All Things in Moderation

Vital Statistics:

Stocks are higher this morning on no real news. Bonds and MBS are flat.

Housing starts rose 15% MOM and 9% YOY to a seasonally-adjusted annual rate of 1.56 million units. Building Permits rose 2.5% MOM to 1.46 million. This was below last year.

Multi-unit (5+) under construction remains near record levels. This should help put downward pressure on rents and ultimately inflation. I am not sure where these multi-family units are being built, but there will be a deluge of units hitting the markets.

Mortgage Capital Trading (MCT) announced that lock volume fell 10.7% in November, as MBS rallied early in the month. Volume tailed off around the end of the month due to the Thanksgiving Day holiday.  Andrew Rhodes, Senior Director and Head of Trading at MCT, commented on the current scenario, saying, “While we’ve seen a decrease in mortgage rates from the highs which would alleviate the seasonal dip, we are still struggling with low supply and see that as a continued trend through the beginning of 2024.”

Morgan Stanley has put out its 10 surprises for 2024. Here are the highlights (I omitted the ones which are about overseas markets)

Surprise 1: The elusive US hard landing arrives in style. Looking forward to 2024, the potential major surprise could be the arrival of the elusive hard landing, catching most investors off guard just after they concluded that “this time was indeed different.” While it took the better part of the previous year for the consensus to fully embrace the soft landing narrative, the reversal to a hard landing may happen more swiftly, leading investors to regret being misled once again

Surprise 2: Fed cuts 8 times, amid soft landing: Looking forward to 2024, the potential major surprise could be the arrival of the elusive hard landing, catching most investors off guard just after they concluded that “this time was indeed different.” While it took the better part of the previous year for the consensus to fully embrace the soft landing narrative, the reversal to a hard landing may happen more swiftly, leading investors to regret being misled once again

Surprise 3: QT ends before the first cut: Looking forward to 2024, the potential major surprise could be the arrival of the elusive hard landing, catching most investors off guard just after they concluded that “this time was indeed different.” While it took the better part of the previous year for the consensus to fully embrace the soft landing narrative, the reversal to a hard landing may happen more swiftly, leading investors to regret being misled once again

Surprise 10: Breakevens revert to 2019 levels: Looking forward to 2024, the potential major surprise could be the arrival of the elusive hard landing, catching most investors off guard just after they concluded that “this time was indeed different.” While it took the better part of the previous year for the consensus to fully embrace the soft landing narrative, the reversal to a hard landing may happen more swiftly, leading investors to regret being misled once again.

Student loan payments resumed in October, and only 60% of them were made, according to the government. That is a pretty hefty percentage of delinquencies, and suggests that some of the spending that has been going on is unsustainable.

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