For the week of MARCH 1, 2021

“Go confidently in the direction of your dreams.”—Henry David Thoreau, American naturalist, essayist, poet, and philosopher

We got an upside surprise, as New Home Sales rose 4.3% in January to a 923,000 annual rate. This second consecutive month of gains took sales 19.3% ahead of last year, while inventories grew by 8,000 units.

In spite of hitting an all-time high for January, the Pending Home Sales index of contracts on existing homes slid 2.8% below December. But it’s up 13% over last year, all four geographic regions showing annual increases.

The monthly decline was from “simply not enough homes to match the demand,” according to the National Association of Realtors chief economist, but he forecasts “a natural seasonal upswing in inventory in spring and summer.”

BONDS BASH STOCKS... Prospects of a faster economic recovery dropped government bond prices, raising yields and rates. This sparked a stock selloff, and the three big indexes ended the week down. 

This was mostly investors taking profits in a volatile market, as Fed Chair Powell spent two days telling Congress that although the economy is rebounding, we have a long way to go before the Fed even thinks about raising rates. 

Strong signs of recovery included a 10% jump in personal income and a 20.5% hike in the personal savings rate. This represents potential pent-up consumer demand that can fuel future growth and corporate revenues.

The week ended with the Dow down 1.8%, to 30,932; the S&P 500 down 2.4%, to 3,811; and the Nasdaq down 4.9% to 13,192.

Beyond Treasuries, bond prices fell overall, with the UMBS 3.0% down .31, to $104.63. In Freddie Mac's Primary Mortgage Market Survey, the national average 30-year fixed mortgage rate increased, but remained in record-low territory. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?... A recent survey found that 44% of millennials would buy a home based just on listing photos. But another survey revealed that 75% of those who bought a home without first seeing it had some buyer’s remorse.

ALL GAINS: CONSTRUCTION, THE ECONOMY, JOBS… Overall Construction Spending should increase for another month, and we'll of course pay attention to the residential numbers. The economy is also forecast to keep growing with ISM Manufacturing and Non-Manufacturing indexes well into expansion territory. February Nonfarm Payrolls are expected to head back to the 200,000 level as things slowly open up again.

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. Fed watchers still see the central bankers keeping rates right where they are for the foreseeable future. They want higher inflation and the job market where it was before the pandemic. Note: In the lower chart a 0% probability of change is a 100% certainty the rate will stay the same.

Current Fed Funds Rate: 0%-0.25%

Probability of change from current policy:

Do sweat the small stuff. Things that aren’t that important from your perspective can be a big deal to a client, without your realizing it. That’s why successful people pay attention to every detail of the product or service they’re delivering.