand, boosting another gain in overall home builder confidence. The National Association of Home Builders confidence index rose to a strong 75 read in September.

TRADE OPTIMISM SETS RECORDS... Growing optimism all week that the long-running trade dispute with China would be resolved powered the markets to new highs for the Dow, the S&P 500, and the Nasdaq.

The President said he hadn't yet agreed to trim tariffs in stages, but that didn't derail the rally amidst decent Q3 corporate earnings and a brightened consumer mood as reported by the U. of Michigan consumer sentiment index.   

As one analyst put it, "It's really hard to have a recession, or some sort of crisis, when you have full employment, a friendly Fed and a government that's lowering regulations and has lowered taxes."

The week ended with the Dow UP 1.2%, to 27,681; the S&P 500 UP 0.9%, to 3,093; and the Nasdaq UP 1.1%, to 8,475.

As equities headed up, bonds went the other way. The 30YR FNMA 4.0% bond ended down .23, at $103.52. In Freddie Mac's Primary Mortgage Market Survey, the national average 30-year fixed mortgage rate fell back, and is now 1.25% lower than a year ago. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?... The Census Bureau reports that more than 40% of renters were cost-burdened in 2018, spending at least 35% of income on housing costs. But only 21% of homeowners with a mortgage were similarly cost-burdened, down from 29% ten years ago.

INFLATION AND RETAIL SALES EDGE UP... Economists expect inflation to increase a tick overall in the Consumer Price Index (CPI), a little less in the Core CPI, which takes out volatile food and energy prices. Retail Sales should grow nicely in October and head even higher when you exclude volatile auto sales.

NOTE: Weaker economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and higher loan rates.

Forecasting Federal Reserve policy changes in coming months... Now that the Fed did its rate cut, everyone's settling in to this level of interest rates till the advent of spring. Note: In the lower chart, a 4% probability of change is a 96% probability the rate will stay the same.

Current Fed Funds Rate: 1.50%-1.75%

Probability of change from current policy:

Successful people are passionate about their work. The truth is, if you aren't absolutely obsessed with what you're doing, your performance will probably be average.